A Demographic Morning in America
BY Gustavo O. Fernandez, Master of Global Policy Studies student
This article originally appeared in National Intelligence Council's blog "Global Trends 2030" on July 26, 2012.
When considering the question of American decline, one could point to yawning budget deficits, unaffordable entitlement programs, a creaking infrastructure or the coming ‘fiscal cliff,’ comprised of tax hikes and budget cuts, as domestic factors contributing to an American power in retreat. Internationally, one could cite China’s rise as a potential threat, and another indicator of possible American decline. Yet, when one looks at the country’s demographic projections through 2050 the US has a strong, positive outlook that will make solving these challenges manageable.
The US has always been a country welcoming to immigrants, who have been enticed by the power of democracy, opportunity and the promise of a brighter future for their children. This promise continues to manifest itself with strong population growth. For example, over 90 percent of US population growth since 2000 has come from immigrants or the children of immigrants. Because of this trend the population of the US is predicted to increase by an additional 30 percent between now and 2050.
A growing population means that the base of citizens that can be taxed will increase, making it relatively easier to fix our deficit, and with less pain, since it will be spread across more people. It also means that we will have the resources to continue to staff our military, and that we will have a robust working population that will support our retiring baby boomers. Most importantly, as the US grows and becomes more racially and ethnically diverse, it will lead to more innovation, and more entrepreneurship. For example, between 1995 and 2005, 52 percent of American start-up companies were founded either by immigrants or their children. This is the kind of innovation that we need in order to meet the challenges that we face today.
Strong population growth will also help the US internationally. China is often cited as one of the central potential threats to American power. Yet when we compare fertility rates we get a different picture. China’s fertility rate, at 1.56, is below replacement. This means that China’s population is, in fact, shrinking. In contrast, the US’s fertility rate, at 2.08, shows a population that is growing. This will be a challenge for China, and one that will limit its ability to project power internationally over the medium and long-term.
Some readers may greet with skepticism the news that China’s shrinking population is a problem. After all, China is a huge country of over one billion people. It is true that a shrinking population is not necessarily bad. The challenge that China faces is that its population is both shrinking and aging very quickly. China’s population will begin to shrink after 2026, and by 2050 the size of the working population will be 50 percent smaller than today. This means that the country will have fewer working-age people taking care of their abundant older relatives, and with no comprehensive, functional pension system in place, China will struggle to meet the needs of its quickly greying population. This will be a significant strain for China, and will demand the attention of the country’s leadership. And while China turns inward to deal with its “senior tsunami,” the US will continue to enjoy the benefits of strong population growth.
Population growth will continue to shift the ethnic makeup of the US. The ethnic makeup may be evolving, but the idea of America, what makes our country exceptional, is alive and well. And that’s good news. The positive demographic numbers mean that we will have the people, ideas, time and energy to find innovative solutions to the problems that worry our country today.
Simply having a positive demographic outlook won’t solve all of our problems, but it is a very good start. Demography may not be destiny, but it does put us in a strong and advantageous position moving forward. It is now up to our political leaders and policymakers to craft and implement the correct forward looking policies to effectively harness the demographic advantage that the US is set to enjoy for the next 40 years or more. Hopefully our leadership is up to the task.
Gustavo O. Fernandez is a graduate student in the Master of Global Policy Studies program at the Lyndon B. Johnson School of Public Affairs at The University of Texas-Austin.