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Can the French Cut Welfare?

Sarkozy touches the troisième rail.

Jun 21, 2010, Vol. 15, No. 38 • By CHRISTOPHER CALDWELL
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Such sentiments, however, do not cut as deep as they did even in 1995. In late May, the country’s major trade unions called for a mass mobilization to protest the retirement changes. The Paris march drew only 22,000 people, according to police. The CFDT—descended from what used to be the Christian wing of the labor movement—had its annual meeting last week and voted against accepting a hike in the retirement age. But labor’s ability to resist welfare reform is being eroded by the same demographic changes that make the system itself untenable. 

The second big crisis addressed at the CFDT conference was the aging of its membership: Sixty-three percent of its leadership will be retired ten years from now. One senses that the unions do not believe they can stop the reform. They just want something to show for their capitulation, such as an assurance that the bulk of the new taxes raised to make the system whole will be raised from “the rich”—i.e., their employers—and not themselves. Such compromises are common. In them, one can see the seeds of France’s structural unemployment problem.

It will be hard for Sarkozy to win even modest welfare reforms without trading away a centerpiece of his small-government agenda: the so-called bouclier fiscal, or “fiscal shield.” The bouclier is George W. Bush’s legacy to French politics, whether he knows it or not. Governor Bush told the 2000 Republican convention, “On principle, no one in America should have to pay more than a third of their income to the federal government.” Whether he was following Bush or the zeitgeist, then-prime minister Dominique de Villepin made a similar promise to the French in 2006, with one small difference. He set the line of this-far-and-no-further, the line beyond which the state lost its moral authority to claim its citizens’ pay, not at 33.3 percent but at 60 percent. In his 2007 campaign, Sarkozy campaigned on lowering the bouclier further, to 50 percent. Of course, in a country where government spending approaches 60 percent of GDP, to promise taxpayers that none of them will pay more than half their income in taxes is merely to promise (a) regressive taxation, and (b) deficits.   Clearly the bedrock fiscal principle in France is that the state will never take more than 50 percent of your income unless it really needs it.

Still, Sarkozy has the stronger hand. Much as Ronald Reagan’s mere mention of “welfare queens” led Democrats to rally behind the most indefensible parts of welfare, much as Bill Clinton’s efforts at gun control led Republicans to oppose restrictions on ever more dangerous weapons, Sarkozy’s opening of the retirement question has led Socialist leader Martine Aubry to reassert the doctrines of her party’s purist left wing circa 1980. She has compared Sarkozy—through a logic only she can follow—to Bernard Madoff. She has alienated the members of her own party who passed second-grade math. Her most likely rival for her party’s nomination in the 2012 presidential elections, IMF leader Dominique Strauss-Kahn, has said he doesn’t want to follow any “dogma” on the retirement age. 

What divides the parties is not the question of whether the retirement system is affordable now—the French increasingly understand that it is not. It is whether it is affordable under any economic circumstances, and whether it will become workable again once the financial crisis has passed. The Socialists argue that the crisis is the problem—it accounts for three-quarters of the deficit. Maybe so. But what is it a crisis of? It’s a crisis of our assets’ being worth less in fact than on paper. That is a terrible truth, but the French would be foolish to think they could return to pre-crisis arrangements by unlearning it.

Christopher Caldwell is a senior editor at The Weekly Standard.

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