French Pension Reform Muscled Through

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Quick Hits: Today’s Top Stories

• Eleven of the largest U.S. banks—including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo—announced Thursday they were depositing a combined $30 billion in the San Francisco-based First Republic Bank in an effort to instill confidence in the nation’s mid-sized banks and assuage fears of a bank run like the one that caused Silicon Valley Bank to fail last week. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and FDIC Chair Martin Gruenberg welcomed the move, saying it “demonstrates the resilience of the banking system.” The Federal Reserve reported Thursday banks borrowed a record amount of money from the central bank over the past week as they seek to shore up liquidity concerns.
• The European Central Bank’s governing council announced Thursday it would move forward with 50-basis-point hikes to three key interest rates despite the turbulence in financial markets over the past week. The central bankers said they were “monitoring current market tensions closely” and that they stand “ready to respond as necessary to preserve price stability and financial stability in the euro area.”
• Polish President Andrzej Duda announced Thursday Poland plans to become the first NATO member to answer Ukraine’s request for warplanes, providing Kyiv with about a dozen Soviet-made MiG-29 fighter jets—including four within the next few days. Also Thursday, Polish Interior Minister Mariusz Kamiński told reporters the government had arrested nine foreign nationals suspected of spying for Russia by surveilling transport routes as part of a scheme to sabotage weapons shipments to Ukraine.
• The Pentagon on Thursday released footage of a Russian fighter jet colliding with an unmanned U.S. surveillance drone over the Black Sea earlier this week, seeming to dispel Russia’s claims that the drone’s operators were responsible for its crash. Defense Secretary Lloyd Austin said Wednesday the incident will not dissuade the U.S. from conducting surveillance flights “wherever international law allows,” and both Russian and American forces are reportedly racing to recover the drone from the Black Sea near Crimea.
• Chinese President Xi Jinping will meet with Russian President Vladimir Putin to discuss “deepening Russian-Chinese cooperation in the international arena” during a three-day visit to Russia early next week, the Kremlin announced this morning, adding “a number of important bilateral documents will be signed.”
• The Defense Security Cooperation Agency announced Thursday that as part of the AUKUS agreement the State Department had approved the potential sale of up to 220 Tomahawk missiles to Australia for an estimated $895 million. “The proposed sale will improve Australia’s capability to interoperate with U.S. maritime forces and other allied forces as well as its ability to contribute to missions of mutual interest,” the Pentagon said in a statement.
• The Salvadoran government’s crackdown on crime continued apace this week, with law enforcement officials sending 2,000 more suspects to a mass prison intended to house gang members. More than 60,000 people have been captured in El Salvador’s anti-gang campaign over the past year, leading human rights groups to express concerns some innocent people are being swept up in the police raids.
• Utah Gov. Spencer Cox, a Republican, confirmed Thursday he plans to sign into law legislation that would require social media platforms to verify the age of Utah residents attempting to open an account and obtain parental consent for would-be users under the age of 18. “Will there be legal challenges? Absolutely there’s going to be legal challenges,” Cox told reporters. “I’m not going to back down from a potential legal challenge when these companies are killing our kids.”
• The Department of Labor reported Thursday initial jobless claims—a proxy for layoffs—fell by 20,000 week-over-week to a seasonally-adjusted 192,000, remaining near historic lows.

Macron Does It His Way

The Senate took advantage of a parliamentary workaround yesterday to muscle controversial legislation through the narrowly divided legislative body. Don’t worry, you haven’t been transported back in time to last August, we’re not talking about the Inflation Reduction Act. But something eerily similar transpired in France on Thursday.

When we last wrote to you about France’s efforts to reform its pension system in early February, President Emmanuel Macron was facing an uphill battle trying to muster enough support for his deeply unpopular plan to raise the retirement age by two years. However fiscally prudent the plan was—Macron’s government and basic math would argue very—the French people were not interested, and their opposition has only hardened in the six weeks since. The question was whether Macron would be able to gin up enough support for the proposal in parliament to squeak it through into law.

He wasn’t. But that doesn’t mean he isn’t going to get what he wants. 

As yesterday’s scheduled vote in the National Assembly drew nearer, there was a very real chance the proposal—the one upon which Macron had essentially staked his second term—would fail. “If I was them I would be worried,” said Olivier Marleix, a Republican member of the lower chamber.

Evidently Macron was worried, opting at the eleventh hour to take advantage of an arcane bureaucratic procedure to bypass the vote entirely. Under Section 49.3 of the French Constitution, the president and his Council of Ministers (his cabinet) are allowed to usher legislation that’s already passed the Senate through the National Assembly without a vote. The move is perfectly legal, and it’s been deployed dozens of times in modern French history—including by Macron as recently as December to get a budget over the finish line.

But it’s not without potential downsides. Once invoked, the National Assembly has 24 hours to call for a vote of no confidence in the government. If the motion passes with majority support, the government—the prime minister and the Council of Ministers—is disbanded, and the law is defeated. If it doesn’t, the law in question goes into effect as normal.

Macron—who is ineligible to run for re-election in 2027 after winning a second five-year term last year—decided just minutes before the vote was set to take place to invoke the constitutional measure. “My political interest would have been to submit to a vote,” he reportedly told advisers. “But I consider that the financial, economic risks are too great at this stage.”

For a quick reminder of why Macron might think that, here are a few paragraphs from February 2’s TMD:

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.—to 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.

Borne, the French prime minister, reiterated that sense of urgency when announcing the government’s decision on Thursday to forgo an assembly vote on the proposal. “We cannot gamble on the future of our pensions,” she said. “We can’t take the risk of seeing 175 hours of parliamentary debate come to nothing.”

Plenty of assembly members would be happy for all those hours of debate to be squandered—and they let Borne know yesterday. As the prime minister attempted to explain the government’s position yesterday afternoon, she was drowned out by many of her fellow lawmakers singing “La Marseillaise,” the French national anthem. Some of her political opponents held up paper signs, or even booed.

Most of the ire, however, was reserved for Macron himself—a president widely considered smug and aloof well before this latest legislative push. Jean-Luc Mélenchon—one of Macron’s left-wing opponents in last year’s presidential race—alleged the president had gone “over the heads of the will of the people.”

“Today is the first day of the end of Emmanuel Macron’s term,” Mathilde Panot, head of the leftist party France Unbowed, declared confidently. Marine Le Pen, Macron’s far-right rival and leader of the National Rally, also decried the maneuver. “This is a total failure for the government and Emmanuel Macron personally,” she said. “The government must be sanctioned. It has lost the confidence of this assembly and the population.” 

Outside the parliamentary building, thousands of demonstrators echoed the lawmakers’ anger on the streets of Paris. Protestors chanted “Macron, resign” and even burned him and Borne in effigy. Many gathered at Place de la Concorde on Thursday afternoon where as night fell, riot police and protestors clashed violently, and more than 120 people were arrested. And the protests show no signs of abating.

Union leaders called for further strikes next week. “The united union front continues to demand the withdrawal of the reform and calls for another day of strikes and demonstrations on Thursday, March 23,” said Catherine Perret, a spokesperson for the General Confederation of Labour. 

Both Le Pen and left-wing MPs have announced they intend to introduce a no-confidence motion today. Once introduced, the assembly must wait two days before holding a vote, which sets the stage for a confrontation early next week. But an outright majority is needed to pass the measure and dissolve the government, and it’s unclear whether the opposition can win over enough support after Eric Ciotti, head of the center-right Republicans party, said he wouldn’t “add chaos to chaos” by backing a no-confidence vote. 

Worth Your Time 

• For Law & Liberty, Mark Movsesian reviews Stephen Bullivant’s new book, “Nonverts: The Making of Ex-Christian America,” on the increasing number of “Nones”—Americans who don’t consider themselves to be religious. “The vast majority of Nones, about two-thirds or three-quarters, weren’t born that way. They made a conscious choice to disaffiliate from the faith traditions in which they were raised,” Movsesian writes. “Most American nonverts are former Christians. That’s simply a matter of numbers. The large majority of Americans historically have identified as Christian and continue to do so today. Most Americans who abandon religion, therefore, abandon Christianity. (Bullivant points out that, although people stereotype Nones as white, ‘as a group, the religiously unaffiliated are as racially diverse as the country as a whole.’) To say that America is becoming less religious means that it is becoming less Christian in social and cultural terms—that Christianity, in Bullivant’s phrase, is less and less our ‘default setting.’ Hence the subtitle of his book. If current trends continue, he predicts, the United States will become an ‘ex-Christian’ nation.”
• Three years after COVID-19 shut down the world, several Bloomberg writers reviewed economic and excess-death data from a number of countries to determine if one pandemic approach was vastly superior to the others. While every policy choice involved tradeoffs, Sweden—with its limited restrictions—came away looking pretty good. “Excess deaths in the first wave of SARS-CoV-2 initially surged, especially among older people, whereas they stayed largely flat in neighboring Norway and Denmark,” Andreas Kluth writes. “But the Swedes changed their behavior and rode out subsequent waves as well as anybody. In later stages of the pandemic, their excess mortality was worse than those of their Scandinavian neighbors but still significantly lower than the rest of Europe’s.” What did Stockholm do differently? “[It took] a holistic view of the public-health crisis, by recognizing that Covid was one risk among many, from financial loss to interrupted learning to mental illness,” Kluth notes. “On some of those measures, Sweden has objectively fared better than countries that prescribed lockdowns. Its young people are doing especially well compared to those of other nations.”

‘Did We Just See What We Think We Just Saw?!’

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Let Us Know

Does Emmanuel Macron survive his bold reform push?