Sunday, April 27, 2008

Rationalization


One thing that students of French history are taught is that the Revolution, whatever else it may have done, had a powerful rationalizing effect on French government, culminating a rationalization that had been under way for many decades under the Ancien Régime: a welter of conflicting legal regimes, disparate weights and measures, regional customs, dialects, etc. gave way to a modern, logical, functional, streamlined state efficiently administered from the top down. One sometimes has the feeling that it would take a revolution of similar magnitude today to clear up the confusion created by layer upon layer of legislation, by the residues of welfare and stimulus programs put in place for reasons that have been forgotten but that are all but impossible to eliminate because, once established, they acquire constituencies of beneficiaries and bureaucrats who have an interest in maintaining them. Then one had pays d'États and pays d'élections, la lieue de Paris et la lieue des Postes, le pied du Roi et le pied de Pérou, le livre parisis et le livre tournois; now one has a retirement system so complicated that no one can calculate what he or she can expect to receive at the end of a working life (see the Bozio-Piketty critique), and one has the latest proposal to finance the RSA by reducing the ceiling on the PPE.

What is this alphabet soup? The RSA is the Revenu de Solidarité Active, which is intended to eliminate disincentives to work; the PPE is the Prime pour l'emploi, which was established years ago as an incentive to work. So the reduction in one incentive to work is to be used to pay for the creation of another incentive to work. The ingenious budgetary arithmetic is no doubt admirable, and a better connoisseur than I am of the intricacies of these two labor market interventions might be able to explain the rationale for decreasing spending on the one in order to increase spending on the other, beyond the obvious fact that the PPE was the work of previous governments, hence no feather in the cap of this one, whereas the RSA has the presidential imprimatur, hence action on this front redounds to the glory of the head of state. Perhaps there are gains in equity; perhaps the target population of the RSA is more in need of assistance than that of the PPE; perhaps the aim is ultimately to phase out the PPE (and other incentives such as the RMI) altogether and replace it with a rationalized and transparent RSA. But all of this needs to be explained more clearly. In the absence of explanation, the budgetary legerdemain looks like an expedient intended to save a presidential promise rather than a policy with a persuasive logic behind it. Or am I missing something?

8 comments:

Anonymous said...

As far as I understand it, the PPE is a tax cut for working-class people who make less than $20,000 a year.
The RSA is meant for those trying to leave the ranks of the poor and join the ranks of the working class.
So strictly speaking they would not be the exact same people.

On the other hand, I fail to see how eliminating a tax cut for the working poor will boost spending power among the poor - that's purely objective logic.
Especially since consumer trust and spending are low - I believe we expected a 0,1% dip in March and ended up with a...1,7% dip. And mass consumption drives French economic growth.


Perhaps more biased-- you can call that tikkun or charity or common good or public responsibility or whatever, but I feel that society ought to keep the poor in mind. There's something wrong with using them as milking cows for a government project, no matter how good the project may be.

Using the working poor's money to help the unemployed is akin to taking bread from those who only have bread to eat and give it to the hungry, disregarding those who could spare the bread from their 4-course-dinner.
If I may be scandalous: Couldn't they use the "fiscal shield" which did not bring back a single millionaire rather than taking money away from the working poor?

But at the very least, the government should think in terms of economic logic rather than ideology: taking money away from those who spend it all -because all they have is needed for basic survival- is going to drive both trust and consumption down, which will feed the economic crisis.

Unless it's just an announcement and nothing will be done...
Or, as you put it, it is "expedient intended to save a presidential promise" ie., pure ideology and communication, without any regard for the actual implementation.

Unknown said...

Anonymous,
Yes, the RSA as originally conceived was to answer the fact that French social transfer payments have not been effective in reducing the risks of poverty (defined as income below 60 pct of the median), as you can read in this report. But as the RSA has evolved, and as its financing has become more problematic, there has been little effort to explain how this goal is going to be achieved.

Leo said...

Art,

I do agree that as usual the lack of explanation muddles the message. As I understand it, the PPE has numerous drawbacks which are listed here:

http://www.ifrap.org/ECONOMIE-EMPLOI-ET-SALAIRES-Pour-une-nouvelle-politique-des-revenus,0065.html

The decision to finance part of the RSA by clipping the PPE seems to be well founded:

"Par ailleurs l’allocation constituée par l’actuelle PPE devrait être redirigée plus nettement vers les titulaires de bas revenus, ce qui était sa vocation première avant de devenir un simple treizième mois bénéficiant à tous les salariés percevant jusqu’à 1,4 Smic. Cette critique est par exemple relevée tant par la Cour des comptes que par le rapport Létard au Sénat. Le saupoudrage actuel devrait donc s’atténuer au profit de l’efficacité"

Of course, it would have been better to think the whole plan through rather than rush half baked measures at the risk that the excess pieces of the millefeuille will never be weeded out.

Unknown said...

Léopold,
Thanks for this. I suspect that you are right, and I'm not sure why the government isn't communicating its rationale more successfully.

MYOS said...

1,4 SMIC is very low. It's 1400 euros a month. Far from being "too well-off " to benefit from a "13e mois" or any little wage supplement. Especially taking into account those low-wage earners are likely to be the hardest hit by the cuts in APL, allocs, and so forth.
If the money can be used better, sure.
But, like Art, I wouldn't call taking chunks from the PPE to fund the RSA "rationalization".
One reason that the governement can't quite find its angle is that it wants to avoid being called "robin des bois à l'envers" again (this is how the paquet fiscal has come to be represented and understood: take from the poor to give the rich, hence, "Robin Hood in reverse". The understanding is widespread, regardless of political leanings, in part because the only part of it that seems to work is the "fiscal shield". If overtime pay had skyrocketed, we'd be hearing a different tune.)
The government is still looking for an angle but since 1,4 SMIC truly isn't much, they need a bit of time. And during that time, the idea "once again the poor are paying because of the rich" is spreading.
Except that here, it's more "take from the kinda-poor to give to the destitute."
Trying to be optimistic: the purported disgusted/revolted people I am acquainted with are now totally knocked out by the avalanche of bad news and in no mood to strike or protest.

MYOS said...

La vie des idées has got something on RSA!
http://www.laviedesidees.fr/Le-Revenu-de-Solidarite-Active-en.html

MYOS said...

Another take on "rationalization", as seen by backchich...
http://www.bakchich.info/article3483.html

Unknown said...

myos,
You're active today! Thanks for all your contributions.