A cartoon published just after the fall of the Berlin Wall showed two travelers moving in different directions, one personifying former Eastern Bloc nations and the other the NATO allies: The two met as the former Warsaw Pact countries rushed away from socialism and the West hurried toward it.
Soon, those characters could symbolize France and the United States.
Indeed, today, our two nations could be represented by two specific people: Emmanuel Macron and Elizabeth Warren. James C. Capretta of the American Enterprise Institute contrasts their proposed reforms to pensions/Social Security in a new article for RealClearPolicy.
There is, no doubt, a pension problem looming in both nations. The French think tank Fondation IFRAP notes that even today’s pension numbers gloss over the depths of the problem. “If today our system is considered balanced, that is thanks to the €32 billion that the pension system receives from other schemes,” the organization states. “[T]hese figures do not take into account the deficit of the civil servants pension scheme that can be estimated between 6 and 10 billion euros financed directly from the state budget.” And U.S. politicians long ago raided the Social Security trust fund to finance other spending programs.
Macron would streamline France’s 42 separate retirement accounts into one, unified national system. The government also initially suggested raising the retirement age to 64, from 62. “Among the thirty-six countries in the Organization for Economic Cooperation and Development (OECD), only men in Luxembourg retire earlier (age 59.7, on average),” Capretta notes.
However, the nation has seen numerous strikes – including a rail strike last April – demanding the right of, e.g., rail employees to retire with full benefits at age 52. Thus, Macron shifted to proposing that people must contribute into the system longer before retiring. The “points-based” system, which would be closer to the U.S. Social Security model, may encourage people to enter the workforce at a younger age. (The unemployment rate in France is 10 percentage points higher than in Germany.)
Senator Warren, on the other hand, has proposed increasing Social Security payments by $200 a month, lifting the “max tax” on wealthy individuals and, for the first time, taxing investment income to pay into the fund. The move would shift Social Security from a quasi-pension system based on workers’ contributions to a more explicitly welfare state program aimed at redistributing wealth.
Capretta lists other issues with the proposal before noting:
Macron and Warren have differing objectives. He wants a reform that promotes economic growth while protecting the elderly and social cohesion. She wants to redistribute income (and appeal to voters in the Democratic primaries).
Macron, for all his faults, campaigned on the hope of reinvigorating the French economy by opening it to greater investment and introducing flexibility into its famously rigid labor market. Warren is capitalizing on young people’s positive view of socialism and government centralization to offer tax-and-spend proposals as a panacea.
Christians must go beyond campaign promises to learn the painful, paralyzing role the welfare state has played in transatlantic history. Then, when we consider our future, we can exercise “the mother of all virtues”: prudence. Otherwise, our nation may cross paths with France en route to economic stagnation.
(Photo credit: Frederic Legrand – COMEO / Shutterstock.com. Editorial use only.)