The Most Frightening Economic Number You’ve Never Heard of

Thursday, 14 Feb 2013 07:41 AM

By Jacob Wolinsky

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Under the laissez faire policies of the Obama administration, where money is spent freely on pork projects, citizens get used to hearing numbers like trillion dollar deficits. Additionally, record numbers of people are receiving food stamps, government aid, out of work, etc. However, there is one economic term number that is barely getting any media attention.

The Centers for Disease Control and Prevention announced earlier this week that the birthrate in 2011 fell to the lowest level in recorded history.

The fertility rate is now at 1.9 children per woman. For a population to remain stable, the average woman needs to have 2.1 children. While no one can predict the future, it seems likely that the birth rate will continue to decline.

The reason for the current drop is due to poor economic conditions causing people to forgo having a child (or extra child) because of the high costs involved. According to a recent article in The Wall Street Journal, this phenomenon is occurring in parts of Europe hit hard by the financial crisis. With the amount of people still out of work and on government aid increasing, the logical conclusion would be for a further decline in birth rates.

Furthermore, immigration to America has slowed dramatically since the start of the economic crisis. Low immigration and low birth rates could lead to a demographic disaster in the coming decades for the United States.

The reason why Japan has the highest debt-to-gross domestic product (GDP) ratio is largely due to the aging population. Recently, adult diapers sales have started to outpace the sales of diapers for babies. Many countries in Asia (including China) and Europe have extremely low birth rates, which will lead to a Japan-type scenario in the not too distant future.

What made America different was the healthy demographics of the country. The post-World War II baby boom led to decades of prosperity for the United States. Countries that have many more workers than retirees receiving benefits are in a better condition than are countries such as Japan, where the population is old.

If the birth rate continues to drop and immigration slows down more, the fertility rate could decline much further. This would lead to a catastrophic scenario in several decades that would make the retiring of baby boomers seem like child’s play. The demographic crisis would kill economic growth leading to many trillions of more debt and possibly a permanent economic crisis. This is not too far-fetched when considering Japan’s GDP has remained basically flat since 1995.

The drop in births is alarming for the future growth of America. However, it must be noted that at a fertility rate of 1.9 children per female, the United States still has a far higher birth rate than almost every European country and is only slightly below the replacement rate. America could still turn around, and there is reason to be bullish on the country over the long term.

It is doubtful that politicians can solve this specific issue besides pro-growth economic policies, such as energy deregulation. However, one thing seems certain, the number 1.9 should get just as much if not more attention than the $16 trillion of government debt.

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