US births have fallen steadily since 2007 and the total fertility rate is now well below replacement level fertility—the rate at which the population replaces itself from one generation to the next. Our analysis suggests that this trend is unlikely to reverse in the coming years. The decline in births is widespread across demographic groups and it does not merely reflect a delay to older ages. Rather, more recent cohorts of women are having fewer children over the entirety of their childbearing years. We are unable to identify any period-specific social, economic, or policy changes that can statistically explain much of the decline. We conjecture instead that the sustained decline in the US fertility rate more likely reflects shifted priorities across recent cohorts of young adults. A prolonged US total fertility rate this low—specifically, a rate substantially below 2—would lead to slower population growth, which could in turn cause slower economic growth and present fiscal challenges. While the decline presents a fairly new challenge to the United States, other high-income countries have sustained below replacement level fertility for some years now and have attempted policies to mitigate that trend. But the evidence on these pro-natalist policies leads us to conclude that incremental policy responses are unlikely to reverse trends in the US fertility rate. The slowdown in native population growth could be addressed with increased immigration and advances in productivity.
Suggested Citation: Kearney, Melissa S. and Phillip B. Levine. December 10, 2022. “The Causes and Consequences of Declining US Fertility” In Economic Policy in a More Uncertain World, edited by Melissa S. Kearney and Amy Ganz. Washington, DC: Aspen Institute. https://doi.org/10.5281/zenodo.14025899.
Immigration has long been celebrated as an engine of America’s economic growth and cultural vibrancy, even as the changes it brings often cause concern among the populace. An estimated 13.7 percent of those living in the United States today were born outside its borders, nearly as high as the peak of 14.8 percent in 1890 (Gibson and Jung, 2006). Annual net inflows of migrants have fallen since 2016, however, and the foreign-born population has stagnated over the past few years. Backlogs in immigration bureaucracy are at record levels (Frey, 2020). There are also more than 10 million people living in the United States without legal status. Political framing of the issue has tended either to highlight humanitarian concerns or to engage in fearmongering, with surprisingly little attention paid to fact-based economic analysis. However, a robust body of high-quality evidence pertaining to immigration and its economic impacts is available, and that data in tandem with humanitarian and political considerations should inform decision-making. Decades of research demonstrate that there is scope for and value in significantly expanded immigration levels and a reimagined enforcement system. But getting there will require congressional action: harnessing the full potential of those who seek to live and work in the United States requires sensible legislation.
Suggested Citation: Watson, Tara. December 10, 2022. “Why and How to Expand US Immigration” In Economic Policy in a More Uncertain World, edited by Melissa S. Kearney and Amy Ganz. Washington, DC: Aspen Institute. https://doi.org/10.5281/zenodo.14026847.
In this paper Clemens and Veuger analyze pandemic-era federal fiscal assistance to state and local governments and draw lessons for the design of stabilization policy. They start by explaining why the federal government plays a key role in stabilizing state and local government budgets across the business cycle, before describing the shape this role currently takes. Then, they provide an overview of how the COVID-19 crisis was expected to affect state and local budgets, and how those expectations affected the amount of fiscal relief the federal government provided. They next assess the design of the federal response and evaluate its effectiveness. They conclude by drawing lessons for the design of future countercyclical federal aid to state and local governments. The authors argue for tying the quantity of aid provided to national measures of tax bases and propose three delivery mechanisms: rule-based grants, loans, and an insurance program.
Suggested Citation: Clemens, Jeffrey and Stan Veuger. December 10, 2022. “Lessons from COVID-19 Aid to State and Local Governments for the Design of Federal Automatic Stabilizers” In Economic Policy in a More Uncertain World, edited by Melissa S. Kearney and Amy Ganz. Washington, DC: Aspen Institute. https://doi.org/10.5281/zenodo.14026853.
The share of the US population age 65 and older is rising dramatically. In the year 2000, 12 percent of the population was over age 65; by 2050 that share will be 22 percent. Much of that aging has already occurred: in 2022, just over 17 percent of Americans are retirement age. Population aging is applying upward pressure on government deficits as a result of increased public spending on programs, including Social Security and Medicare, that are designed to support older Americans. I argue that broader distributional measures assessing who pays for and who benefits from age-related government programs, both across and within generations, are necessary to inform policy decisions. However, in addition to direct aging-related government expenditures, I argue that unfunded spending in other, non-aging parts of the budget along with recent tax policy changes portend significant intergenerational redistribution. These distributional impacts should be measured and taken into account by lawmakers who seek to address looming fiscal challenges in a more equitable way.
Suggested Citation: Sabelhaus, John. December 10, 2022. “Will Population Aging Push Us over a Fiscal Cliff?” In Economic Policy in a More Uncertain World, edited by Melissa S. Kearney and Amy Ganz. Washington, DC: Aspen Institute. https://doi.org/10.5281/zenodo.14026862.
The US economy has been suffering from weak productivity growth, business dynamism, and competition for the past several decades. The loss of a vibrant economy is even more concerning as the economy faces new challenges such as the transition to green energy that call for novel technological advancements. Reduced technological diffusion in the economy has been impairing the competitive environment favoring established market leaders, with patents and inventors being hoarded by these firms, hampering overall innovativeness and dynamism of the economy. We argue that policies to alleviate these concerns and enhance competition can boost overall innovativeness of the economy. Reducing barriers to foreign competition is an effective option to achieve this goal. Similarly, tapping into global talent is a viable policy to improve the level of human capital.
Suggested Citation: Akcigit, Ufuk and Sina T. Ates. December 10, 2022. “New Insights for Innovation Policy” In Economic Policy in a More Uncertain World, edited by Melissa S. Kearney and Amy Ganz. Washington, DC: Aspen Institute. https://doi.org/10.5281/zenodo.14026870.
The Aspen Economic Strategy Group’s Annual Policy Volume Economic Policy in a More Uncertain World marks the group’s 5th anniversary and is released against a backdrop historic economic and strategic uncertainty. The book’s seven chapters, each written by leading experts and edited by AESG Director Melissa S. Kearney and Deputy Director Amy Ganz, provide a deep-dive on long-term economic headwinds confronting the country, including demographic changes—declining fertility and population aging—and what a smaller worker to population ratio means in terms of slower economic growth, reduced revenue, and lower productivity growth. Additional chapters on the US immigration system and US innovation policy highlight potential solutions for countering these trends. Another chapter explores potential adverse impacts on local labor markets from the green energy transition and highlights policies to avoid repeating painful mistakes of the past, including the response to the decline of the coal industry and rise of globalization and automation. A final chapter highlights lessons learned from the unprecedented federal aid to state and local governments during the COVID-19 pandemic.
AESG co-chairs Henry M. Paulson, Jr. and Timothy Geithner lay out the stakes for the US economy in a foreword by asking: Can US firms continue to innovate the technologies of the future? Will the recent push for industrial policy help or hurt American firms? To what extent can public policy alter America’s demographic trends?
Washington, DC — December 6, 2022 — The Aspen Economic Strategy Group (AESG) today released a paper, “Why and How to Expand US Immigration”, by Tara Watson, the David M. Rubenstein Fellow at the Brookings Institution, showing immigration can help address the demographic challenges in the United States and spur economic growth. The paper will be included in the AESG’s policy volume “Economic Policy in a More Uncertain World” which will be released in January 2023 to mark the fifth anniversary of the founding of AESG.
“The evidence is overwhelming that well-designed immigration reform is our best hope for spurring economic growth and helping the United States confront the growing demographic challenges we face from declining fertility,” said Watson, who makes clear policy recommendations within the paper, including:
Gradually expand legal family immigration each year, expand employment-based migration opportunities, and loosen per-country caps
Shift towards permanent rather than temporary migration pathways
Discourage visa overstays and penalize employers who hire unauthorized immigrants
Offer relief to long-term undocumented residents
Redistribute funds to localities and individuals adversely affected by immigration
Fund the bureaucratic infrastructure so that the system functions smoothly
Watson aims to inject fact-based economic analysis into a policy debate that is often characterized by political extremes. The paper describes economic benefits of immigration for the US economy, including:
The foreign-born population participates in the workforce at a higher rate than native-born Americans and are more likely to move to areas of greater economic opportunity.
The federal government also gains from payroll and income taxes paid by immigrant workers, who often consume less in government benefits relative to what they pay in.
Immigrants can help the US address its growing demographic challenges posed by population aging and declining fertility.
The paper calls for policies to help individuals and communities who are adversely impacted by immigration, including workers at the bottom of the US income distribution and state and local governments in immigrant-heavy areas.
Watson portrays an immigration bureaucracy overwhelmed by administrative backlogs and outdated policy. For example:
In 2021, an estimated 250,000 green cards were “wasted” when permanent admissions authorized by law were not processed and cannot be used in future years.
The backlog of pending green-card and other permanent adjustment-of-status applications grew from 3 million in 2013 to 8.4 million in 2022.
Quotas for family preference migration and employment-based admissions have not been updated since 1990.
Congress has not authorized any significant immigration packages since 1996 and this inaction has led local authorities to take action, resulting in an immigration policy that is inconsistently enforced throughout the country. The paper calls for bipartisan comprehensive reform as a necessary step towards a functional immigration policy.
The Aspen Economic Strategy Group (AESG), a program of the Aspen Institute, is composed of a diverse, bipartisan group of distinguished leaders and thinkers with the goal of promoting evidence-based solutions to significant U.S. economic challenges. Co-chaired by Henry M. Paulson, Jr. and Timothy Geithner and Directed by Professor Melissa Kearney, the AESG fosters the exchange of economic policy ideas and seeks to clarify the lines of debate on emerging economic issues while promoting bipartisan relationship-building among current and future generations of policy leaders in Washington. More information can be found at https://economicstrategygroup.org/.
The Aspen Institute is a global nonprofit organization committed to realizing a free, just, and equitable society. Founded in 1949, the Institute drives change through dialogue, leadership, and action to help solve the most important challenges facing the United States and the world. Headquartered in Washington, DC, the Institute has a campus in Aspen, Colorado, and an international network of partners. For more information, visit www.aspeninstitute.org.
Much of the conversation at COP27 has focused on economic compensation and assistance for developing countries who will likely bear the greatest damages from climate change but contribute little to overall global emissions.
If carbon emissions are left unaddressed, the climate crisis will not only become more costly to global health and the global economy, but also will exacerbate inequality within the U.S. and around the world.
Projected changes in the frequency and severity of climate events vary starkly across local geographies and how these changes manifest is a major factor in shaping the economic impact of climate change around the world.
In a high emissions scenario, climate change could cost the U.S. 1.4 percent of GDP by 2030, growing to 2.4 percent of GDP by mid-century.
But climate change damages are also uneven and unequal. Hotter places tend to be poorer and less developed, leaving them vulnerable to the most pronounced effects of climate change without the resources needed to adapt.
Figure 12. Mortality Damage Function and Projected Change in Death Rate
Figure 14: Those Least at Fault Are Most at Risk
Countries’ share of current GHG emissions and projected increases in mortality from climate change by income quintile
To combat these challenges, AESG Author Trevor Houser emphasizes adaptation. In the US, this means preparing for the irreversible effects of climate change, including making coastal communities in the U.S. more resilient, expanding access to low-cost air conditioning, promoting climate-resistant crops in the plains states, and reducing wildfire risk.
As COP27 leaders negotiate over who will bear the costs of adaptation globally, they must also prepare for the reality of large-scale climate displacement.
