Family-friendly federal policy should be a priority

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This is peak season for conceiving babies. Coincidentally, this December has also seen a debate over whether and how to expand the child tax credit, and that debate has brought more attention to another one: Why have U.S. birth rates been dropping?

On the American right, the line of division over this question is a little peculiar. Social conservatives typically fixate on culture, while libertarian conservatives emphasize economics. On birth rates, the sides are reversed.

Social conservatives tend to emphasize the economic causes for the decline, saying wage stagnation has made men less attractive as marriage partners and made raising a family harder. Blake Masters, the failed Republican Senate candidate in Arizona, spoke for this faction when he said that America needs an economy where you could once again raise a family on one income. (He did not detail how to get that economy.)

More market-oriented conservatives say that people’s preferences have simply changed. Scott Winship, who researches socioeconomic trends at the American Enterprise Institute (where I am a fellow), summarizes this point of view: “More women have professional aspirations, more young adults want to spend more time childless and single, and more adults of all ages prefer a more comfortable lifestyle that often requires two incomes.” If that’s the main reason you think birth rates have fallen, you might still favor policies such as the child tax credit as a means of helping parents and reducing child poverty. But changing government policy to make family formation more affordable won’t seem urgent.

Each side of this mostly friendly argument has a strength and a weakness. The difficulty of the wage-stagnation theory is that wages haven’t actually stagnated. Even looking only at men’s wages, the median wage has risen during the last 30 years. It hasn’t risen as rapidly as in the 1950s and 1960s, but the trend has been much better than in the 1970s and 1980s, when it fell. Rates of marriage and childbirth do not align closely with this pattern.

At the same time, the notion that people are just getting what they want out of life runs into a lot of survey research that says they aren’t. When women in the U.S. are asked how many children they would like to have, or variants of the question such as what is the ideal size for a family, the consistent tendency is to volunteer a larger number than they end up having.

Maybe there’s a way to reconcile these points of view with each other, and the evidence. For a lot of reasons – including economic growth, the opening of careers to women, the development of modern financial markets – the opportunity cost of raising children has grown.

It may be just as possible as ever, as Winship says, to raise a family on one income if you are willing to accept a 1970s standard of living. But the wealth and income gap between the couple with three kids and the couple with one child (or no kids) has, it stands to reason, expanded. That’s especially because the more kids in a family, the greater the likelihood the mother is forgoing income. A family of five today may have a higher income than one did 50 years ago. But its relative income, and status, has declined.

That would be a straightforward economic explanation for part of the decline of birthrates, albeit not the one favored by most social conservatives. But even if it’s right, it doesn’t really point to what should be done. We could say: Life is full of trade-offs, and if you want a standard of living close to that of your peers, you have to have fewer kids than you want.

Or we could say that the opportunity cost has gotten too large, and we should look for ways to make it lower. Overregulation has pushed up the cost of housing, for example, which could be causing a delay in starting families and a decline in the willingness to expand them. That’s not something we have to accept as an inevitable feature of modern life.

There is also the question of whether the cost of government is falling too heavily on parents. Federal programs to take care of older Americans, especially, depend on people making the financial sacrifices needed to raise the next generation of taxpayers but do not pay parents more (or tax them less) in recognition of their contribution. The structure of these programs amounts to a large implicit tax on parents.

This too is something that could be changed, through reform of either the tax code or entitlement programs. The overall financial gap between larger and smaller families would then also shrink. One way of accomplishing this goal would be to enlarge the tax credit for children and make it apply against all federal taxes.

None of this would be likely to create an economic incentive so great that it made adults want to have more children. It would, however, make it easier for them to have the children they already want.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Ramesh Ponnuru is a Bloomberg Opinion columnist. He is the editor of National Review and a fellow at the American Enterprise Institute.

(This column does not necessarily reflect the opinion of Parikh Worldwide Media/News India Times)