April 3, 2019

ANALYSIS: TRUE. America’s Biggest Economic Challenge May Be Demographic Decline.

For many years, American economists have spoken of Japan and Western Europe as places where the slow grind of demographic change — masses of workers reaching retirement age, and smaller generations replacing them — has been a major drag on the economy.

But it is increasingly outdated to think of that as a problem for other countries. The deepest challenge for the United States economy may really be about demographics. And our understanding of the implications is only starting to catch up.

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.

The debt and the interest on the debt keep growing, however.

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