Magazine | March 19, 2018, Issue

The Graying of the Welfare State

(REUTERS\Enrique Castro-Mendivil)
It’s going broke -- and that’s not the worst problem.

Though less than 150 years old, the welfare state takes its moral bearings from ancient forms of human association. In 1984, New York governor Mario Cuomo analogized it to a family, “sharing . . . benefits and burdens for the good of all.” Philosophy professor Elizabeth Anderson compared the welfare state to an Amish barn-raising, where every community member pitches in to help a young farmer get started. The practice is based on the understanding that each beneficiary “will reciprocate when other members of the community need their barns raised.” A social-insurance program, such as Social Security or Medicare, is “no different in principle from the barn-raising system,” Anderson argued. “It’s just on a vastly larger scale that, due to its size, requires an intermediary administrative apparatus.”

These older arrangements, which shaped our expectations about what other people would do for us, and we for them, were established over millennia when life expectancy and the population’s age distribution were strikingly different from what they are today. If there were no welfare states, families and small communities would be challenged by modern life’s unprecedentedly large proportion of old people in the population, the demographic feature that sets our era apart from everything previously known to the human race. The welfare state will face challenges, too — some that are larger-scale versions of those confronting smaller, more intimate social arrangements, and others that are unique.

The proportion of the American population over the age of 65 was 3.9 percent in 1900, 8.4 percent in 1950, 12.4 percent in 2000, and 15 percent in 2016. The Census Bureau expects it to exceed 20 percent by 2050. This graying is not a uniquely American phenomenon. Twenty-seven percent of Japan’s population was 65 or older in 2016, as were 23 percent of Italy’s and 21 percent of Germany’s.

For most of human history, life was poor, nasty, brutish, and, consequently, short. One reason there are so many more old people now than in all previous epochs is that adults are living longer than they used to. By one analysis, covering the period from 1400 to 1745, male aristocrats in England who reached the age of 21 had an average life expectancy of an additional 41 to 50 years. We can safely assume that few people less favorably situated than noblemen enjoyed such longevity. Still, lifespans from 62 to 71 are not dramatically lower than the most recent (2014) figure for all 21-year-old American males, who can expect to live, on average, a further 56 years and three months.

The bigger reason for the worldwide senior boom is that children are so much more likely to survive long enough to become adults. Less than 300 years ago, child-mortality rates in northern Europe were between 33 percent and 50 percent. Such deaths, horrifically frequent by modern standards, were the biggest reason average life expectancy at birth was between 30 and 40. As recently as 85 years ago, one out of every 13 American children died before the age of five. The latest (2015) figure is one out of every 154. In 2014, 98.7 percent of the American males born in 1993 were alive, as were 99.1 percent of the females.

Percentages are fractions, of course. One way they can grow over time is for the numerator — the number of people 65 and over, in this case — to increase rapidly while the denominator, the total population, increases slowly. Both are happening, in America and around the world. Demographers believe that at a fertility rate of 2.1 (i.e., 1,000 women will, on average, give birth to a total of 2,100 babies during their childbearing years), a nation’s population will remain stable, barring any changes in net migration or mortality. For most of human history, fertility rates were at least two or three times this replacement level. People had so many children for obvious, powerful reasons. Where a large portion of the population is engaged in subsistence farming, children were needed for their labor. Abstinence, never popular, was the one highly reliable form of contraception. High child-mortality rates required high birthrates for those who hoped to have even some offspring survive to adulthood. Other than through bearing and raising children, women had few pathways to economic security or social status.

As all these factors have changed in prosperous modern nations, fertility rates have fallen. The global fertility rate is now below 2.5, half what it was in the 1960s. In prosperous nations, it has been below the 2.1 replacement level for decades. According to the Organisation for Economic Co-operation and Development, the U.S. fertility rate, which has not exceeded 2.1 since 1971, stood at 1.8 in 2015. The Census Bureau reports that in 1976, 10.2 percent of women between the ages of 40 and 44 (born, that is, between 1932 and 1936) had never had children. By 2000, for women born between 1956 and 1960, the peak of the Baby Boom, the figure was 19 percent. In 1976, the proportion of women between 40 and 44 who had had just one child was 9.6 percent; in 2000, it was 16.4 percent.

For all that, a fertility rate of 1.8 renders America fecund compared with many other industrial democracies. The 2014 average fertility rate for the 28 developed or nearly developed nations studied by the OECD was 1.7. Canada’s fertility rate was 1.6 in 2013, the most recent year with data the OECD could use. In 2015, Germany and Japan each had a 1.5 rate. Italy’s was 1.4, and the figure was 1.3 for Spain and Poland.

‘Will the world ever grow young again?” asked Ted C. Fishman in Shock of Gray (2010). It can’t be ruled out, he concluded, but neither could he identify any particular reason to expect such a reversion. For some time now, reasonably well-informed citizens have been aware of and concerned about the threat these long-term, apparently irreversible demographic trends pose to the welfare state. Advanced industrial nations designed and launched their welfare states just as the age distributions that had prevailed for millennia were beginning to change. Welfare-state architects and advocates assumed, plausibly, that future demographic realities would be fundamentally similar to those known throughout history. A famous example was economist Paul Samuelson’s bland assurance in a 1967 magazine column that there was no reason to be concerned about the fact that social-insurance programs are “actuarially unsound,” providing benefits far in excess of the contributions made to them. The “national product is growing at compound interest and can be expected to do so for as far ahead as the eye cannot see,” he argued. Moreover, “always there are more youths than old folks in a growing population.”

But, we now know, not in a stagnant or declining population. Increasing longevity and declining birthrates are going to exacerbate every fiscal, political, and social challenge related to the welfare state. In 1950, according to the OECD, there were 142 Americans 65 and over for every 1,000 between the ages of 20 and 64. By 2000, there were 209, and the OECD predicts that by 2050 there will be 403. Roughly, we’ll have gone from seven workers for every Social Security recipient in the middle of the last century to five workers for every two recipients in the middle of this one. Nations with bigger welfare states and lower birthrates than America’s will face even more-severe problems. The OECD projects that by 2050, France, Germany, and the Netherlands will all have more than 500 people 65 or over for every 1,000 between the ages of 20 and 64. In that situation, two workers’ taxes will not suffice to pay for one senior citizen’s benefits.

If the world does not grow young again, the welfare state will face problems that are easy to understand but will be very hard to solve. The Population Reference Bureau projects that the U.S. will have to increase the proportion of GDP devoted to Medicare and Social Security from the present 8 percent to 12 percent by 2050. As a matter of both politics and economics, devoting an additional four GDP percentage points to two legacy social-insurance programs is likely to prove more daunting than it sounds. Over the past half-century, federal outlays fluctuated within an extremely narrow range, from 17.2 percent of GDP to 24.4 percent. Most of the big “increases” took place during economic contractions: Federal spending grew relative to the economy in large measure because the economy was shrinking.

Lyndon Johnson’s presidency did see a volitional increase in federal spending of 3.2 percent of GDP, from 16.6 percent in 1965 to 19.8 percent in 1968. But that surge required a perfect storm: historically strong economic growth combined with an optimistic commitment to guns and butter from a nation that believed it possible to contain Communism in South Vietnam while building a Great Society at home. In the ensuing era of heightened skepticism about government’s competence and integrity, which lasts to this day, federal spending has generally (in 38 out of the 47 years from 1969 through 2015) fallen between 18 and 22 percent of GDP.

To devote an additional 4 percent of GDP to the two biggest welfare-state programs for a period of decades will, then, be very difficult to do. But it will also be very difficult not to do. A philosopher-king might determine and then impose the optimal mix of tax increases, benefit cuts to Social Security and Medicare (such as later retirement ages and increased insurance deductibles), and spending cuts that affect nearly every other government undertaking (Medicare and Social Security accounted for 39 percent of all federal spending in 2015) — or face deficits unlike any seen since World War II. But presidents and legislators will be far more constrained when attempting to enact policies that have serious adverse effects on large numbers of voters.

Before GDP percentages can be redistributed, they must be produced. Faster economic growth is the deus ex machina that would alleviate the hard political choices in our future, but also the result you would least expect from a society with a disproportionately large number of people either retired or nearing the end of their working years. Not only are brisk productivity gains less likely in such a society than in a younger one, but the risk-taking and unconventional thinking that produces companies such as Apple and Facebook are always more common among people in their 20s and 30s than those in their 60s and 70s. If an older America’s economy grows more slowly in the coming decades, it might be necessary to shift more than four GDP percentage points to avoid reducing our social-insurance programs.

The 20 most recent Democratic-party platforms all demonstrate that, to the welfare state’s advocates, any contradictions or inherent difficulties it might have are trivial problems compared with the single important one: the implacable opposition of its greedy, callous enemies. Defeat them, and all will be well. Always and simply, the cure for the ailments of the welfare state is more welfare.

Until the last Baby Boomer dies sometime in the second half of this century, the welfare state’s struggles will, however, highlight the fact that it was built on weak foundations. Yes, it will be harder and harder to keep the promises made over the past 85 years. But it was always going to be difficult to pay for the welfare state, which pandered to and reinforced democracy’s self-destructive habit of maximizing the benefits we’re entitled to receive while minimizing the duties we’re expected to perform. The 21st century’s demographic realities mock the conviction of Bernie Sanders Democrats that overturning Citizens United is the only thing standing between America and Scandinavian social democracy. “Medicare for All” is a fantasy, given that we’ll need stalwart efforts and exceptional good luck to preserve Medicare for anyone.

The welfare state’s sociological challenges in a gray America will be at least as severe as its financial ones. The welfare state is supposed to be a modern nation acting like a big family or community, but families and communities have boundaries that make clear who’s in and who’s out. A Left preoccupied with diversity and inclusion, convinced that people of good will can easily combine the two, stands against any real community’s inevitable attention to commonalities and exclusion. At many Barack Obama campaign events in 2012, after the president spoke, the crowd heard a recording of the Bruce Springsteen song “We Take Care of Our Own.” Good Democrats liked the “take care” part, but the 2016 election shows that many Trump voters, the people Springsteen sings about, were much more interested in “our own.” High immigration rates conduce to “welfare chauvinism,” in the words of Thomas Edsall of the New York Times. This disposition ties welfare benefits to “the explicit proviso that only legal residents qualify and that public spending on behalf of illegal immigrants be eliminated.”

The Atlantic’s Derek Thompson calls the effort to fortify the welfare state against the effects of low birthrates by accepting more and more immigrants “the doom loop of modern liberalism.” The leftist vision would realize the best of several worlds: diversity and inclusion and governmentally guaranteed economic security. But, Thompson laments, the evidence grows that “cultural heterogeneity and egalitarianism often cut against each other.” Aging nations “import” young workers for the same reason nations lacking oil deposits import fossil fuels. Beyond the general need to fortify the economy and tax base, the welfare states of relatively prosperous and aging societies often become heavily dependent on immigrants from poorer, younger nations. Fishman reports that Spain’s growing immigrant population includes many Ecuadorians working as caregivers for old, native Spaniards. Among the consequences is that the emigration of so many people from Ecuador in search of work in wealthier countries has made the country they left behind older and less prosperous.

And it’s not just to the foreign-born that we outsource the tasks of generating the wealth that welfare states require and delivering the services they promise. Elizabeth Anderson’s contention that social insurance is just community sharing undertaken on a vastly larger scale ignores the evidence and logic that dramatically changing the scope of an activity usually changes its nature. An “intermediary administrative apparatus” is needed when we set out to replicate, in a modern nation of millions, a small community’s reciprocal exchanges. But the people who constitute that apparatus will inevitably acquire interests and dispositions of their own, ones that may well leave them indifferent or even hostile to a national project of sharing and caring. “He who undertakes for a wage to be compassionate for 40 hours a week,” says political scientist Clifford Orwin, “will soon be so for no hours a week.” No mission statement or professional code of conduct can force employees to regard their clients the way we regard friends and family members.

This problem is likely to become acute in our new century, set apart demographically from all that has gone before. Not only will there be more old people than ever, but a larger proportion of them than in the past will spend their final years without a spouse, with few if any siblings, and few if any children. Even if the welfare state finds the money to pay the professional caregivers who act in lieu of family members, who will guard the guardians in our “kinless” future? If the nursing-home employees or visiting caregivers are abusive or just mediocre, and the “client” is incapable of demanding better treatment, who will be left to know, care, or intercede?

Absent a medical breakthrough, for example, the most reliable way to avoid Alzheimer’s disease will be to die of something else before it afflicts you. The Alzheimer’s Association calculates that 3 percent of Americans between the ages of 65 and 74 have this form of dementia, as do 17 percent of those between 75 and 84, and 32 percent of those 85 and older. As the number of very old people increases, while the proportion of them who have relatives engaged with their lives and struggles declines, the welfare state will be called on to solve problems for which it is ill prepared. Seen in this light, Europe’s growing reliance on euthanasia in nations with some of the world’s oldest populations and most extensive welfare states is shocking but not especially surprising.

For all the attention paid to the welfare state’s precarious finances, then, an aging population might cause more problems related to insufficient social capital than ones related to insufficient financial capital. The same fundamental paradox is implicated in the provision of both love and money: Welfare states were created to simulate families and communities when those forms of association were considered inadequate to meet the challenges of modern life. The existence and operations of the welfare state, however, steadily displace the older, more intimate forms of human association, whose atrophy leads to the expansion of the welfare state. As political scientist Alan Wolfe wrote in Whose Keeper? (1989), “the Scandinavian welfare states, which express so well a sense of obligation to distant strangers, are beginning to make it more difficult to express a sense of obligation to those with whom one shares family ties.” The danger is that “as intimate ties weaken, so will distant ones, thus undermining the very moral strengths the welfare state has shown.” If the welfare state turns out to be the cure for which it has also become the disease, then it will be remembered as a disease without a cure.

— Mr. Voegeli is a senior editor of the Claremont Review of Books and a contributor to the American Project at the Pepperdine School of Public Policy.

William Voegeli — Mr. Voegeli is a senior editor of the Claremont Review of Books.

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