the very best way to provide for the elderly: have children

By Phil Lawler ( bio - articles - email ) | Aug 09, 2010

Reflecting on the priorities of the US government, as evidenced in the federal budget, columnist Robert Samuelson makes a critically important point that most economists fail to notice:

Our society does not -- despite rhetoric to the contrary -- put much value on raising children. Present budget policies punish parents, who are taxed heavily to support the elderly.

Heavy entitlement payments to the elderly are now written into the budget for years to come. To make those payments, the government must collect taxes. Who will pay the taxes? Not the elderly, who will be past their income-producing years. The taxes must be paid by younger people, who are already hard-pressed because of the rising costs of raising children.

One likely result? People are likely to have fewer children—which will mean, in the long run, fewer taxpayers to share the growing burden. But Samuelson notices a related problem, aggravating the whole mess:

Societies that cannot replace their populations discourage investment and innovation. They have stagnant or shrinking markets for goods and services. With older populations, they resist change.

Policies that discourage child-bearing also discourage saving and investment. Without saving and investment, the economy won’t grow. Without economic growth, tax revenues will falter. Without rising tax revenues, we can’t continue making those entitlement payments to the elderly.

Oddly enough, the best way to ensure security for the elderly is not to expand their entitlements, but to encourage young parents to have more children.