The coronavirus pandemic has slashed fertility rates to their lowest point in U.S. history, but the experts at the Social Security Administration — who are deeply invested in the issue — say it’s just a blip and women are merely deferring children to later years.
The Total Fertility Rate, a measure of how many births a woman is projected to have in a lifetime, will dip to 1.54 this year and stay low at 1.64 next year. But Social Security’s trustees, in a new report last week, said they expect that “will be fully made up for by increased rates” in the years afterward.
“In other words, the pandemic will cause a number of women to defer childbearing from 2021-22 to 2024-26,” the trustees concluded.
Birth rates have been one of many closely watched markers of the pandemic, and combined with the morbidity rates of the virus, it is among the most important in the long run. A lasting birth dearth means fewer workers to support retirees in the second half of the century.
Social Security’s trustees have an optimistic take. In fact, they predict things will come roaring back even beyond the lows and highs of the pandemic and its immediate aftermath. The fertility rate should reach 2 by the mid-2050s — a rate that hasn’t been seen since 2009, when the country was mired in the Great Recession
Stephen Goss, Social Security’s chief actuary, said they believe that the last decade was an aberration and that women on average do say they want to have at least two children.
Other experts are more pessimistic.
The Congressional Budget Office sees a lasting birth dearth, with 130,000 fewer births each year this decade and 160,000 fewer births each year in the following two decades.
That means hundreds of thousands fewer people in the labor force in future years to support retirees toward the end of the century.
The CBO, in its long-term budget outlook released in March, said once the pandemic is over, the Total Fertility Rate (TFR) will rise for the rest of this decade, hitting 1.85 births per woman in 2029, then remain there for the coming decades.
If the CBO is right, it means a somewhat tougher time for the country’s big social safety net programs.
Chuck Blahous, a former Social Security public trustee, said there’s reason to be skeptical that birth rates will come roaring back the way the trustees project.
“We haven’t had it at that level throughout the last decade,” he said in an online briefing on the trustees’ report, held by the Mercatus Center at George Mason University. “It surprised me a bit, and if I had to bet on whether things are going to be worse or better than projected in this report, I would probably bet they would be worse.”
He said the trustees’ report was bad enough even with the optimistic birth rates.
They projected Social Security’s trust funds will be exhausted in 2034, at which point under the law the program will only be able to pay out what’s coming in from taxes. That is projected to be just 78 cents for every dollar in promised benefits, dropping a few cents more in the later decades.
Birth rates are at the heart of the calculations.
Mr. Goss said that if women had continued to have children at the rates of old, there would be plenty of workers supporting Social Security beneficiaries.
“Our big shift in the cost of Social Security over the long term is because of the change associated with birth rates,” he said in the Mercatus Center briefing.
It plays out in big ways.
For the period from 1990 to 2008, Social Security benefits amounted to about 4.2% of gross domestic product. Given current benefits and the expected labor force, it will rise to about 6%, then stabilize toward the end of this century.
Mr. Goss said it all boils down to some simple math: Does the country want to pay the taxes to fund that higher rate, cut benefits to keep it to the 4% rate it was before, or do some combination of taxes and benefit cuts to find a middle ground?
The 2021 trustees’ report is the first to take account of the coronavirus pandemic. Mr. Goss said they will be closely watching fertility rates in the future to see whether they do rebound, as he’s projecting.
He said the pandemic has affected the other end of the demographic curve as well, with death rates rising.
Among those ages 15 and older, the rate for 2020 increased 16.4%, and for 2021 it will be 15% higher than previously thought. Things improve next year with death rates only 4% higher, and 1% in 2023.
Among those under 14, mortality rates are falling during the pandemic, Social Security predicts, with a 14% decrease in 2020, 10% this year and 2% next year.
That still works out to an overall increase. Deaths had been steady at just above 800 deaths per 100,000 people over the last decade, but that reached 925 last year and will still be 900 deaths per 100,000 people this year.
Things will improve by 2023, when the rate will drop below 800 deaths per 100,000 people, Social Security projects.
That is both good and bad news.
“As good as it will be for all of us to live longer, it’s bad for the finances for Social Security or for any pension, for that matter,” Mr. Goss said.
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Source:Washington Times
