By Robert Romano
The U.S. and other developed economies are rapidly aging, and are bound to place an increased burden on taxpayers in coming years, new forecasts by the International Monetary Fund show.
According to the estimates, by 2050 there will be approximately 75 seniors and children — i.e. dependents — for every 100 working age adults, a measure of dependency that will make today’s dire fiscal situation even worse. That’s about a 42 percent dependency rate.
When one looks at just the U.S., the numbers are even worse. According to estimates by the Congressional Research Service, by that time there will be approximately 85 dependents for every 100 workers. That’s an alarming 46 percent of the population.
The problem? A combination of lower fertility or parents having fewer children, and increased life expectancy. Generally speaking, we could deal with everyone living longer, but it would require younger Americans to have more children. It appears that the choice not to is largely driving the problem.
One of the major reasons for that, however, is because of the increased cost of living in the U.S., with high inflation — greater costs for housing, education, and don’t forget taxes. Those in turn are all costs that have been driven higher by government policies designed to artificially increase demand through supplying more mortgage and student debt.
However one cuts it, it’s a self-inflicted demographic time bomb.
And unless the trend can be reversed, it will mean a worsening budget picture going forward. Already, the Social Security and Medicare trustees report that by 2033 and 2024, respectively, the trust funds will be exhausted. Afterward, only a fraction of benefits will be able to be paid out.
Overall, with the $15.8 trillion national debt now larger than the entire economy, rising to $25 trillion by the end of this decade alone, we will be unable to meet our obligations honestly. Instead, we resort to a printing press to refinance our debt, with the Federal Reserve having already purchased more than $1.6 trillion of treasuries.
So, while the debt grows by about10 percent a year, the economy only grew by a tepid 1.8 percent in 2011.
To counteract these trends, we need more workers, families, and entrepreneurs. In short, more productive members of society as a percent of the population.
Fortunately, unlike Japan or Europe — which tend to be more closed as societies — the U.S. may have an escape hatch. How to escape this time bomb?
A nation of immigrants, our salvation may lay with the next generation of Americans coming from abroad.
Two of the largest immigrant groups today come from Latin America and Asia, two regions that value work, utilize education well, and have a strong commitment to families. They come here with the hope of economic prosperity. That is what drives them, just as it drove Italian, German, and Irish immigrants in years before. Being a large nation, there is still much room for expansion here.
How we get there is by dramatically expanding immigration to younger, working age adults, and their families. But also by creating the conditions for more business creation here domestically by eliminating the corporate tax, freeing up controls on capital, and unraveling the vast environmental, health, and labor rules that would be the envy of any 1930’s central planner.
This will make certain the influx of new labor actually has somewhere to work, instead of becoming dependents themselves.
Throughout America’s history, a robust immigrant population was drawn to our country as the land of opportunity from stagnant societies where they were consigned as a permanent underclass. Economic freedom is what they seek — to prosper based upon their own abilities and hard work, not depending upon a far-away ruler for their well being.
The only question is will America remain these industrious immigrants’ destination of choice?
Robert Romano is the Senior Editor of Americans for Limited Government.