Children And Economic Growth

The Wall Street Journal has a nice article on one of the Presidential Candidates (OK, so it’s Rick Santorum.)  Now, I’m not pro-Rick Santorum, or anti-Rick Santorum, but one paragraph of this article leaped out at me.

Most disappointing is the Pennsylvanian’s proposal to triple the tax credit for children (from $1,000 today), which is a hobby horse of the Christian right. This is social policy masquerading as economics. Unlike a cut in marginal tax rates, a larger tax credit does little for growth because it doesn’t change incentives to save, work or invest. It merely rewards taxpayers who have children over those who don’t.

Now, this is only partially true.  (Of course, I’m one of those ‘Christian right’ people with a hobby horse, so my opinion is obviously not valid.)  While there may be little direct and immediate economic benefit, to say that it does “little for growth because it doesn’t change incentives to save, work or invest” means that those metrics are the only way to measure economic growth.  But they are not.  One of the primary forces behind economic growth is population.  Without population growth, economic growth is unsustainable.  One of the countries in Europe (and the world) with the lowest birth rates is Greece.  How’s that economy working right now?  What?  You say that they have a massive problem because there are too many retired people being supported by too few working people?  Shocking. (Yeah, I know, Greece has other problems, but this is certainly one of primary ones.)

In China, officials have noticed something.  The “One-child” policy is going to create a massive population crash.  Of course, they wanted that, but then they noticed what it would do to the economy.  Now they are re-thinking it.

In Ancient Rome during the first century (before it became a mouthpiece for the “Christian right”) there was actually a law passed that said young men from the aristocracy needed to get married and have children.  Why?  Because the men found out that it was more fun to go to college, then grad school, and then live in their parent’s basement while going clubbing and hooking up on weekends than it was to get married, get a job and settle down.  Birth rates were too low among the nobility, and the Senate saw that soon there would be no nobility. This was a crisis that was more than just Christian social policy.  It would destroy the foundations of Roman society, and it would take the economy with it.

Encouraging families is hardly “social policy masquerading as economics”.  The very word economics means “law of the house.”  The social structures of the family are the basis of financial policy.  What was it that brought about the recession?  The “Home Loan” crisis.  Some might say that it was not about families,  it was about obscure financial instruments.  But those instruments were designed to minimize risk so more people could buy buildings and land.  But you see, those ‘people’ were families.  The ‘land and buildings’ are called homes.  The idea of “everyone a homeowner” may or may not be a good idea, but people providing for their family is what drives the economy.

Children working at McDonalds and blowing their money on new 45’s of the Beach Boys (or whatever those young whippersnappers buy these days) does not drive the economy.  It drives the economy of RCA records.  That is very different from the Banking industry, the Automotive industry, etc.  Those are generally structured to help support, and to make profit from, the family.

Ford loses money on small cars that they must sell to meet fuel efficiency requirements.  They make it up on big people-movers that they sell to families.  How many families ponder the idea of more children and say, “But we can’t fit any more into our vehicle”?  We made the final decision about our last two vehicles based solely on seating capacity. Family drives the economy in thousands of ways.   More children will mean more large vehicles sold, more children in college, more workers to support all those retirees, and so on and so on. Now, this is not just Keynesian economics that says, “just spend more to increase economic growth.”  More children means more people producing as well as consuming.   Of course, this is not an immediate benefit.  It is long term.  But it is an economic one.

Finally, their claim that “work, save, invest” are the ways to measure economic growth shows a decidedly pragmatic and materialistic view of economic growth.  That may be the accepted definition in modern economics, but it is no less “social policy masquerading as economics.”  Any economics is social policy.  It will influence what a person does for a living, how much can be earned, how many years they work, what sort of working conditions they experience, where they will live, etc.  If you don’t think that the disastrous economic policies of, for example, Michigan have had an impact on social interactions of those who must endure them (and for that matter the lives of the million plus people who left for better economic climates) then you do not understand that economic policy is first and foremost about people.  What you decide today will effect them tomorrow in a thousand unplanned ways.

So, while I may or may not be in favor of the tax plan of a particular candidate, or for that matter, the candidate himself, I do think that the government encouraging families is a good thing.  It’s got to be better than the plan they had in the sixties to pay people to have children but no fathers.

But again, I’m one of those “Christian right” people riding my hobby horse into the sunset, so my opinion can be safely ignored by the economic elite that gave us October of 1929, October of 2008, and October of whatever year is coming when they destroy the economic dreams of millions more.

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