Thursday, August 12, 2010

Euroformula - How to be Inconsequential
The Parent Trap
By Robert Samuelson
WASHINGTON -- "Among the government's most interesting reports is one -- published by the Agriculture Department -- that estimates what parents spend on their children. The latest version finds, not surprisingly, the costs are steep. For a middle-class husband-wife family (average pre-tax income in 2009: $76,250), spending per child is about $12,000 a year. Assuming modest annual inflation (2.8 percent), the report estimates that the family's spending on a child born in 2009 would total $286,050 by age 17. A two-child family would cost about $600,000."
"These dry statistics ought to inform the deficit debate, because a budget is not just a catalogue of programs and taxes. It reflects a society's priorities and values. Our society does not -- despite rhetoric to the contrary -- put much value on raising children. Present budget policies punish parents, who are taxed heavily to support the elderly. Meanwhile, tax breaks for children are modest. If deficit reduction aggravates these biases, more Americans may choose not to have children or to have fewer children. Down that path lies economic decline.  Societies that cannot replace their populations discourage investment and innovation. They have stagnant or shrinking markets for goods and services. With older populations, they resist change. For a country to stabilize its population -- discounting immigration -- women must have an average of about two children. That's a "fertility rate" of two. Many countries with struggling economies are well below that. Japan's fertility rate is 1.2. Italy's is 1.3, as is Spain's. These countries are having about one child for every two adults.
The U.S. fertility rate isn't yet close to these dismal levels. In 2007, it was at the replacement rate of 2.1 children per woman, reports the National Center for Health Statistics. Hispanics were at 3.0, and other groups clustered near replacement: 1.9 for non-Hispanic whites; 2.1 for non-Hispanic blacks; and 2.0 for Asian-Americans."
"No one has a good answer" as to why fertility varies among countries, says sociologist Andrew Cherlin of Johns Hopkins University."
"After the Soviet Union's collapse, says Cherlin, "anxiety for the future" depressed birth rates in Russia and Eastern Europe.  In poor societies, people have children to improve their economic well-being by increasing the number of family workers and providing support for parents in their old age. In wealthy societies, the logic often reverses. Government now supports the elderly, diminishing the need for children."
"We need to avoid Western Europe's mix of high taxes, low birth rates and feeble economic growth. Young Americans already face a bleak labor market that cannot instill confidence about having children. Piling on higher taxes won't help. "If higher taxes make it more expensive to raise children," says demographer Nicholas Eberstadt of the American Enterprise Institute, "people will think more about having another child.""
From 2011 to 2020, the Obama administration projects budget deficits of $8.5 trillion. Other estimates are higher. Even if spending and benefits for the elderly are cut -- as they should be -- higher taxes will still almost certainly be needed. Parents ought to be shielded from the steepest increases.
Any tax system rewards some activities and punishes others. A case in point is the mortgage interest rate deduction that rewards people for buying larger homes with more debt. We might reduce this dubious subsidy and shift some savings toward children. Stein advocates combining existing pro-child tax breaks (the personal exemption, the child tax credit, the child-care credit and the adoption credit) into one generous credit. Whatever the details, policies should have a pro-family bias because parenting is, as he writes, "one of the most important services any American can perform.""

There's no way the government will ever get the balance right - they'll tax too much, the wrong way, and then still waste what they take.  Political calculus cannot possible balance the priorities intelligently.  It's arguable whether a genius making decisions with the conscience of saint could do it - but a gang of politicians?   "Pull the other one."

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