Emmanuel Macron’s Pension Problem

Happy Thursday! We never should’ve doubted you, Western Australia Department of Fire and Emergency Services. Great work tracking down that 8-millimeter-long capsule of radioactive material that fell off a truck somewhere along a 900-mile stretch of highway.

Quick Hits: Today’s Top Stories

• Speaker of the House Kevin McCarthy met with President Joe Biden Wednesday to discuss an agreement on raising the debt ceiling and emerged projecting confidence about reaching a two-year deal—though he offered few details on what the potential agreement would include. Both leaders issued statements afterward expressing their willingness to keep talking, with Biden saying he’s open to a “separate discussion with congressional leaders about how to reduce the deficit and control the national debt.” The president maintains Republicans must agree to a so-called clean debt ceiling increase—no policy concessions attached.
• The FBI searched Biden’s vacation home in Rehoboth, Delaware, Wednesday morning and took possession of materials related to his vice presidency—but investigators didn’t find any classified materials, Biden personal attorney Bob Bauer said. CBS News reported earlier this week that federal agents had in November also searched the Penn Biden Center office where Biden’s team originally found classified documents. Robert Hur—special counsel assigned to oversee Biden’s improper handling of classified documents—officially began his role Wednesday.
• The Federal Reserve on Wednesday raised interest rates by 25 basis points—bringing the federal funds target rate between 4.5 to 4.75 percent—the smallest such hike since last March, when the central bank’s anti-inflation pivot began in earnest. Inflation ebbed to 5 percent in December by the Fed’s preferred measure, but the central bankers anticipate additional rate hikes will be necessary in the coming months to reach their target 2 percent inflation.
• The Bureau of Labor Statistics reported Wednesday job openings in the United States spiked month-over-month in December to a near-record 11 million, up from 10.4 million in November but still below the measure’s peak of 11.9 million in March. The quits rate—the percentage of workers who quit their job during the month—held steady at 2.7 percent, while the number of layoffs and discharges ticked up slightly to 1.5 million.
• The Treasury announced sanctions on Wednesday targeting 22 individuals and entities—including Russian arms dealer Igor Zimenkov—accused of helping Russia evade sanctions and obtain weapons to carry out its war against Ukraine. Treasury officials say Zimenkov and his network have helped Russia with “cybersecurity and helicopter sales,” but framed these sanctions as cutting off the already “harder and costlier” workarounds Russia had found for military-industrial complex sanctions.
• Two years after a military coup deposed Burma’s civilian government, the United States and allies this week imposed fresh sanctions targeting six individuals and three entities accused of helping the junta obtain money and weapons. The junta this week extended the state of emergency in place since the coup for another six months—possibly delaying August elections international leaders had already said would not be free and fair. The military regime has killed more than 2,900 people and detained upwards of 13,700 in its takeover and violent repression of protests.
• The United Kingdom’s Trades Union Congress estimated as many as 500,000 workers—including teachers, train drivers, and border officials—stopped work Wednesday to demand wage hikes in the largest such walkout since 2011. 
• One year after retiring and un-retiring from the NFL, Tom Brady, 45, announced Wednesday he’s retiring again—this time “for good.” His final lackluster season capped a remarkable 23-year career which included six Super Bowl championships with the New England Patriots and another Lombardi Trophy with the Tampa Bay Buccaneers.

French “Rage, Rage” Against Retirement Tweaks

If you’re going to strike, you might as well be good at it. And the French—apologies to the Associated Press—sure are good at it, as evidenced by this nifty grill-turned-tram contraption from a protest in Nice: 

That picture is from 2018, but French workers have taken to the streets en masse twice in recent weeks, and have plans to do so again on February 7 and February 11. Why? Proposed changes to the country’s retirement system.

French President Emmanuel Macron kicked the new year off with a bang, announcing in his annual December 31 address to the nation a plan to reform France’s overburdened pension system. “This year will indeed be the year of pension reform, which aims to ensure the balance of our system for the years and decades to come,” he said. “We need to work longer.”

If you’re feeling a strong sense of déjà vu after reading those sentences, don’t worry—Macron said something similar in his 2019 address. But that reform push was put on hold when the coronavirus burst onto the scene a few months later, and remained on hold through last year’s presidential and parliamentary elections—which Macron himself won easily while his party bled seats in the National Assembly. With both those extenuating circumstances now squarely behind him , France’s centrist president is ready to take another crack at his country’s complicated and bloated retirement bureaucracy. 

As currently constructed, the French pension system allows most workers to retire at age 62, with carve-outs allowing workers in a handful of public-sector industries—soldiers, police, electrical and gas workers, rail employees, etc.—retire even younger. Not everyone does—to be eligible for a full pension, workers must pay into the system for at least 42 years—but France’s employment rate among 60 to 64 year olds is a paltry 34 percent according to the country’s economic ministry, compared to about 56 percent in the United Kingdom and 63 percent in Germany. 

Macron and his allies in Parliament say that’s unsustainable. Leaving the system untouched would be “irresponsible,” Prime Minister Elisabeth Borne, a member of Macron’s Renaissance Party, said earlier this month. “[It] would lead inevitably to a massive increase in taxes, a reduction in pensions and would pose a threat to our pensions system.” 

The problem, as Macron’s government describes it, isn’t unique to France: People are living longer than they were when the system was created. But France’s demographic situation “is worse than [the United States’], and it’s worsening more quickly than ours,” said Andrew Biggs, a senior fellow at the American Enterprise Institute who studies Social Security reform. Given the system’s pay-as-you-go structure—whereby retirees’ pension payments are funded by payroll taxes of those currently employed—“it really matters how many workers you’ve got and how many retirees you’ve got.”

That ratio is decreasing. In 1950, according to French economist Jean-Marc Daniel, there were four workers paying for a single retiree. Due to France’s aging population, that number had fallen to two by 2000 and is expected to hit 1.3 by 2040. Combine that forecast with one of the lowest retirement ages in Europe, and you can see why the French system is projected to start running major deficits in the coming years, even as it reportedly ran a surplus in 2021 and 2022. France devotes nearly 14 percent of its GDP to pension expenditures, more than double the United States’ proportional spending on Social Security.

Macron says his plan to improve the system would eliminate any deficits by 2030. Under a proposal introduced last month, the minimum retirement age would increase by three months every year—starting in 2023—until it hits 64 in 2030, and by 2027 workers would be required to work 43 years to receive a full pension, rather than 42. Most of the “special regimes” for public-sector workers would also be eliminated. To soften the blow, the minimum monthly pension payment would rise to about 1,200 euros a month indexed for inflation, and some workers—those who started work at younger ages, or who work in public jobs considered physically demanding—would receive allowances for a slightly earlier retirement than everyone else. The government would also implement incentives for businesses to keep older workers on their payrolls.

The reforms are overwhelmingly unpopular—about two in three French citizens are opposed—and the country’s major labor unions have responded with multiple, debilitating nationwide strikes. Teachers, public transit workers, and energy company employees all left their jobs en masse on January 19 and 31, leading to shuttered schools, stalled subways, and power outages. During the first round of strikes, members of the far-left CGT union cut electricity to the office of a Renaissance Party lawmaker and Macron ally for more than three hours, and threatened further class warfare. “Strikes are good, but they’re no longer enough,” Sébastien Menesplier, head of the CGT’s energy division, told the Wall Street Journal. “We have to take actions that are visible and impact those who are supporting the government.”

The general strikes’ numbers were slightly smaller on Tuesday, but more than 1 million people around the country still filled rural rues and grand boulevards. Some carried signs that read “on strike until retirement,” while others held up cardboard cutouts of Macron with “public danger” stamped across his forehead. A separate protest last Saturday had marchers walking down the Rue du Faubourg-St. Antoine in the center of Paris, just steps from the former site of the infamous Bastille prison where the French Revolution began. One man clutched a sign noting the date: January 21. The same day on which revolutionaries executed King Louis XVI in 1793.

The retirement issues touches the French psyche in very particular ways, said David Troyansky, a history professor at Brooklyn College who is writing a book about entitlements and old age in France. “There’s a long history of concern for late life and concern for preserving rights to things that have been won, gained over time,” he told The Dispatch, noting the concern dates all the way back to the French Revolution. “There’s [an] idea that a pension at the end of a working career is a thing one ought to have.”

The French have an affection for a social safety net that protects them from the coups durs—hard knocks—of life, said Sophie Enos-Attali, head of the political science department at the Catholic Institute of Paris. For reasons having to do with worker solidarity, social justice, and discrimination against the elderly, pensions are a live wire. In targeting the retirement age, Enos-Attali added, Macron has “touched a symbol.”

Labor leaders have argued the changes would disproportionately affect blue-collar workers with more physically taxing jobs, who typically begin their careers at younger ages after forgoing college and expect to retire at 62. They’ve also expressed skepticism Macron’s deficit projections are actually as dire as he makes them sound, and knocked his reluctance to consider higher taxes on the rich to make up for budgetary shortfalls. “Macron refuses to tax windfall profits made by our biggest companies,” François Ruffin, a progressive member of France’s National Assembly, told the Financial Times. “And somehow all the effort to fix the pensions problem must fall on the shoulders of workers?”

The National Assembly, the lower chamber of France’s Parliament, is expected to begin considering the proposal next week, and it’s not at all clear it has the necessary support after Macron’s party lost dozens of seats and its outright majority last June. The plan is expected to face strident opposition from both progressives and the nationalist right, but Borne said Sunday raising the age from 62 to 64 is “non-negotiable.”

The proposal isn’t helped by the fact that Macron is not a terribly popular figure. He’s called “Jupiterian” by his opponents—a reference to the Roman god of the sky—for his aloofness, and his approval rating fell from 36 percent on New Year’s Eve to 29 percent last week. The perception that he lacks a true mandate—failing to gain an outright majority in the first round of last year’s election, and beating the polarizing far-right leader Marine Le Pen in the second—makes the reforms an even heavier lift.

As Biggs noted, the need for pension reform isn’t going to magically go away—and the longer a country delays, the more painful its remaining options become. But that’s someone else’s problem. “If you kick the can down the road and delay, it means you don’t pay those higher tax rates and get lower benefits,” Biggs said. “It means the next generation does. And as much as people claim to like their kids and their grandkids, they don’t like them that much.”

Worth Your Time

• A world of radicals needs incrementalists to make real change, Greg German and Aubrey Fox argue in Persuasion. “Gradualists know how little they know,” they write. “Anyone trying to understand a given problem these days is necessarily missing crucial information because there is simply too much information to process effectively. Gradualists acknowledge that, inevitably, errors happen. Building on this insight, an iterative, incremental process allows for each successive generation of reformers to learn from, and improve upon, their predecessors’ efforts.” Make no mistake, they continue: “We still need dreamers and visionaries and rabble-rousers who want to pursue moon-shot goals like curing cancer and ending hunger. But our default setting should be to admit the obvious: Our problems are big and our brains are small. Incrementalism is nothing less than the endless, ongoing effort to alleviate injustices. It is a way of greeting the world in a spirit of optimism even in the face of the daily conflicts, disappointments, and tragedies that life throws at all of us.”
• A biotechnology company is focusing its de-extinction efforts on resurrecting the dodo, the very archetype of extinction. But things quickly get complicated, not only biologically and ecologically, but metaphysically. Since the plan is to alter an existing bird’s genome rather than, say, construct and animate a bird body, the project raises “Ship of Theseus” complications. Even if the company can successfully recreate the dodo—then what? “There won’t be a clear answer about where to put it,” Antonio Regalado writes for the MIT Technology Review. “The big agricultural industry in Mauritius [the dodo’s former habitat] is sugarcane farming, and there are plenty of rats and other non-native predators around. ‘It would not really be a dodo—it would be a new species. But it still needs an environment,’ says Jennifer Li Pook Than, a gene-sequencing specialist at Stanford University, whose parents were born on the island. ‘What would that mean ethically, if one is not available?’”

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Toeing the Company Line

• On today’s episode of Advisory Opinions, Sarah and David scrutinize New York prosecutors’ reliance on untested legal theory to indict Trump, talk about Biden’s approach to ending emergency law, and question whether “sincerity of belief” should factor into religious freedom decisions.
• John Podhoretz makes a triumphant return to The Remnant today for a characteristically freewheeling discussion covering everything from Israeli politics to the classified document scandals. How is the GOP doing? Will Joe Biden run in 2024? And is it ever appropriate to sing the Felix the Cat theme song?
• New Hampshire Gov. Chris Sununu sits down with Steve on the latest episode of the Dispatch Podcast to discuss New Hampshire’s role in the primaries, Sununu’s presidential prospects, the relative merits of scotch and Spanish wine, and his thoughts on former president Donald Trump.
• Speaking of New Hampshire and the primaries—in Wednesday’s edition of Dispatch Politics, Andrew, David, and Audrey unpack the Granite State’s fight against a new electoral calendar. Plus: how Tom Cotton quietly gave Jim Banks a boost in Indiana and details on Republicans’ 2024 Senate map advantage.
• Scott makes the economic case for criminal justice reform in Wednesday’s Capitolism (🔒), arguing that—on top of other benefits —improving the U.S. justice system would boost workforce participation. “Work is an important step for the reentry and reintegration of those with a criminal history into broader society,” he writes. “It substantially reduces recidivism, particularly in the months after release when reoffending is most likely to occur.”
• Jonah examines police brutality in Wednesday’s G-File (🔒), arguing that putting America in its global context shows a need for policing and the potential to do it better. “If policing is inherently racist and police brutality is simply the fruit of the poisoned tree of American slavery, why does literally every other country in the world have police?” he asks. “The idea that you can reduce all of this to a simple narrative of racism is not just simplistic, it’s dangerous. Because if you think there’s one explanation for a problem that has many causes, you’re going to do a bad job at fixing the problem.”
• And on the site today, Price looks at what might happen if the U.S. fails to raise the debt ceiling, Kevin ponders how Texas should handle rare but recurring snow storms, and Michael Mazza and Shay Khatiri argue that—against all odds—2022 turned out to be a very good year for liberalism.

Let Us Know

Is Macron right to push for pension reforms in France? Is he going about it the right way?