February 12, 2019

I just returned from my annual vacation of two weeks in the Caribbean on our ninth annual Jazz Cruise, coinciding with our anniversary (51 years and counting). Like my wife and I, most passengers are visibly aging. Dozens entered and exited the ship in wheelchairs or walkers. I will join them soon as I undergo knee replacement surgery next Tuesday. Aging is a fact of life in America and the West, but a lesser-known fact is that we are having fewer children, so fewer workers are underwriting our aging needs.

The media and most politicians seem to concentrate on trivial events – perhaps so that they can avoid facing the more important issues. The press is obsessed with 35-year-old yearbook pictures instead of a $22 trillion public debt. Both Democrats and Republicans seem to agree that the federal debt is not a problem worth addressing. On the weekend “Meet the Press” program, several Democratic hopefuls said, “I’m sick and tired of hearing we can’t afford…” this or that new form of spending. Host Chuck Todd and others also quoted polls showing that an overwhelming majority of Americans want MORE SPENDING!

A September 15, 2018 Washington Post article titled, “Deficit hawks are dead,” said, “Few in Washington can muster any outrage” over runaway spending or debts. The Republicans have apparently given up on their traditional role as fiscal conservatives, and any Democratic outrage over the recent Republican tax bill is not centered on the resulting deficits it helped create but that the money should have been spent “for other federal spending, such as infrastructure or an expansion of the Affordable Care Act.”

The Congressional Budget Office just released a massive study, “The Budget and Economic Outlook, 2019-29,” released January 28. It projected that the Treasury debt held by the public would grow by over $1 trillion per year over the next decade, rising from $16.6 trillion in 2019 to $28.7 trillion in 2029. (This does not include all public debt – only that held by the American public). The CBO warns that this would precipitate a “fiscal crisis…Specifically, the risk would rise of investors’ being unwilling to finance the government’s borrowing unless they were compensated with very high interest rates. If that occurred, interest rates on federal debt would rise suddenly and sharply relative to rates of return on other assets.”

Meanwhile, the Millennials aren’t procreating enough. According to Bloomberg, women in the 25-34 age cohort are delaying their child-rearing decisions, some until it may be too late or dangerous to undergo their first pregnancy. Also, many couples simply desire smaller families than in previous generations. The number of live births in the 12 months through March 2018 was only 3.8 million, the lowest since 1997.

For the Social Security system to have any long-term viability, the U.S. Social Security Trustee’s Report needs the total fertility rate to rebound from its present 1.76 average births per woman back up to 2.0, but that is wishful thinking for now. The established trend since 2008 is fewer children born each year.

East Asia and Western Europe are Aging More Rapidly

America’s birth rates are slowing down, but at least we have immigrants to boost our population. Asia has near-zero immigration and very few children. It’s a lesser-known fact that the poorer half of the world is also having far fewer children. The average global fertility rate has been cut in half from 5.0 children per woman of child-bearing age in 1965 to 2.4 in 2017, according to a long-term study published in Lancet.

For population to remain level, a 2.1 rate of birth per woman is required (due to infant mortality), but the world is headed for Zero Population Growth by mid-21st century. The current U.S. birth rate is 1.76 children per women, while Western Europe is 1.6, and China’s rate is 1.5. Shrinking regions include:

China’s one-child policy was necessary in its time, but the repercussions will include fewer workers in future years. China will not be an industrial powerhouse in the future unless it imports workers or builds factories in other nations with lower-cost workers. China’s domestic worker population will soon shrink:

In addition, many Chinese are trying to escape to the West and live in America. The net result will be more Chinese grandparents than children, and more retired Chinese than workers. There is also a surfeit of 117 boys born per 100 girls, which implies sex-selective abortion and likely some female infanticide.

In Europe, the same trend is true, but in more dramatic fashion, exacerbated by Europe’s welfare state:

However, the United States has a more hopeful demographic profile of workers through immigration:

(These data were compiled by Populyst, an independent website focused on demographic trends, based on the 2015 edition of the UN’s “World Population Prospects” for workers aged 15-64 in various regions.)

This series of charts tells us that it still pays to invest more in the U.S. than in Asia or Europe. But we must still address our long-term entitlement crisis, which is the key to addressing our budget deficit crisis.

We must also refuse to close our borders to qualified workers out of short-sighted populism of any stripe. One reason American prospects trump those of our competitors is that our net migration rate in recent years was a relatively high +2.9 vs. Europe’s +1.1 and China’s -0.2. (Net migration is the number of immigrants entering vs. number of emigrants leaving between 2010 and 2015, per 1,000 population).

As the late Swedish professor and demographic expert Hans Rosling said shortly before he died, “Fertile countries have a far brighter future,” although immigration and free markets can replicate the same effect.

A gradually growing population in a free market would be a good place to invest in the long-term.

(Note: Let me give a special thanks to the team at Yardeni Research for the one-time use of these charts!)

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. *All content of “Growth Mail” represents the opinion of Gary Alexander*

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