I love unintended consequences. This article in the Weekly Standard online is a great example. We all know that declining birth rates cause problems for Social Security. I'll bet most of us haven't figured out that Social Security can be a cause of declining birth rates.
First, let's review the facts. Social Security is a pay-as-you-go system. The payroll taxes you pay today are not saved for your retirement, they are used to pay the pension of someone who is now retired. The system's major problem is our aging population. The reasons for this aging are twofold: we live longer and have fewer children. As the ratio of younger workers to older retirees declines, fewer workers have to pay higher taxes to support more retirees.
Capretta's argument is that people in societies without retirement plans have more children in order to be sure to have care-givers in their declining years. People in societies with retirement plans have fewer children as they rely instead on government payments for old-age support. Much of the money they might have spent raising children gets paid into formal retirement plans instead. Thus, the existence of a retirement system removes one motivation for large families, and also reduces the earnings available to raise children.
I find this interesting because while I knew that a declining birth rate caused problems for Social Security, I hadn't spotted that Social Security helps cause a declining birth rate.
