Kicking The Can Down The Road

It’s an over-used term that’s been even more over-used as budget battles have heated up in state capitols and in our nation’s capitol.  Failure to come to terms with our fiscal problems now only “kicks the can down the road,” to be faced in greater measure in the future by our children and grandchildren.

But this post isn’t about budget battles.  It’s about the most egregious example of all of “kicking the can down the road”:  the use of population growth to avoid dealing with the costs associated with an aging population.  And here, right off the bat, I’m going to digress onto a tangent.  The “cost of an aging population” bogeyman is regularly lobbed out there any time someone dares to look to a nation with a stable population as a good economic model.  The “cost” they talk about is by now well known – a smaller labor force to support the the elderly in their retirement.  Each retiree will be supported by only two workers instead of three, or some variation of that data.  Your taxes will have to rise.  Sounds scary, right?

But an aging population isn’t a permanent trait of a stabilizing population.  It’s a transient situation that, in about one generation, will vanish as the stable population settles in at a constant median age.  During the course of that generation, the cost of providing retirement income for the elderly will certainly have to rise as the labor force stabilizes and then declines slightly.  At today’s rate of population growth in the U.S., in 70 years we will have only 2.5 working-age Americans suppporting each person over 65.  If our birth rate declined to the point required to stabilize the population, that figure drops to 2.25.  In other words, taxes would have to rise by 10% to continue supporting retirees.

But what no one ever talks about are the costs and taxes associated with all those people added to the population to avoid the “aging population” phenomenon.  In the course of one generation (let’s say 20 years), the population will have grown by approximately 23 million people.  (This assumes only native population growth and factors out immigration.)   That’s 23 million children who will have to be educated.  Assuming an average of 14 years of eduction (half stop at high school and the remainder stop with a bachelor’s degree), and assuming a cost of $10,000 per year per student, that’s a total cost of $3.22 trillion.

And that doesn’t even include the cost for building new schools.  If the birth rate stays at today’s level, then in 20 years the number of school-age children will increase from 81 million today to 85 million, an increase of 4 million students.  Assuming that a new elementary school and new high school will be required for each 1,000 additional students, a total of 8,000 new schools will need to be built.  If we assume a cost of 50 million dollars per school, that’s an additional cost of $400 billion.

So far, that’s a total of $3.62 trillion that would be paid by mostly public funds, while some of the education cost would be paid privately for those students in private schools.  However, I dare say that nearly all of these additional students will end up at public schools, since the affordability of private education is declining faster than the rate at which the population is growing.

What about the cost of simply bringing 23 million additional people into the world?  Even assuming that it’s paid for by private health insurance, insurance costs are really nothing more than another way to distribute costs across the whole population in virtually the same manner that taxes to support public spending programs do.  Assuming an average cost of $5,000 per birth (maybe that’s low), that’s a total cost of $115 billion for 23 million births.  Without those births, we would all have lower health insurance premiums.

So now the cost is up to $3.75 trillion.  And this may just be the tip of the iceberg.  What about the costs to expand our infrastructure to support this larger population – water and sewage treatment, gas and electric utility distribution, roads, bridges, public buildings, railroads, airports, etc.?  These costs, all publicly funded, would add trillions more.  (The cost of expanding our network of paved roads by 7% would cost over $1 trillion alone.)  And what about the costs incurred through the greater demand on limited natural resources?  How much higher will the price of gas be when the population has grown by that many people?

Compare these costs to the cost of providing retirement income for our elderly.  We currently have about 50 million people over the age of 65.  The cost of providing them with social security and medicare currently runs about $1.3 trillion per year.  To provide them with such benefits for an average of 13 years (the difference between age 65 and the average life expectancy of 78), that’s a total cost of about $17 trillion.

When you add up all the costs of providing retirement income for the elderly vs. the costs associated with growing the population, it’s approximately a wash, with one big exception:  the elderly are already here.  The cost is already baked into the economy.  It’s unavoidable.  That’s not true of the additional 23 million people we plan to add just to hold down tax rates a little.  None of them are here and all of the trillions in spending required to support them have yet to be incurred.  Those many trillions of dollars in public spending are completely avoidable.

But I still haven’t touched on the biggest problem of all, the one that started this whole post.  If we add those 23 million people and incur all those trillions of dollars of cost just to keep tax rates from rising a little, we will have only “kicked the can down the road.”  We will be left with a population of elderly that is now that much larger and we’ll need to grow the population even faster to support that many more elderly.  Ultimately, since it’s impossible to grow the population forever, our descendants will, at some point, be forced to come to grips with the same “aging population” problem, but one that’s far worse.

So the next time you hear your congressman, senator or anyone complain about “kicking the can down the road” (as they rightly should in regards to our fiscal issues), you might ask them if they feel the same way about every “can.”  Ask them about curbing legal immigration.  They’ll probably reply, “oh, we should never do that.”  “Our nation is built from immigrants and we have a legacy to uphold.”  BANG …. clankety clank clank.   There goes a can down the road.

Or ask them if we should consider policies that would encourage the stabilization of our population in order to combat rising unemployment, over-dependence on foreign sources of fossil fuel and worsening climate change.  “Oh, no, we depend on population growth as a source of economic growth.  Without it, we’ll be saddled with an aging population.”  BANG …. clankety clank clank.  There goes another one.

Or ask them if we should protect domestic workers from the imported effects of overpopulation in places like China, Japan and Germany by returning to the sensible application of tariffs.  “Don’t be silly.  Free trade benefits everyone!”  BANG …. clankety clank clank. 

With all the cans that are being kicked down the road without even a second thought, even by those so concerned about the fiscal can, the road ahead is beginning to look like the grounds beneath the bleachers at a NASCAR race.

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