I am turning childbirth into inventory, and you’re paying me to do it. Vernell is a gestation unit in the maternity lodge I own outside Dothan, Alabama, 31 weeks along, holding the account that will one day pay for your retirement. Lyman Stone writes in National Review that America’s fertility rate has fallen below 1.6 and proposes seeding $17,000 into an investment account at every birth, where it can compound for 20-plus years and pay out when that child produces a child of her own. He sees a population problem. I see a labor-supply pipeline with the seed capital pre-funded. The Lord commanded increase. I have merely priced the fruit.
Your tax dollars seed 3.6 million such accounts every year. The collateral is a woman whose blood-pressure cuff she wraps in tape because mine was never replaced, standing since dawn at $8.20 an hour. She holds the child. I hold the principal. You hold the promise.
I administer the fund.
The prenatal vitamin costs $0.33 a day.
I don’t buy it.
Put your finger on the number. It’s the part worth learning. The fund compounds at 7%. Vernell’s blood pressure does not. I kept the $0.33, and I mean to keep it on the next 40,000 accounts too. That’s not cruelty. Cruelty would mean I’d thought about her. I haven’t. It’s a cost basis.
She is not.
Here’s where Stone’s proposal becomes useful. He wants the $17,000 to remain untouched until the child reaches adulthood and has a first child, at which point the account can provide a substantial payment. He says the bonus counts as income and may push a parent over welfare cliffs and phaseout ranges. Let me translate that for you, since you’re paying for the lesson.
A payment becomes income. Income becomes a threshold. The threshold becomes a vacancy at my loading door.
The state stops feeding the family the week it starts paying me to hold the child. We call it improved marginal returns to labor. The honest sentence is simpler: you may choose between the check and the groceries. I’ve left that sentence out of the prospectus because it spoils the marketing dinner, and the mandate is won at the marketing dinner.
The workhouse architects understood the arrangement without an index fund. Make every alternative to the offered wage floor less desirable than my wage, and the worker arrives because every other door has been closed. The state closes the doors. I set the rate. The account moves the parent from public assistance onto my payroll at $12.60 an hour instead of the $20.40 I bill the distributor.
Trella is a cartoning unit on the egg-processing line I own outside Springfield. She trays, wraps, and pallets the cartons you bought this morning. Her fingers are taped with electrical tape from the supply closet because compression gloves cost $8.90 a pair and I decline them. I pay her $12.60. I bill $20.40.
You bought her output. I keep the $7.80.
Her fingers don’t close properly. The account hasn’t matured. The parent hasn’t qualified. I’m preparing the line for both events.
James described the older arrangement with admirable precision:
“Behold, the hire of the labourers who have reaped down your fields, which is of you kept back by fraud, crieth: and the cries of them which have reaped are entered into the ears of the Lord of sabaoth.”
— James 5:4, King James Version
I don’t use fraud. I use a disclosed wage, a signed form, a benefit threshold, and a child account whose terms were written by people who call themselves compassionate. Scripture objects to withheld wages. It says nothing about the worker being made grateful for the privilege of receiving them.
That distinction is why I prefer paperwork.
The account is new. The arrangement is not. The state invests in the unit. The unit arrives at my door. The yield exceeds the seed. The maintenance cost stays on the public ledger. All of the yield. None of the maintenance obligation.
Same ledger, different column. Otis is 54. Never married. No draws. His principal has sat untouched for 20 years and more. On his birthday, it rolled back into the fund, exactly as designed, to finance the next generation’s bonuses. Stone calls this the yield-back. The average American, he calculates, will return $22,000 against the $17,000 outlay.
He presents this as the program paying for itself.
So it does.
The people the program was built to save—the ones who had no children, the ones who had one, the ones who waited too long—are its truest benefactors. They pay on time, in the only coin the fund accepts. I haven’t asked what the census column says in year 60. The actuary doesn’t consult the census. The projection is self-sustaining, and I’m a patient man.
Now widen the frame. The lesson is bigger than one lodge and one egg line.
The welfare state was the maintenance contract. It kept the worker fed, housed, and doctored so capital could keep the yield. The Birthday Account is the acquisition contract. The state stops renting the worker’s labor and starts buying it at birth: $17,000 of principal in the child’s name, compounding until the child can produce another funded account.
The planter wrote increase beside a child born to the quarters. The value appreciated on his books. The child’s upkeep was the mother’s task, not his. We’ve modernized the ledger and hired the index fund to do the appreciating.
Exodus reduced the relation to its cleanest property claim: if the injured servant survives a day or two, the owner bears no penalty because the body is money. I’ve improved the arrangement. I don’t own the body. Ownership implies maintenance. I simply own the contract, the line, the margin, and the public program that keeps the body available.
The birth certificate is collateral. The Social Security number is the ticker.
Vernell is 31 weeks tonight. The account is 11 days old and compounding. The sonogram hangs in the fund’s office like a title deed in a county clerk’s vault. The vitamin was $0.33 a day. Her blood pressure is what it is.
When she delivers, she’ll sign the state’s form—the form I drafted—and return to the line. In 20 years, her daughter will draw down the principal to have a child of her own, who will arrive with an account already open.
That is the closest thing the actuarial age permits to an inheritance.
The next account is already open. I haven’t asked what happens to the families that cannot furnish a claim. Their paperwork can wait in the lower drawer.
The fund is fully funded. Vernell is not. Only one of those lines is on my books, and I’m satisfied with the one I chose.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.