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Happy Thursday! In today’s newsletter, we examine America’s fertility crisis, the economic dangers of tariff uncertainty, and the failures of the 118th Congress. 

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1. America’s True Economic Challenge 

Topline: The US is facing an existential economic crisis driven by falling fertility rates. The US fertility rate is at 1.6—below the replacement rate of 2.1, or the fertility rate needed to sustain the population in the long run. AEI’s Jesús Fernández-Villaverde analyzes the effect of falling fertility rates on the US economy, finding that rapidly falling fertility rates could have an impact measured in the millions.

Fewer Kids, Bigger Problems: The fundamental accounting equation for economic growth is dependent on the growth rate of the labor force. With current population projections, the 2040s may see a growth rate of workers to be -1 percent—which could result in the US economy reaching only a 0.9 percent annual growth rate.

Further Costs: Population growth is essential for more than just US economic growth. It is essential for funding programs like Social Security, Medicare, and Medicaid, in addition to servicing US public debt and financing the armed forces.

“If we are unable to address our fertility crisis, the US will face an existential economic crisis driven by a steep decline in fertility rates—one that could have an impact measured in the quadrillions of dollars.” —Jesús Fernández-Villaverde

2. Tariff Troubles  

Topline: President Donald Trump has announced a flurry of tariffs since taking office, spurring higher levels of economic uncertainty. AEI’s Steve Kamin argues that although tariff policies themselves have profound economic impacts, it is the uncertainty surrounding Trump’s tariff agenda that presents the greatest challenge.

The Evidence: Trade policy uncertainty soared in late 2018 and mid-2019. Although the average level of US tariffs rose only marginally, uncertainty about future trade policy negatively impacted the economy: The growth of real investment was halved by early 2019, while industrial production stalled entirely.

The Outlook: By the end of 2024, trade policy uncertainty has surpassed peak levels of Trump’s first administration. With recent tariff announcements, Trump’s trade policy is now at a fever pitch.

“The most likely curb on Trump’s tariff proclivities would be a sustained fall in stock prices, which Trump views as a central metric of his performance. But hoping for a stock-market bust as a way to restore rationality to trade policy is a sorry hope indeed.” —Steven Kamin

3. An Unproductive Congress 

Topline: The 118th Congress passed fewer laws than any other since the Civil War. AEI’s Philip Wallach finds that even when considering the decades-long downward trend in the number of laws passed, last Congress reached a new low in terms of legislative productivity.

Congressional Chaos? This group of lawmakers passed just 274 enactments into law, and 82.6 percent of their total output was packed into its 10 longest bills, rather than smaller and more tractable enactments. The 118th Congress faced challenging political divisions and the first forcible ejection of the Speaker of the House, which slowed down their productivity and set the stage for the record low output.

“Time will tell whether it may yet come to be seen as a turning point in the institution’s history—or whether future congresses will plumb new depths of woe in the years to come.” —Philip Wallach

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