After The Fiscal Cliff Comes More Dependence On The State
The present fiscal cliff is only the beginning. The erosion of society, the cause of our so-called "fiscal cliff," will continue even if a compromise is reached to shore up the federal budgetary landscape.
This cliff overcome, America can only become economically more dependent and her growth more anemic. Our fiscal state will become ever more precarious.
Over the decades, entitlement and welfare spending have been slowly but unremittingly growing. Now, they together require all of federal tax revenue. The total federal part is somewhat north of $2 trillion annually. This federal piece is a large fraction of our overall economic activity: GDP stands a little above $15 trillion.
This pressure for spending is essentially demographic: Older people demand more government services, entitlements especially, but Medicaid and other welfare as well.
Remember "Julia," the imaginary woman portrayed in an Obama ad whose life was configured, informed and animated by the federal government? This fictional, unfortunate, young woman spends her entire life being cared for and tended to by the state. This brazen political bid for support from single mothers drives our politics and our deficits.
Julia barely existed before the 1960s, when revolution hit. Ninety percent of persons 25 to 54 years old were married then. Now, among the less-skilled, this number is well below 50%.
Julia votes her peers and herself state-run benefits — by over a 30% margin. And, as she grows in number she will grow in importance: Numerical size is political power.
The pressures against marriage are themselves titanic. They are society itself. Julia, since she is unchurched and saw her parents divorce, most likely will choose cohabitation, and will probably divorce herself. Sociologically this is simply what happens.
Even more certain is the growth in entitlement demand:
The mass of persons entering retirement and demanding entitlements and similar services will grow by 3% a year.
Recall, the economy is taxed to raise federal revenue. GDP growth of 2% is too small to match this growth in demand. That our GDP growth must be so anemic is itself a demographic phenomenon, again originating in the 1960s: Americans turned away from the family then, and the results are here now.
Move the U.S. population forward, through the productivity phases of life — including the retirement phase the baby boom is entering — all the while accounting generously for immigration, and one determines that growth potential.
So, the welfare state will overtake more and more of the economy.
Societies may seem to change at the speed of a glacier, but demographics also moves with a glacier's power: all yields to its force.
The head of this glacier — as we might call the welfare state — has behind it the U.S. population, concentrated in the baby boom. The hulking welfare state will be brought down by its own prime mover.
There is nothing larger than the present value of this state's future liabilities, except one thing. Using a conservative median monetary value of human life — $2 million per household — the households lost to the revolution of the 1960s would be valued at $100 trillion. In present-value terms this covers that liability.
The cause of all of this is the breakdown in the primary U.S. economic unit: the household, which is to say, the family. The new American family is smaller and does not have the human capital production capacity equal to its responsibilities.
What will America look like when the Baby Boomer are at the peak of their dependency and state dependents decide, more and more, our policy? America of the later 2020s will look like the overburdened states of Europe.
There is a mountain behind our fiscal cliff.
Blackwell is senior fellow for Family Empowerment at the Family Research Council and was chairman of the 2000 Decennial Census Monitoring Board.
Potrykus is senior fellow and head of research at the Marriage and Religion Research Institute.