Rush's Morning Update: The Costs
June 18, 2010
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An article in The Economist magazine highlights the trouble thatFrance is having trying to reform its bloated pension system,which is a major factor driving them toward insolvency. The system is billions of dollars in the hole,while the country is running a budget deficit of 8 percent; that's close to the 9 percent deficit has that plunged Greece into turmoil.
The French government will raise the retirement age from 60 to 62.(Big deal!)But that will take eight years, andcivil service pension contributions will be aligned with those in the private sectorover the next ten years. Predictably, France will raise taxes on income, capital gains, and stock options -- which will kill growth.
Equally predictable is the reaction from unions and the Socialist Party. The unions are calling the moves a "provocation," and, of course, they're calling for strikes. The Socialists are promising to repeal the reforms if they're elected. Meanwhile, financial experts say the plan is more symbolic than anything else,noting the retirement age would have to be raised to 65 to put a real dent into the problem.
France is our future. California faces a half-trillion-dollar shortfall, but it's being ignored-- as are deficits in every other state liberals run. New Jersey Governor Chris Christie is trying to get public pensions under control,but liberals are fighting him tooth and nail there.
This much is clear:The costs of public sector unions are killing economies all over the world, and until they're dealt with,no economy -- anywhere -- is safe.