Wednesday, March 22, 2023

Sid Salter: French Pension Reform Protests Offer Lesson

François-Marie Arouet - known by his literary nom de plume Voltaire - was a French writer, historian, and philosopher who died two years after the signing of the U.S. Declaration of Independence.

Voltaire’s most famous work was the satire novella “Candide: The Optimist” in which the author engaged in social commentary while his protagonist Candide’s early privileged life transitioned to disillusionment and hardship.

In the novella, Voltaire offered this observation in French: “Le travail éloigne de nous trois grands maux: l'ennui, le vice et le besoin.”In English: “Work delivers us from three great evils: boredom, vice and want.”

Given the riots and civil unrest that grips France today over pension reform, one can only wonder what Voltaire would make of modern French society’s growing pension crisis and the generational divide over the issue that it engenders.

A more germane question for Americans is just what lessons can we learn from this episode when considering our own looming national crisis over the future of Social Security? First, perhaps a brief recap of the building blocks of the French protests.

After several political fits and starts in pushing a program of pension reforms, French President Emmanuel Macron used a constitutional loophole to bypass both houses of the French Parliament to raise the full retirement age from 62 to 64 without a parliamentary vote.

France doesn’t have a monolithic retirement program like Social Security – it has 42 different programs in which the rules of each program are tied to one’s job. Full retirement ages are different depending on one’s vocation and each of those programs are tied to unions or other powerful labor and trade organizations.

Depending on whose estimate is used, U.S. Social Security is facing insolvency in 2035. French pension systems – convoluted and disjointed – faces insolvency in 2025. But the protests in the streets of France suggests two distinct camps – older workers infuriated over being asked to work longer before they retire and younger workers being asked to pay into a pension system in which they don’t have confidence will be there for them.

Despite the fact that Macron campaigned loudly and openly on pension reform when seeking the presidency, protesters in France want their president to kick the political can down the road. In the meantime, mountains of uncollected garbage line the streets of Paris. Teachers, public transit workers, energy workers and air travel workers engaged in strikes or slowdowns.

Americans have a hard time fully grasping the anger of the French populace over a two-year increase in full pension eligibility from age 62 to 64. After all, the U.S. did the same thing back in 1983 when Republican President Ronald Reagan, GOP Senate Majority Leader Howard Baker and Democratic House Speaker Tip O’Neill compromised on a plan to raise the full retirement age from 65 to 67 – but it was implemented over a 40-year span from 1983 to 2023.

Macron’s plan to raise the French full retirement age from 62 to 64 will be implemented over just eight years. For French workers young and old, there’s an urgency in that schedule that spurs an anger that the Gipper and the Tipper had the good sense to stretch over four decades for American workers.

But that bit of foresight in 1983 doesn’t change the inevitable clash of Social Security math – moving forward there will be more people drawing benefits from the program than there are active workers paying into the system. 

In 1940, there were 42 workers paying into Social Security for every retiree drawing a benefit check. Today, there’s 2.8 covered workers for each beneficiary. By 2050, it is projected that there will be 1.95 covered workers for each beneficiary.

Social Security’s long-term funding shortfall already exceeds $20 trillion. So how great a leap is it in America – barring a recovery of the increasingly lost ability of Congress, the White House, and American taxpayers regardless their party to actually work together to govern – to see riots in the streets over Social Security?

Kicking the can down the road is not solution. We’re running out of road and running out of cans.


Sid Salter is a syndicated columnist. Contact him at sidsalter@sidsalter.com.

13 comments:

Anonymous said...

Somebody needs to figure out what the actuarial savings would be to social security by making it much more difficult to enroll in social security's disability benefit program -- or perhaps if we just moved that feature out of social security. Vast numbers of people who can work (and may of which DO work), but perhaps not at their previous vocation, receive full-time disability payments as if they were physically unable to work. I have never seen any analysis on what this part of the program has contributed to the shortfall in the social security fund.

Anonymous said...

@9:10
It doesn’t matter. The money isn’t real and it hasn’t been real since at least 1913.
You either have faith in the Fractional Reserve Banking system or you don’t.
The system either collapses or stays afloat when they can no longer extract labor for fiat.
That’s why illegal immigration is so important to the elites. They need that labor for our fiat.

Anonymous said...

As Monsieur Le Saltier sips his Perrier on the Champs Elysee, he muses how, in an article, to relate the French retirement system with that of America so that his foreign adventure can be written off as 'work', n'est-ce pas?

Anonymous said...

Hey Sid, now compare and contrast the French retirement system with PEERS.

Anonymous said...

@9:39am Salter deserved that... but the comparison isn't too far of a reach. Whether Social Security or PERS, these systems can (and will) collapse if not attended to - very slowly, then all at once - as usual throughout history.

Anonymous said...

Hey Champ! There's no such thing as PEERS!

I have never understood why the system, by law, stops taxing wages at a certain level. That should immediately be removed to the dung-heap of dead-law.

The rationale commonly given to explain that is as weak as explaining why the taxes collected on wages for someone who dies (prior to collecting SS) are NOT returned to his survivors.

If any wage should be taxed then all should be taxed. Those most able to afford the 'all wage' tax calculation are enjoying millions, ne billions, or trillions in FICA-untaxed wages.

Anonymous said...

They need that labor for our fiat....you couldn't explain that if your life depended on it.

Anonymous said...

Social security is a tax, was a tax and will always be a tax masquerading as a retirement plan. It was proposed and signed by FDR as a way of getting workers to pony up a portion of their wages on the promise of something tomorrow. Think Wimpy of Popeye fame "I'll gladly pay you tomorrow for a hamburger today." It was 5 years before benefits were paid. They did not invest it, they spent it. ohhh they bought Government bonds you say. Think about it rationally, if they “Bought Government bonds, all that means is that they moved the money from one government pocket to another government pocket using accounting trickery. The Government still has the money, it is just in another pocket. Retirement age was 65, average lifespan, in the us at that time, was 61 or 62. Tell me another lie that they wanted us to collect. The Lock Box is a lie and always has been. There is no social security Slush fund, never has been, it has been spent - recklessly. The money goes to the government, then moves to the general fund to be spent on whatever our spendthrift government decides to spend it on. Sorry, it's not your money, it's the governments money and as such, they can change the requirements to collect at any time. If you cannot leave it to your kids, wife or significant other in your will, then it is NOT your money, it's good ole Uncle Sam's money. When they say the SS fund is going insolvent all that that means the tax collected is less than the benefits paid and the government is going to be upset that it doesn't have the excess to spend recklessly.

Anonymous said...

Kicking the can down the road is not solution. We’re running out of road and running out of cans.

Except when it comes to PERS.

Anonymous said...

We need to duplicate what Reagan did in 1983.

So simple and it would save SS for another 25 years or so.

Anonymous said...

7:00 - Earlier you claimed it was PEERS.

Anonymous said...

SS reform is nothing more than making the next generation work longer and pay more so baby boomers can retire earlier and pay less. They did it in the 80s when they raised the retirement age to 67 and gonna do it again soon to kids starting their careers now.

Anonymous said...

Maybe we could just reduce the number of beneficiaries through something, I don’t know, like a huge pandemic that would mow down like a scythe huge numbers of oldsters and younger ones with diabetes, high blood pressure, or fat asses.


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