French Voters Get Bankruptcy For Social Security
Two years ago, French citizens rioted across the nation, angered by then-President Nicolas Sarkozy's timid effort to put the country's social security system on a sustainable footing, by raising the retirement age — from 60 to 62.
That minor reform led to Sarkozy and his center-right party being thrown out of office, and replaced by socialist Francois Hollande.
Calling himself "the enemy of finance," Hollande reversed Sarkozy's raising of the retirement age, and cut employers' social security contributions into the system, restoring the ancien regime. Like President Obama, the socialist leader also raised taxes on the rich — to 75% — and began hiking taxes on food deemed "bad" for people as his means of balancing the budget.
What Hollande's political crowd-pleasing acts didn't do was come up with the money.
According to an official report cited in the Financial Times, France's national pension system is still going broke, with its deficit expected to grow from 14 billion euros last year to 19 billion in 2017 — a 30% surge.
To pay for this, France's COR pension council says unemployment will have to be cut from above 9% to 4.5% and productivity growth raised to 1.8% from about 1%.
It can't happen as long as mega-taxes and vast waves of tax exiles — from France's richest billionaire to actor Gerard Depardieu — continue to flee the country.
Sadly, the U.S. is on precisely the same path — with a president hellbent on taxing the rich and, like Hollande, refusing to address runaway entitlements.
France's public debt is near 90% of GDP and its unfunded pension liabilities amount to at least 200% of GDP. But neither tax hikes nor demonizing the rich has done a thing to defuse the entitlement bomb.
Unless Hollande is prepared to make a truly free market move, such as privatizing pensions along the Chilean model, he'll have just three choices — cutting benefits, raising taxes or just going broke.
This is what comes of the socialist left's rejection of economic reality, a bankruptcy based on what Lady Thatcher called "running out of other people's money."
Incredibly enough, the U.S. is going down the same path as France. President Obama is no more willing than Hollande to change course before the deluge.