How Our Budget Policies Are Hurting Families

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Among the government’s most interesting reports is one that estimates what parents spend on their children. Not surprisingly, the costs are steep. For a middle-class, husband-and-wife family (average pretax income in 2009: $76,250), spending per child is about $12,000 a year. Assuming modest annual inflation (2.8 percent), the report estimates that the family’s spending on a child born in 2009 would total $286,050 by age 17. A two-child family would cost about $600,000. All these estimates may be understated, because they don’t include college costs.

These dry statistics ought to inform the deficit debate, because a budget is not just a catalog of programs and taxes. It reflects a society’s priorities and values. Our society does not—despite rhetoric to the contrary—put much value on raising children. Present budget policies punish parents, who are taxed heavily to support the elderly. Meanwhile, tax breaks for children are modest. If deficit reduction aggravates these biases, more Americans may choose not to have children or to have fewer children. Down that path lies economic decline.

Societies that cannot replace their populations discourage investment and innovation. They have stagnant or shrinking markets for goods and services. With older populations, they resist change. To stabilize its population—discounting immigration—women must have an average of two children. That’s a fertility rate of 2.0. Many countries with struggling economies are well below that. Japan’s fertility rate is 1.2. Italy’s is 1.3, as is Spain’s. These countries are having about one child for every two adults.

The U.S. fertility rate isn’t yet close to these dismal levels. In 2007 it was at the replacement rate of 2.1, reports the National Center for Health Statistics. Hispanics in the U.S. were at 3.0, and other groups clustered near replacement: 1.9 for non-Hispanic whites; 2.1 for non-Hispanic blacks; and 2.0 for Asian-Americans. (Not all the news is good. About 40 percent of births are to unmarried mothers; many children are entering poor or unstable homes.)

Though having a child is a deeply personal decision, it’s shaped by culture, religion, economics, and government policy. “No one has a good answer” as to why fertility varies among countries, says sociologist Andrew Cherlin of Johns Hopkins University. Eroding religious belief in Europe may partly explain lowered birthrates. In Japan young women may be rebelling against their mothers’ isolated lives of child rearing. General optimism and pessimism count. Hopefulness fueled America’s baby boom. After the Soviet Union’s collapse, says Cherlin, “anxiety for the future” depressed birthrates in Russia and Eastern Europe.

In poor societies, people have children to improve their economic well-being by increasing the number of family workers and providing support for parents in their old age. In wealthy societies, the logic often reverses. Government now supports the elderly, diminishing the need for children. By some studies, the safety nets for retirees have reduced fertility rates by 0.5 children in the United States and almost 1.0 in Western Europe, reports economist Robert Stein in the journal National Affairs. Similarly, some couples don’t have children because they don’t want to sacrifice their own lifestyles to the time and expense of a family.

We need to avoid Western Europe’s mix of high taxes, low birthrates, and feeble economic growth. Young Americans already face a bleak labor market that cannot instill confidence about having children. Piling on higher taxes won’t help. “If higher taxes make it more expensive to raise children,” says demographer Nicholas Eberstadt of the American Enterprise Institute, “people will think [twice] about having another child.” That seems like common sense, despite the multiple influences on becoming parents.

How to reconcile this with deficit reduction is unclear. From 2011 to 2020 the Obama administration projects budget deficits of $8.5 trillion. Even if spending and benefits for the elderly are cut—as they should be—higher taxes will still almost certainly be needed. Parents ought to be shielded from the steepest increases. Stein advocates combining existing pro-child tax breaks (the personal exemption, the child tax credit, the child-care credit, and adoption credit) into one generous credit. Whatever the details, policies should have a pro-family bias because parenting is, as he writes, “one of the most important services any American can perform.”

Robert Samuelson is also the author of The Great Inflation and Its Aftermath: The Past and Future of American Affluence and Untruth: Why the Conventional Wisdom Is (Almost Always) Wrong.