NCPA - National Center for Policy Analysis

Where France Goes...

October 21, 2010

Americans arriving in Paris these days will notice that France's planes, trains and automobiles are all being slowed or stopped by nationwide protests over President Nicolas Sarkozy's proposal to raise the retirement age by all of two years, says the Wall Street Journal.

  • Mr. Sarkozy's reform is intended to shore up France's public pension system, which faces a €32 billion ($45 billion) shortfall.
  • But this modest reform, which has passed the lower house and is scheduled for a vote in the Senate this week, is merely a down payment on France's unfunded liabilities.
  • The larger issue is whether France and other Western nations will grapple with their entitlement obligations before it is too late, or sink under their weight, dragged down by intransigent government-employee unions.

Sound familiar, Californians?

The scope of the protests is all the more remarkable given the smallness of the reform, says the Journal.

  • Besides raising the minimum retirement age to 62 from 60, the government wants to raise the age of eligibility for a full state pension to 67 from 65.
  • This is in a country where average life expectancy is 81.5 years today, up from 70.2 years in 1960, according to World Bank figures.

Across Europe, the recession that began in 2008 has laid bare how unaffordable the extravagant promises of the welfare state have become.  Even in the United Kingdom, where the government of David Cameron is due to announce some £83 billion ($131 billion) in budget cuts over five years, spending will only come down to the pre-crisis levels of 2008 -- a little over 40 percent of gross domestic product from 50 percent today.

The obvious lesson for America is to avoid the mistake of imposing such unaffordable entitlements in the first place.  Europe shows what happens when entitlements are too big and expensive to afford -- but also too big and entrenched to reform, says the Journal.

Source: "Where France Goes...," Wall Street Journal, October 20, 2010.

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