Aging America needs immigrants or faces higher taxes, more imports

The country is becoming a nation of the elderly. 

In Maine, the future is us.  The state now has the highest median age of all states.

The U.S. birth rate continues to decline.  By 2035, Americans over 65 will outnumber all children.  A reduction in family size is typical of societies as they become more affluent. 

Not all families enjoy the same wealth.  More affluent families that have enjoyed economic opportunity have smaller families.  The reality is that mostly white families are causing the decline in the population.  

The country would have grown older more quickly, except for youthful immigrants and a higher birth rate among non-whites.  In fact, the number of non-Hispanic whites will begin the fall in just six years.  They will be less than half the population by 2045.

The booming senior population creates major economic problems.  There are fewer workers relative to the entire population.  One reason for Maine’s low unemployment rate is the shrinking number of young people in the state seeking work.

The reduced working population nationally will slow economic growth. It will simply be impossible for the smaller workforce to keep up production much less make it grow.  Increasing automation will help, but will not fully offset the decline in labor.

Current trade policy is based on replacing U.S. imports with domestic production in sectors from steel to autos.  But the U.S. economy will not be able to meet this challenge when employers won’t find enough workers.

The economy must shift toward meeting the needs of the enlarged older population.  Money that might have been intended to boost the economy either through tax cuts or public spending will go to support programs like Social Security and Medicare. 

Older citizens vote more heavily than the general population and cannot be denied.  They present major demands.  Estimates show that more than 40 percent of the aging population does not have enough money to maintain their standard of living in retirement. 

Social Security was meant to supplement other retirement plans.  But the percentage of the elderly with access to employer-funded retirement plans has plummeted.  And the 401(k) retirement plan has produced far less money for old age.

The traditional plan yielded a guaranteed retirement income and its assets were invested by professional managers.  But businesses found that, by using 401(k) plans, they could reduce their costs.  The payout would depend on investment decisions made by employees, the ultimate beneficiaries.

Reduced pension funding, recession and poor investment decisions drastically undercut the new system.  Added to these factors was the ability of beneficiaries to withdraw funds to meet family needs, thus stripping their own pensions.  This was not possible under the traditional system.

The inevitable result of inadequate pensions is greater reliance on the government, well beyond the effect of the population shift toward the elderly.  Social Security and Medicare, funded by contributions from current workers, are asked to do more while receiving less.

To deal with the crisis of a smaller workforce and a larger senior population relying more heavily on government, only two solutions appear to have any chance of working – more imports and higher taxes. 

Income support programs will have to be financed by higher payroll taxes. Domestic production will have to be replaced by foreign goods.   Both could undermine economic growth.  

The U.S. now wants to cut imports from countries with cheaper labor and lower environmental standards.  Conditions abroad may improve, but, whatever happens, the U.S. will remain dependent on foreign goods produced by foreign labor.

Raising taxes and increasing imports run counter to current Trump administration policy.  Yet these actions will not be a matter of choice.  They are the inevitable result of a falling birth rate and an aging population. 

An alternative, already shown to work throughout American history, is obvious.  If a nation of immigrants returned to its traditional immigration policies, it could quickly increase the number of American workers and customers. 

New Americans would supply the payroll taxes to support Social Security and Medicare, and they would stimulate economic growth by boosting both production and demand.

Current opposition to immigration stems from concerns that new, young arrivals change the ethnic make-up of the country.  But that change is taking place naturally, even without immigration.

In recent years, Congress has come close to agreeing on a new immigration policy, going beyond merely closing the door on illegal immigrants.  Economic reality dictates the need for congressional action that does more than build a wall.

The best solution for an aging American population is to make it younger.