Why U.S. measures like baby bonds and child tax credits cannot induce Americans to have children

[UNITED STATES] America is quietly slipping into a demographic downturn with outsized economic consequences. At just 1.6 births per woman, the nation’s fertility rate sits well below the replacement level of 2.1—a threshold that, if unmet, triggers population decline. This isn’t just a sociological curiosity. It’s a strategic problem for policymakers, businesses, and investors alike. A shrinking base of future workers will stress entitlement programs, weaken domestic demand, and distort the economic assumptions baked into pensions, housing, and healthcare. While both parties have begun floating financial incentives—like $5,000 newborn bonuses or expanded child tax credits—these measures only scratch the surface. As economist Melissa Kearney notes, “Our population will, in the not too distant future, start to decline.” If demography is indeed destiny, then America’s future growth engine is flashing red.

Context: A Demographic Downshift With Economic Stakes

The US fertility rate has been below replacement since 2007, with no signs of returning to prior norms. According to the CDC, the total fertility rate in 2023 hovered around 1.6 births per woman—on par with rapidly aging countries like Japan and South Korea. But unlike those countries, the US has long relied on its relatively high fertility and steady immigration to fuel labor supply and consumer growth.

This drop isn’t just a statistical quirk; it signals a long-term reordering of national potential. Social Security and Medicare depend on a robust worker-to-retiree ratio. “If we see kind of dramatic declines in fertility,” says University of Virginia professor Brad Wilcox, “we will eventually see a drag on our economy and our capacity to cover all sorts of government programs.”

Policymakers have begun responding, albeit timidly. Proposals include lump-sum baby bonuses, expanded tax credits, and “Trump Accounts” seeded at birth. But these tools, while politically convenient, are unlikely to shift deep-seated cultural attitudes or economic realities. As Kearney bluntly puts it: “That’s an 18-year commitment. It’s not just a one-year cost.”

Strategic Comparison: The Culture Shift Policymakers Miss

Historically, fertility dips during recessions but rebounds in recoveries. That pattern broke after the Great Recession. “That kind of caught a lot of demographers around the world flat-footed,” said Karen Guzzo of UNC-Chapel Hill. The post-2008 birth slump never reversed. In fact, it deepened—even as employment, GDP, and equity markets recovered.

This points to something beyond economics: a cultural reorientation. Increasingly, younger adults see parenting as incompatible with personal fulfillment. Career ambition, rising urbanization, and declining religiosity have shifted the perceived value of childrearing. In this sense, US demographics more closely resemble Japan’s trajectory than most Americans care to admit. Japan has spent decades trying to coax its fertility rate upward with generous subsidies, only to see marginal results.

Why should the US be any different? A $5,000 check can’t overcome 20 years of rising housing costs, stagnant wages relative to childcare, or a social narrative that decouples adulthood from family formation. Strategic thinking requires acknowledging that fertility is no longer just a function of GDP—it’s a reflection of national identity, gender norms, and generational aspiration.

Implications: The Coming Strain on Economic Assumptions

For investors, founders, and policy architects, low fertility presents a risk hiding in plain sight. Many long-term asset valuations—housing, education, healthcare, even equities—implicitly assume future population growth. That assumption may no longer hold. Fewer children today mean fewer workers, consumers, and taxpayers tomorrow. This alters the calculus behind retirement systems, productivity forecasts, and growth-linked investment strategies.

Labor shortages, already acute in skilled trades and healthcare, could deepen. Consumer product companies may face flat or shrinking domestic markets unless immigration policy becomes more ambitious. And politically, aging electorates tend to become more risk-averse—potentially dragging on innovation and structural reform.

This makes fertility a cross-sectoral concern. “More and more young adults are kind of assuming that what matters for them is their education, their money, and especially their careers,” Wilcox notes. That mindset is rational given today’s economics—but it may not be sustainable for the macroeconomy.

Our Viewpoint

The fertility decline is not just a family issue or a cultural trend—it’s a strategic inflection point. America must confront the reality that its demographic engine is stalling. Incentives alone won’t move the needle unless paired with broader changes to how society supports parenting: affordable housing, flexible work, cultural validation of family life, and long-range immigration reform. If leaders treat birthrates as a lagging indicator instead of a leading signal, they’ll miss the forest for the trees. The cost of inaction won’t be felt in one election cycle—but in the next generation’s lost potential.