Monday, 27 March 2023 06:56

What Republicans should learn from French protests over pension cuts

Protesters march in Paris against pension reform on March 23, 2023.

Mass protests continued to roil French cities on Thursday, with more than a million people turning out to oppose a new policy that raises the retirement age from 62 to 64 and requires workers to contribute to the pension system for longer. The new law is a priority of President Emmanuel Macron, who used a constitutional loophole to force the change into effect after it became apparent parliament would reject it.

The weeks of French protests have been mostly peaceful and led by union leaders. Piles of trash, left out on the streets by striking garbage collectors, have become an emblem of the opposition, and there have also been disruptions to transportation, air traffic, oil refineries, and schools.

But violence broke out Thursday as protesters set fire to the front door of the Bordeaux city hall and newsstands across Paris, hurled smoke bombs, and damaged property. Police tried to quell them with tear gas and water cannons late into the night. At least 149 police were injured and 172 people were arrested. It’s not clear how many civilian injuries there were, and we don’t yet have estimates as to the extent of the damage.

Macron, who narrowly survived a vote of no confidence this week, has said he has no intention of reversing the law. He claimed in a television appearance Wednesday that he needed to convince the public that the reforms were necessary to save what he frames as the country’s endangered pension system, especially given higher life expectancy. But it’s not at all clear that current pension spending is out of control, and in making his claims, only added to protesters’ fury.

It’s difficult to imagine the same kind of mass protests breaking out in the US over raising the age at which people can start collecting Social Security, which is projected to potentially become insolvent by 2033, meaning that beneficiaries could see their checks diminished by 25 percent thereafter. France’s size and strong unions help with protest cohesion, and the US has struggled to maintain intense public protests over time in recent decades. But they do offer a warning to those Republicans who have been agitating for reforms to Social Security, which they have also misleadingly framed as the only means of ensuring the program’s survival.

“It’s the same conversation in the sense because it’s a way to cut benefits,” said Alicia Munnell, director of the Center for Retirement Research at Boston College.

Raising the retirement age is effectively a cut to benefits

The Republican Study Committee, a group of House conservatives, proposed in their 2023 budget to gradually raise the retirement age in the US from 67 to 70 in light of longer life expectancies. Republicans have tried to frame such proposals as reforms that would keep the system solvent for future generations without touching the benefits for any current retirees or those close to retirement age.

Though there was speculation that this idea would be a sticking point in debt ceiling talks, Republican House Majority Leader Kevin McCarthy took the issue off the table last month following backlash from moderates in the party and relentless Democratic attacks. The idea, however, remains a topic of discussion among some Republicans, including the party’s presidential candidates.

“It is unrealistic to say you’re not going to touch entitlements. The thing is, you don’t have to touch it for seniors and anybody near retirement. You’re talking about the new generation, like my kids coming up,” Republican presidential candidate Nikki Haley said earlier this month.

One common misconception in the US is what the retirement age is. Though an American can start claiming benefits as early as 62, they will only reap their highest monthly benefits at age 70 under the Delayed Retirement Credit, which was implemented in the early 1970s. The average American currently retires at age 64, but that might partially be because they don’t know that they will get a higher benefit if they hold off.

Also, raising the retirement age further, despite what Republicans may say, is a cut to benefits, given that a retiree gets less money over a shorter period.

According to an analysis by CBS’s Aimee Picchi, the average retiree would lose out on three to four years in benefits under Republicans’ plan, amounting to a minimum of $65,000. That’s critical, especially given that other sources of retirement income such as ​​employer-provided pensions have dried up over the years, that taxes on Social Security benefits have increased, and that Medicare premiums have risen.

“When we talk about raising the retirement age, you have to put air quotes around it because most people hear that and they’re actually hearing the wrong thing,” said Alex Lawson, executive director of the advocacy group Social Security Works. “What they’re actually saying is, we’re going to cut your benefits so that rich people don’t pay more in taxes.”

Though France’s retirement system is more generous than the US’s, Lawson’s argument is the same one French protesters have levied against their government over the course of recent demonstrations: Raising the retirement age would put an undue burden on low-income individuals and the working class, without exploring other tax solutions or tapping into other accounts.

There are some solutions, however, being floated in the US that would avert those burdens and the widespread public outrage that we’ve seen in France.

There are many ideas about saving save Social Security that don’t involve raising the retirement age

At the moment, Republicans are largely proposing ways to reduce the money doled out through Social Security, but they aren’t talking about ways to increase amounts flowing into the program.

There are myriad ways to do that, including by extracting more Social Security taxes from payroll. The government could raise the Social Security tax cap, under which income over a certain amount — $160,200 in 2023 — is not subject to Social Security payroll taxes of 6.2 percent for both workers and their employers. About 6 percent of Americans earn more than that amount.

Democratic Sens. Bernie Sanders and Elizabeth Warren have proposed making people who earn over $250,000 pay Social Security taxes on their income, as well as subject investment and business income to Social Security taxes. That would ensure Social Security’s survival through 2046, according to projections by the Congressional Budget Office.

Congress could allocate some general revenues to support the program in recognition of the fact that much of the Social Security trust fund was spent on the first generation of retirees after the Great Depression, Munnell said.

“To sort of recognize that ongoing burden because of the decision made decades ago, you could put in some general revenues, and I don’t think it would erode the relationship between contributions and benefits in the sense of an earned right,” she said.