K-12 Tax &Spending Climate: America’s Biggest Economic Challenge May Be Demographic Decline

Neil Irwin:

A new report from the Economic Innovation Group, a Washington think tank funded in large part by tech investors and entrepreneurs, adds rich new detail, showing that parts of the United States are already grappling with Japanese-caliber demographic decline — 41 percent of American counties with a combined population of 38 million.

At the national level, slower growth in America’s working-age population is a major reason that mainstream forecasters now expect the economy to expand around 2 percent each year rather than the 3 percent common in the second half of the 20th century. As a matter of simple arithmetic, lower growth in the number of people working will almost certainly mean slower growth in economic output.But demographic change doesn’t hit everywhere equally. Besides the inevitable effect of the extra-large baby boom generation hitting retirement age and stepping away from the work force, decisions by working-age people can accentuate or lessen the impact of that underlying shift.