Is Slow Population Growth Good or Bad for the Economy?

Time magazine's Stephen Gandel says low population growth will help the country by raising wages and reducing government spending on the needy:

For the economy, a slower increase in the population raises concerns about American competitiveness. But it could actually be a good thing. A number of economists, including the Federal Reserve Chairman Ben Bernanke are worried about the lack of inflation and income growth in the United States. Fewer workers could drive up salaries. What's more, fewer new Americans might help slow government spending. That may curtail the rising US federal debt, which many think will soon cause interest rates to jump and hold down US GDP growth. "At a time of fewer government resources, fewer new people might not be such a bad thing," says New Hampshire's Johnson.

The Economist's Ryan Avent doesn't see it that way at all. With fewer working age Americans, we'll have fewer tax dollars to support that growing retired population that consumes most government spending. The easiest way to follow in Japan's footsteps, he writes, is in fact to pursue a policy of low population growth while preserving our policy of high retiree spending:

Indeed, all of the above is precisely what has been observed in Japan, where population growth slowed, halted, and eventually reversed. Per capita incomes have risen only very slowly, government debt is enormous, households are heavy savers, and deflation is endemic. Population growth isn't a cure-all, but in the present economic situation it's likely to make the resolution of a range of problems much easier.

Some context: Of the 27 million Americans added in the last ten years, 17 million were babies born in the United States and 10 million were immigrants. To be clear, 40 percent of US population growth in the last decade came from immigrants. A policy to reduce immigration -- by expanding deportation, "strengthening" the borders, making it difficult for college-educated immigrants to stay here after graduation and so on -- is a policy to freeze America's population growth at historically low levels.

I don't know of a precedent for a dynamic country that has basically stopped growing. The examples in Europe and Japan are warning signs, not beacons. Yet, as more Americans emulate upper-middle class families and average fewer than two children, there's no reason to expect the United States to continue its historical growth pattern without immigration. In a rich, modern country that prides itself on benefits for old retirees who are living longer and longer (and consuming more and more government money), this would be a clear cut recipe for tax revenue to fall way behind promised spending.

Although maybe that would make for a neat Trojan Horse for small government types looking for reasons to dramatically shrink the entitlement state...