The pressures stemming from an aging population, rising health care costs, and an expansion of federal subsidies for health insurance

Let’s Get Back to Robbing Peter: 

The Welfare State and Demographic Decline

by Dylan Pahman

The German economist Wilhelm Röpke, commenting on the expansion of European welfare states in 1958, wrote, “To let someone else foot the bill is, in fact, the general characteristic of the welfare state and, on closer inspection, its very essence.” While he did not argue that, therefore, such state assistance should in all cases be stopped, he put the question in sober terms: “[T]he welfare state is an evil the same as each and every restriction of freedom. The only question on which opinions may still differ is whether and to what extent it is a necessary evil.”

In the interest of carrying on that same sobriety of analysis, I believe the picture is far bleaker today. Röpke, in the title to the essay quoted, characterized the welfare state as “robbing Peter to pay Paul.” But Sts. Peter and Paul were contemporaries. If only we would simply rob our peers! Then we could have a lively discussion regarding “whether and to what extent” such robbery is “a necessary evil.” Instead, it is our children and grandchildren who must “foot the bill.” Yet on our current course, when the time comes to pay up there will be much less welfare available to them.

In a recent essay at First Things, Stephen Phelan examines a negative trend of modern economies undervalued by Röpke: population decline. Phelan reports that in the world today,

the most dynamic economies appear to be those benefitting from a large population or high fertility, even as the developed world’s debt explodes in an effort to maintain a standard of living that is only apparently sustainable by borrowing from one’s children—children which many of these nations refuse to have.

Rising standards of living in several African countries, he notes, coincide with high birthrates in these same countries. Phelan’s aim is to counter the propagators of population control, such as the Bill and Melinda Gates Foundation, who claim that more children will only hold countries back from economic progress.

Convincing NGOs that their Malthusian policies are doing more harm than good may be difficult enough. Convincing the young, educated, and heavily in debt in developed countries that they need to have more children to pay for benefits that we may not be able to afford when they need them is harder still. It has become increasingly more difficult to convince them even to get married.

In light of this, some would blame Millennials, and perhaps that is not always unmerited. But such sentiment could just as easily be seen as blaming the victims. Devalued educations, high debt, and high underemployment make up the inheritance they have received. A bit of pessimism about their future prospects is understandable.

As a Millennial myself, I am doing my part, I suppose (though I would hardly think of it in such sterile, economic terms). My wife and I have a child, and we intend to have more if possible. But what inheritance will my son receive? In order to pay for today’s state assistance, we are effectively spending my two-year-old son’s future tax dollars through debt, and at an unsustainable rate.

Consider, for example, the Congressional Budget Office’s (CBO) 2014 projections this past July. Under current law, after 2018, “The pressures stemming from an aging population, rising health care costs, and an expansion of federal subsidies for health insurance would cause spending for some of the largest federal programs to increase relative to GDP.” 

The consequences?

• “[A] smaller stock of capital and lower output and income than would otherwise be the case, all else being equal.”
• “Federal spending on interest payments would rise, thus requiring higher taxes, lower spending for benefits and services, or both to achieve any chosen targets for budget deficits and debt.”
• “The large amount of debt would restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises. As a result, those challenges would tend to have larger negative effects on the economy and on people’s well-being than they would otherwise. The large amount of debt could also compromise national security by constraining defense spending in times of international crisis or by limiting the country’s ability to prepare for such a crisis.”

Thus, what we have to look forward to, on our current course, is fewer resources, higher taxes or less spending (or both), and general economic instability, which carries with it risks to national security, among others.

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