July 5, 2006


China's choice: Baby boom or bust (Antoaneta Bezlova, 3/21/06, Asia Times)

Fixated on maintaining the country's high-powered economic growth, Chinese policymakers have been soliciting opinions from economists about how to avoid future labor shortages by relaxing and even scrapping the rigid one-child policy. [...]

The government's confidence...has been dented by a series of studies in recent years, and demographic evidence suggesting that because of the low birth rates China is growing old too early and too fast.

Fears have risen that a rapid increase in aged people will put a strain on the working-age population and slacken economic growth. As China's baby-boomers born before 1979 start retiring, there will be fewer young people of working age to take their places and fuel the country's economic powerhouse.

"For 20 years China benefited from its 'demographic dividend', but now we anticipate that around 2015, this dividend [will] turn into deficit," said Cai Fang from the Population and Labor Economic Research Institute under the Chinese Academy of Social Sciences.

Cai's research credits the surge in the number of working-age people, or what he calls the "demographic dividend", with contributing to 24% of the economy's growth between 1978 and 1998. But Cai predicts China will see the growth of its working-age population coming to a halt around 2013 and might begin experiencing labor-force shortages.

"We are currently witnessing the transformation of China into an unprecedented aging nation," Li Keping of the National Social Security Fund Executive Council told a recent meeting on family-planning policy where various population and economic experts gathered. "What is unique about China's case is that the aging process is happening before the country has grown rich, and it is happening too fast."

A Sickly Compromise for German Healthcare Reform: Like so many ageing Western societies, Germany has struggled with surging healthcare costs in recent years. But instead of coming up with a grand reform to the healthcare system, the government in Berlin has agreed to a sickly compromise. (Der Spiegel, 7/04/06)
The surge in costs comes at a time when the German birthrate is decreasing, the population is aging, fewer people are paying into the country's elaborate social system and the costs of providing treatment are growing. On top of that, the country has a two-class healthcare system that has further complicated matters. The country's highest earners can opt out of the public healthcare system and go with an often cheaper private insurer instead. This means that of the 78.7 million Germans who are insured, 8.4 million of the country's highest earning individuals are not contributing to the public-private national healthcare system. Private insurance companies attract new customers with prices that are often below the patient's actual health care costs, but as an insured person gets older, that person's monthly premiums also increase.

Both the conservatives of Chancellor Angela Merkel and her junior coalition partners the center-left Social Democrats (SPD) agreed the system needed an overhaul, but for months, they were at loggerheads over the best way to do it.

So instead of opting for a clear plan, the ruling grand coalition opted for a sickly compromise after Merkel and her colleagues emerged from an overnight bargaining session on Monday morning. She called the planned reform a "true breakthrough," but since then, nobody, not even the members of the two ruling parties seem particularly happy with the deal.

Instead of radically altering the system -- for example, by financing it significantly via taxes, or eliminating many of the duplicated bureaucracies of the state-funded health insurers -- contributions that are roughly equally divided by employers and workers will continue to rise from their current 14 percent of an individual's salary. The compromise enables the coalition government to neatly avoid imposing a hefty new tax (in recent days, SPD leaders were calling for up to €45 billion in fresh taxation to support the costly healthcare system) at the same time it is making a major three percentage point increase to the country's value-added (sales) tax, taking it from 16 percent to 19 percent. [...]

The ideological differences between the conservatives and the SPD left the coalition unable to deal with the question of what to do with Germany's private health insurers, which generally cover the wealthy, civil servants and the self-employed for often far less than the state insurance.

Merkel's Christian Democrats hailed their ability to limit the SPD's attempts to place a greater burden on the private insurance companies. The Social Democrats were dead set against a system based on a flat fee per insured, which could have helped Germany lower its non-wage labor costs.

But it is exactly this jumble of models that makes German healthcare so expensive and inefficient. And it is far from certain that the proposed reform will increase competition or transparency enough to help rein in exploding costs.

A nation of 300 million (Haya El Nasser, 7/05/06, USA TODAY)
The USA is closing in on a milestone that seemed unthinkable 25 years ago. Sometime in mid-October, we will become a nation of 300 million Americans.

We will then embark on a relatively quick journey to 400 million. Target date: around 2040.

How did this young country get so big so quickly? Immigration, longevity, a relatively high birth rate and economic stability all have propelled the phenomenal growth. The nation has added 100 million people since 1967 to become the world's third-most populous country after China and India. It's growing faster than any other industrialized nation.

The biggest driver of growth is immigration — legal and illegal. About 53% of the 100 million extra Americans are recent immigrants or their descendants, according to Jeffrey Passel, demographer at the Pew Hispanic Center. Without them, the USA would have about 250 million people today. [...]

The USA is alone among industrialized nations in its relatively rapid population increase. The populations in Japan and Russia are expected to shrink almost one-fourth by 2050. Germany, Italy and most European nations are not making enough babies to keep their populations from sliding.

"There's a fertility malaise in (other) industrialized countries," says Carl Haub, senior demographer at the non-profit Population Reference Bureau. "Europe and Japan and South Korea and Taiwan are getting desperate."

Women have to give birth to an average 2.1 babies to offset deaths and keep the population even. The birthrate in Western Europe is 1.6. It's even lower — 1.4 — in Italy, Spain and other southern European countries. France, which has done more to accommodate the needs of working mothers, has the highest rate at 1.9, Haub says.

Germany, where leaving children in day care is not socially embraced, is proposing a family allowance that would pay mothers 67% of their partner's net income up to 1,800 euros ($2,304) a month for up to a year after childbirth.

The USA would hardly grow in the next 50 years except for Hispanic immigrants, who have a higher birthrate than non-Hispanic whites. White women, who give birth to 56% of the children born here, have an average 1.85 babies. Blacks average about two and Asians 1.9. Hispanics have 2.8. The overall birthrate is slightly above two — just below replacement levels.

And as the Blue Staters die off the fertility rate for non-Hispanic whites will head back up over replacement.

Posted by Orrin Judd at July 5, 2006 10:12 AM

We also haven't had a war on our soil in 140 years. "Fighting them over there so we don't have to fight them over there" has practical effects.

Posted by: Bob Hawkins at July 5, 2006 10:35 AM

I don't know about that. It doesn't matter how much room you have, if the enviroment is toxic(legally). I can see the blue states becoming big empty parks.

Posted by: Robert Mitchell Jr. at July 5, 2006 11:07 AM

I can see blue states continuing to survive by siphoning off a significant percentage of the young from red states. Universities work hard to proselytize their students and have been successful doing so. I don't see that changing anytime soon.

Posted by: Patrick H at July 5, 2006 12:02 PM

Thank you for your thoughts Patrick H. How do you think the students will pay off their $150000+ students loans with a 60%+ tax rate? Where will they live, once the dorms are closed to them? The blue states aren't letting new construction happen.
At what point does regulation make new citizens impossible?

Posted by: Robert Mitchell Jr. at July 5, 2006 12:18 PM

Yeah, China's going to control the end of the century.


Posted by: Sandy P at July 5, 2006 12:44 PM

What will happen to the Red States when the Blue States won't be around to transfer money to them? Red states generally receive more federal money than they pay, while the Blue states pay more than they receive.

Posted by: Chris Durnell at July 5, 2006 2:27 PM

We'll reduce the size of government. That's the deal the Blues made--give us Statism and we'll give you money.

Posted by: oj at July 5, 2006 2:34 PM

I would use my home state of WA as an example. The population of the blue counties continues to grow as people from the red counties migrate to the cities around Puget Sound. At the same time schools are closing in Seattle and the birth rate is low. Seattle isn't self sustaining but it isn't dying off or getting more conservative either. Until the Dems destroy the local economy (tough to do with the ports, Boeing and high tech industries doing so well) the area will continue to be a bright blue population sinkhole. You make a good point about housing growth, but I don't see a collapse coming anytime soon. Of course, people in Michigan probably felt the same way during the US Auto Industry's glory days.

Posted by: Patrick H at July 5, 2006 2:40 PM

As we all know here, there are no blue states. Only states dominated by big cities. (Thank you very much, Warren Supreme Court, for one man-one vote, which inexorably led to the descent of CA politics into its current hellhole.)

Posted by: b at July 5, 2006 2:54 PM

The USA is closing in on a milestone that seemed unthinkable 25 years ago. Sometime in mid-October, we will become a nation of 300 million Americans.

Couple of thoughts:

(1) I'm surprised they didn't call it a "grim" milestone.

(2) Of course it was unthinkable 25 years ago. We were all supposed to be killed by the coming Ice Age!

Posted by: the wolf at July 5, 2006 4:08 PM

Red states are losing population???

MA/IL/NY will all lose at least 1 house seat the next census.


where do you think the boomers will buy that cheap 2nd home?

Posted by: Sandy P at July 5, 2006 4:20 PM

I don't see where it was claimed that red states were losing population, and I think everyone here realizes that the population is shifting south and west to red states. I just don't believe that the blue states are going to collapse due to the decreased birthrate of liberals. They'll just keep recruiting young people to their way of thinking as long as they control education. There is a precedent. Gays don't generally breed, but there seems to be a lot of them around.

Posted by: Patrick H at July 5, 2006 7:09 PM


Hollywood, academia, the media, and Andrew Sullivan want us to believe the population is 10% gay. If the actual number is 2-3%, their myth-making won't last.

Posted by: jim hamlen at July 6, 2006 1:46 AM

if healthcare in germany is ineffcient. what about the ,milltary sector and sepending in any country.
They are destructive and ineffecient .

Posted by: dave long at July 6, 2006 6:38 PM