Last year, Gretchen Livingston of the Pew Research Center observed the following:

States experiencing the largest economic declines in 2007 and 2008 were most likely to experience relatively large fertility declines from 2008 to 2009, the analysis finds. States with relatively minor economic declines were likely to experience relatively small declines.
For example, North Dakota, which experienced one of the nation’s lowest unemployment rates (3.1%) in 2008, was the only state to show even a slight increase (0.7%) in births from 2008 to 2009. All other states and the District of Columbia experienced either no change, or declines, in births during that period.
These correlations are based on fertility trends calculated using data from the National Center for Health Statistics and the U.S. Census Bureau and economic trend data from six familiar indicators (per capita income, per capita gross domestic product, employment rate, unemployment rate, initial unemployment claims, and foreclosure rates) tracked by the Bureau of Economic Analysis, the Bureau of Labor Statistics and RealtyTrac.
Since 2007, the U.S. fertility rate—which controls for variations in the size of the female population of childbearing age—has dropped markedly from 69.6 births per thousand women ages 15-44 to 66.7 births per thousand women ages 15-44 in 2009. Provisional data for 2010 indicate a further drop to 64.7 births per thousand women ages 15-44.
The Pew Research Center analysis also finds evidence of an association between economic hard times and fertility declines by race and ethnicity. Hispanics, whose employment levels and household wealth were particularly hard hit by the Great Recession, have experienced the largest fertility declines of the nation’s three major racial and ethnic groups. Conversely, whites have experienced smaller economic hardships, and smaller declines in fertility. From 2008 to 2009, birth rates dropped by 5.9% among Hispanic women, while birth rates dropped 2.4% among black women and 1.6% among white women.

As Livingston goes on to note, it is possible that this fertility decline merely means that women are postponing childbirth, e.g., it seems that the fertility decline is concentrated among younger women. If, however, we’re seeing a secular deterioration of the labor market position of less-skilled workers, one wonders what impact this might have on fertility decisions over the longer-term. Moreover, among the upper-middle-class, child-rearing is seen as a far more labor-intensive activity than it had been some decades ago. Parents who are more attuned to the future labor market prospects of their children have been diverging from those who are less so in their fertility decisions, and this is likely to have significant implications for the skill mix of the prime-age population in future decades.

This evolving landscape strengthens the case, in my view, for Robert Stein’s call for a more “family-friendly” tax code:

There are, of course, already some modest tax benefits attached to having children. Combining the impact of the $1,000 per-child tax credit with 15% of this year’s dependent exemption of $3,650 (15% being the income-tax rate paid by most middle-class parents), it turns out that ­having a child today reduces the typical household’s annual tax burden by a total of about $1,550. But considering both the cost and the value of raising children, $1,550 is much too low.
The exact cost of raising a child is notoriously difficult to estimate, given disparities in spending at different income levels — not to ­mention the countless unquantifiable factors involved. But if we take the commonly cited Department of Agriculture figure of $13,000 per child per year through age 17 (a figure that does not even account for college-­education costs) — and the fact that Social Security and Medicare will absorb about 25% of the labor income of a child born today — we would find that sharing the direct financial costs of raising children to the same extent that the benefits of their future labor income will be shared would require reducing the annual tax bill of parents by $3,250 per child (25% of $13,000).
Another way of looking at the issue is to consider that the present value of future Social Security and Medicare contributions for a typical worker born today is about $150,000. Rewarding parents for creating these future contributions suggests annual tax relief of about $8,500 per child.
To correct for this inadequate treatment of households with ­children, the existing dependent exemption for children, the child credit, the ­child-care credit, and the adoption credit should be replaced with one new $4,000 credit per child that can be used to offset both income and payroll taxes. (This amount is set much closer to the $3,250 figure than the $8,500 one mostly to reduce the plan’s negative impact on federal revenue.)
The new child credit would accomplish several significant policy goals. First, it would offset the anti-parenting bias created by Social Security and Medicare. Second, the credit would help simplify the tax code by getting rid of other exemptions and credits that apply to ­children. Third, and very important for many families, it would end the bias against families with a stay-at-home parent now caused by the child-care credit (which applies only if both parents are working for pay). And finally, it would reduce effective marginal tax rates for many middle-class families.

This view is not universally embraced. It certainly represents a departure from horizontal equity, in which families with children would enjoy far more favorable tax treatment than families without children earning comparable incomes. And of course there are other ways to achieve the same goal, e.g., through a direct subsidy rather than a tax credit. While I tend to favor the elimination of tax expenditures, I recognize that ordinary income should be treated somewhat differently than capital gains and dividends. In a similar vein, I think it is entirely coherent to treat the decision to have children as meaningfully different from consumption as conventionally understood; the expenses associated with child-rearing can be understood as a form in investment in human capital. The case for the mortgage interest deduction strikes me as much weaker, particularly when we consider how it interacts with supply constraints in the housing market.

Unfortunately, many people will nevertheless see calls for an increased child tax credit as just another form of special pleading. I doubt they can be persuaded otherwise. Fortunately, my sense is that a majority of voters would be broadly sympathetic to the idea that a more decentralized, parent-centric approach to investing in human capital has merit.