The U.S. birthrate just fell to its lowest point since we've been keeping track. Here's why that may be a problem for my 2-year-old son.
Right now, I, my colleagues and everybody else with a job is paying to support our parents, our grandparents and all the other elderly people in the U.S. who currently receive Medicare and Social Security. Relatively speaking, there are still plenty of us working people, compared to the number of retirees.
But the fall in the birthrate means that, by the time my son gets to be my age, there will be fewer working people for each retiree. So he'll have to pay a bigger share of my retirement costs — which he may not want to do.
So maybe we should start paying more now, or agree that retirees should accept a bit less, or do both.
Or maybe we shouldn't worry about it.
Hand-wringing about declining birthrates is totally unnecessary because workers become more productive over time, says Dean Baker of the Center for Economic and Policy Research.
"You know, a lot of these people run around going, 'In 1960, we had five workers for every retiree, and today we have three, and in 20, 25 years we'll have two,' " Baker says. "Guess what? Both workers and retirees have considerably higher living standards, at least on average, than they did in 1960."
In other words, my son and the other workers of his generation will have a higher standard of living than we have today, so they'll be able to support those of us working today.
Not everyone is convinced by this argument.
"When they laid out the long-term financing of Social Security, they assumed a world that didn't happen," says Phillip Longman, author of the book The Empty Cradle: How Falling Birthrates Threaten World Prosperity and What To Do About It.
"They assumed a world in which GDP growth would be 5 percent a year, in which poverty would wither away, in which we would be beset by the miseries of affluence," he says. "And guess what? We didn't grow up to be the affluent society. We grew up in a world in which kids are more likely to be poor now than they were 20 years ago."
Social Security and Medicare are sticking points in the negotiations over the fiscal cliff. Recommendations range from raising the retirement age to getting the wealthy to pay more payroll taxes and to any number of policy proposals in between. The one thing that's certain about this debate: Because of our declining birthrate, its almost certain to continue for decades to come.