The Congressional Budget Office (CBO) recently released its latest demographic projections for the United States over the next 30 years. The size and composition by age and gender of the US population are significant for the economy mainly through the labor force, and the federal budget through taxes collected and retirement and health benefits paid. CBO projects that overall population growth slows from an average of 0.4 percent a year between 2025 and 2035 to an average of 0.1 percent a year between 2036 and 2055. This decline in expected growth occurs because of a continued low fertility rate, despite declining mortality and moderate immigration. The number of people age 65 and older increases markedly (at an annual rate of 1.0 percent), the number of people age 24 or younger actually declines, and the prime working age (25 to 54) population increases only 0.2 percent annually.
CBO increased its population projection from last year for the next eight years owing to new data showing unexpectedly large illegal net immigration flows in the last few years (2.0 million in 2022, 2.4 million in 2023 and 1.8 million in 2024, up from 850 thousand in 2021). For the years following 2033, however, CBO lowered its population forecast, owing to a reduction in its assumption about future fertility, consistent with recent experience, and lowered net immigration in future years, mainly reflecting the consequences of the June 2024 executive order limiting entry of most noncitizens at the southern border. In total, CBO projects 10.8 million fewer Americans in 2054 than it projected last year, a reduction of 2.8 percent, so that the total population only rises from 350 million in 2025 to 372 million in 2055.
CBO projects that the total fertility rate declines through 2035 to 1.60 births per woman of childbearing age (the rate for full population replacement is 2.1), consistent with the 1.62 rate observed in 2024. This long-run rate is lower than the 1.70 births per woman that CBO projected last year. Indeed, research presented by Steve Robinson at the Concord Coalition supports this downward shift. He notes that while it is theoretically possible that the decline in total fertility over the last two decades could represent a shift among women toward childbearing later in life and therefore an eventual bounce-back to the fertility rate in future years, data from the 2023 National Survey of Family Growth indicates otherwise. Indeed, the average number of actual previous births plus the average number of expected future births has fallen in the latest survey below 2.0 among women under the age of 35 from about 2.4 births in earlier surveys. Among women 20 to 24 years old, it has fallen to only 1.5 births per woman from 2.4 in the 2006 survey.
Clearly a major cultural change has occurred affecting fertility, which CBO is recognizing in its population projections. By contrast, the Trustees’ Reports for Social Security and Medicare, and by extension, the Financial Report for the US Government and long-range budget projections coming from the Office of Management and Budget, which rely on the assumptions of the Trustees, project that the fertility rate will increase from 1.70 in 2025 to 1.90 by 2036. (The Census Bureau, like CBO, also projects a 1.60 rate.) In particular, unlike CBO, the Trustees do not expect the fertility rate for women under 30 to decline. As I have noted elsewhere, this unrealistic assumption makes the long-range projections of the Trustees (and the budget scores for program reforms and changes upon which they are based) unreliable for Social Security, Medicare, and indeed the entire federal budget. The Trustees should change it.
We have known for decades that the US population would age, as the baby boom generation grew old, and we have been long aware of the negative implications for the old-age programs of Social Security and Medicare and underfunded government employee pensions and retiree health plans, even as we have done little to them to address their sustainability. Something as fundamental and consequential is now occurring as fertility rates decline. The overall population and labor force is not growing much and this is negative for economic growth, military preparedness, government revenues, educational institutions, risk-taking, capital formation, innovation, and overall economic and cultural flexibility and responsiveness. Immigration becomes even more important along with the need to design a rational and coherent policy to govern it. Effective pro-natal policies need to be discovered and implemented. Our society, businesses, cultural institutions, and governments need to adapt to these trends soon.
Mark J. Warshawsky
January 18, 2025
aei.org