Book Excerpt: Origins of the False “Aging Population” Scare
March 18, 2013 • Family Planning, United States, Daily Email Recap
In continuing to try and contextualize the great wave of United State’s birth dearth alarmism in early 2013, we were reminded of a section of Derek Hoff’s excellent book, The State and The Stork: The Population Debate and Policy Making in US History (Univ. Chicago Press Books, 2012). Professor Hoff agreed to allow a short excerpt. Hoff’s book traces the political and ideological (rather than demographic) origins of the so-called aging crisis. This particular section really honed in on some interesting dynamics around the urge towards welfare state retrenchment, among others.
And, for future reference, here is the book’s dedicated website: http://stateandthestork.com/
Rethinking the “Aging Crisis”
(excerpt)
…Economist Robert Clark, for example, put the problem [an increasing average age of the population] this way:
“All of our projections indicate that the movement toward zero population
growth will require even greater transfers of income to support the
elderly, with the Social Security system being forced to bear much of the
burden.”107 Leading demographer Nathan Keyfitz worried that older, less
free- spending consumers might act as a drag on economic growth, but he
observed that the empirical links between aging and economic performance
were tenuous.108 Keyfitz was also concerned that a stagnant population
would stunt individuals’ labor mobility as older workers clung to
their jobs, but he concluded that the system could adjust, with workers
becoming “more concerned with pay and the goods they can buy than
with rank and title.”109 Several economists emphasized that the fiscal consequences
of an increasing old- age dependency ratio would be offset by a
reduction in social spending on the young.110 William Reddaway, the British
Stable Population Keynesian who gained prominence in the 1930s, declared
that “one should dismiss the increased pensions bogey as quantitatively
negligible, so far as it rests on demographic factors.”111 A notable
exception to the prevailing view was conservative Harvard economist
Martin Feldstein, who later chaired President Reagan’s Council of Economic
Advisers; in the mid 1970s, he unambiguously identified a “social
security crisis.”112 Feldstein also claimed that Social Security reduced savings
and stunted capital accumulation.113
In the short term, the new anxiety only modestly affected policy.114 The
1977 Social Security amendments addressed the deficit by raising taxes
slightly and lowering benefi ts but kept intact the expansionary trajectory
of the program.115 At the end of the 1970s, the Carter administration incorporated
a warning about population aging into its budget projections,
estimating that current demographic trends augured an increase in the
total tax burden from 33 percent of GDP in 1980 to 50 percent in 2030.116
Moreover, the 1970s had exposed a fundamental weakness of Social Security:
its tax structure left it vulnerable to economic downturns. And after
skyrocketing interest rates and inflation, and two recessions, in the early
1980s, demographers adopted a more urgent tone. In 1980, for example,
Keyfitz compared Social Security to a chain letter that would inevitably
fail.117
The Republican victory in the 1980 election helped turned a simmer
into a boil, as the accompanying attacks on the social contract and
Keynesian progressive fiscal policy reinforced the preoccupation with
the budget- busting threat of an aging population. In 1981, President Reagan
declared a Social Security crisis.118 That year also saw the creation of
the bipartisan National Commission on Social Security Reform, often referred
to as the Greenspan Commission after its chair, future Federal Reserve
head Alan Greenspan. The commission’s recommendations, issued
in early 1983 and brokered by Senators Robert Dole (R-Kan.) and Daniel
Patrick Moynihan (D-N.Y.), were the basis for that year’s Social Security
amendments,119 which increased coverage (a clever way to augment
revenue in the short term), delayed cost- of-living increases, imposed taxes
on the Social Security benefits of better- off recipients, raised the Social
Security payroll tax rate, created what we know as the Social Security
Trust Fund, and instituted a gradual increase in the age for full benefits
from 65 to 67.120 The committee was optimistic that it had solved the
problem for at least seventy- five years, with Greenspan reporting that it
would take “a very adverse economic scenario” to jeopardize retirement
benefits.121
Yet Reagan’s (and Feldstein’s) crisis tag stuck.
The early 1980s recession,
which occurred when the American birthrate was only beginning
its recovery, shored up the notion that an aging workforce would exacerbate
macroeconomic malaise. In other words, the graying of the American
population was seen as not only worrisome for the future of Social Security
but also contributive to the current economic doldrums. Less tied
to the immediate business cycle, however, belief that there was an aging
crisis also reflected growing antipathy to the state among policy makers
and the general public; it was inextricably linked to and helped consolidate
the anti- welfare state agenda of a conservative movement rejuvenated
by Reagan’s election. Put another way, the current fiscal crisis
in America, and the fact that balancing the budget without deep cuts in
Medicare, Medicaid, and Social Security now seems next to impossible,
has masked the contingency and ideological origins of the aging issue.
Three decades ago, the potentially significant problems associated with
the Baby Boomers still resided in the distant future, but the immediate
politics of a splintering Democratic coalition and a rising conservative critique
of the New Deal loomed large. Yes, liberals and conservatives alike
expressed concerns about aging, but it was primarily conservatives who
deployed demographic trends as a powerful tool in their larger project of
welfare state retrenchment. An emphasis on demography allowed opponents
of the welfare state to point to fiscal forces seemingly out of their
control as they called for retrenchment rather than stating their ideological
preferences unambiguously. Engaged in a larger critique of escalating
social welfare spending, many conservatives prematurely claimed
that Social Security was a fiscal house of cards and proposed that the system
become entirely voluntary. In the words of economist Phil Mullan,
“Ageing is used as a neutral, non- ideological, apolitical pretext for legitimising
reductions in public and especially, welfare spending. The assumption
of ‘too many old people’ impresses the need and urgency for welfare
reform.”122
Put in the simplest terms possible, the aging of America moved from
policy challenge to crisis because taxing the wealthy to fund the welfare
state, or sustaining large deficits (at least politically popular ones) were
both taken off the table in the United States in the 1970s and 1980s. Moreover,
the waning of Keynesianism and the concomitant embrace of the
new classical economics buttressed the theoretical conception of an aging
crisis. First, the erosion of the Keynesian consensus weakened a basic
counterpoint to the fiscal anxieties surrounding the graying of America,
namely that the US could simply borrow the money to finance the Baby
Boomers’ retirement and then pay off the debt when the Boomers had
died and been replaced by the smaller cohorts born after them. A society
can choose to redistribute resources from one group to any other in any
way it sees fit. (Some experts in these years indeed worried that public
spending was skewing too heavily toward the elderly at the cost of children.)123
But in an era of declining top tax rates and anti- tax sentiment,
the idea of increasing taxes on the rich to cushion the pension system became
a non- starter. Second, the supply-siders’ emphasis on investment,
as opposed to the Keynesian emphasis on consumption and aggregate
demand, further promoted the aging preoccupation. During the middle
of the twentieth century, proponents of population growth, following
Keynes, opined that an aging population was problematic because the
elderly consumed less than the young. In the 1970s, however, experts who
promoted population growth to help counteract population aging flipped
assumptions about savings and consumption around. Following the lead
of supply-side economists who downplayed the importance of consumption
in determining future investment, these pro- population growth in-
dividuals now lamented that the elderly over- consumed (and dis- saved),
and thus that an increasing elderly dependency ratio stifled investment.124
Belief that there was an aging crisis also meshed with broader pro-
population growth economic doctrine.125 British sociologist Frank Furedi
notes, “Concern with the greying of society is often linked to a preoccupation
with apprehensions about declining fertility rates.”126
Indeed, most aging doomsayers wished for a new Baby Boom to counteract the fiscal
dilemmas of population aging and found much common ground with
market- knows- best demographers such as Julian Simon, who proposed
that the nation double immigration levels and return to its 1957 fertility
in order to support the elderly.127 Even moderate participants in the
aging discussion discredited Malthusian ideas and sardonically dismissed
the zero population growth movement for peaking just before birthrates
reached their nadir.128 Today, even some theorists who dismiss the notion
of an aging crisis are populationists, noting that fertility rates have fluctuated
wildly and suggesting hopefully that the US may return to high fertility
of the 1950s and early 1960s.129 Above and beyond questions related to
the age pyramid and social spending, the larger community of intellectuals
who drove the new classical economics in the 1970s was prone to identifying
the economic benefits of population growth.
The fear of aging fit well with conservative cultural views, as well.
Since the decline of the eugenics movement in the middle of the twentieth
century, Malthusians had often come under fire for allegedly keeping
eugenic discrimination alive by focusing on the fertility patterns of the
poor and minorities. Recently, however, it has been anti- Malthusians who
link demographic change to supposed ethnic and cultural decline. Pat Buchanan
and other conservative commentators claim that Western culture
will diminish as industrialized countries age and developing nations continue
to enjoy rapid population growth. These accounts generally lump
the United States with Italy and Japan and downplay the fact that the US
has the highest rate of population growth in the industrialized world.130
Despite diametrically opposed conclusions, the aging panic echoes
Malthusianism in one other significant way. Richard Easterlin, whose fertility
theories helped defuse the population bomb during its heyday, wrote
in his wonderful summary of growth in the twentieth century that those
focused on aging are guilty of using rhetoric as exaggerated as that of late
1960s Malthusians. After dismissing the macroeconomic and dependency ratio
arguments of the aging pessimists, Easterlin observes, “Perhaps too
there are policy implications that have attracted some to the alarmist view
of aging just as some have been attracted to the alarmist view of rapid
population growth. Malthusianism has been a bulwark of opposition to
reform from Malthus’s First Essay through contemporary attacks on poverty
programs. The dependency burden analysis provides rationalization
for assault on yet another pillar of the welfare state-social security.”131
Easterlin’s theory that fertility fluctuates with generations has often been
crudely distilled as “demography is destiny.” But as he suggests here, demography
is not fiscal destiny.
During the 1970s, traditional population- resources questions were left
unaddressed as the aging issue rose to the surface. The two developments
were intimately related. The rise of pro- population growth thought, reinforced
by new concerns about economic and demographic stagnation,
fused with a burgeoning anti-statism to create a lasting political economy
of population centered on the problem of aging. Although to this day a
major overhaul of Social Security has proven impossible politically, the
aging paradigm has dominated Americans policy makers’ discussions of
demography ever since.132
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