Trump Takes a Page From Sarkozy's Playbook

Trump Takes a Page From Sarkozy's Playbook

Trump Takes a Page From Sarkozy's Playbook

Trump Takes a Page From Sarkozy's Playbook

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Sep 13, 2024

Sep 13, 2024

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We don't know who in or around the Trump-Vance campaign is a follower of French politics, but President Trump's new proposal to exempt overtime from tax was Nicolas Sarkozy's signature issue in the 2007 campaign. 

Comparing President Trump's proposal to the Sarkozy proposal is enlightening. 

The policy was presented under the slogan “Work more to earn more.”

Under the proposal, overtime hours would be exempt from income tax, but also both employers and employees would pay reduced social security contributions—i.e., payroll tax—on overtime hours. Both public and private sector workers would be eligible. Importantly in a country with structural low growth where so much employment was marginal and part-time, the policy also covered part-time workers' "complementary hours" worked beyond their contracted hours. The aim was to increase purchasing power for workers and to stimulate economic growth by encouraging longer working hours.

The proposal accomplished numerous goals for the Sarkozy campaign. During this time, France was still debating the merits of the infamous 35-hour workweek, which had been passed in 2000. The conservative government elected in 2002 had promised to repeal the 35-hour law, but while it created many exceptions and exemptions in the law, it did not return to a legal 38-hour work week. 

In some ways,  the proposal was a culture war play even before it was an economic proposal: Nicolas Sarkozy decided to make a centerpiece of his campaign the proposition that hard work, earning money, and creating opportunity for one's self, were more important values than redistribution and leisure time, which at the time was almost revolutionary. Insert joke about the lazy French here. But this type of discourse may come to the US if manufacturing jobs continue to disappear, growth continues to be sluggish, and so much of white collar work continues to seem (justifiably in so many cases) meaningless and disconnected from actual value creation. 

We believe this is what undergirds UBI discourse. People (especially men) find it attractive to work when they make good wages and when they feel that their work is actually productive, that, at the very least, it actually leads, even if the process is somewhat roundabout, to creating actual goods and services that people find useful. As these things slip away from our society, the siren songs saying everyone can go on a year-long vacation if we can just tax the billionaires will become more attractive. 

The other feature of the policy was that it solidified Sarkozy's overarching strategic objective to go after the white working-class voters that the traditional right had abandoned and who had been picked up by Jean-Marie Le Pen's National Front—without alienating the conservatives' traditional, middle and upper-middle class voters.

The “Work more to earn more” policy, by its nature, applied to blue-collar workers, since white-collar workers don't have contracted hours with overtime. (That's right, the 35 hour law in France doesn't apply to white collar workers—a huge chunk of the workforce, and the most economically productive.) It was a direct appeal to their votes. It didn't offer them a free lunch, which these voters no longer trusted politicians to provide, instead it promised a benefit that they would have to earn, which seemed more credible and appealing.

At the same time, the policy made a pro-market argument. The socialists had sold the 35-hour workweek using the “lump of labor” fallacy: if everybody works less, there will be more work to go around for the unemployed. Of course, that's not how things work. When attacked on the idea that his policy did nothing for the unemployed, Sarkozy replied with perfectly orthodox pro-growth language: his policy does work for the unemployed; if existing workers work more, there will be more growth, which will create new jobs for those who don't currently have any. Also it's a tax cut, and everybody on the right loves tax cuts. 

What was genius about the policy is that it was both “populist” and market-friendly. 

In other words, it checked a lot of boxes for Sarkozy, just as it checks a lot of boxes for Trump. 

Did it work? 

It certainly worked at the ballot box. Sarkozy's 2007 campaign connected with working-class voters in a way that essentially no traditional conservative candidate had since Jean-Marie Le Pen arrived on the scene. In the first round of that election, Le Pen had his worst score in decades, as Sarkozy's combination of anti-immigration rhetoric and what you might call market-friendly economic populism appealed to Le Pen's constituency of blue-collar workers and small business owners. 

As to its impact on the economy, it's less clear. 

After winning the election, Sarkozy's administration implemented the policy in October 2007 as part of the TEPA law (“Travail, Emploi, Pouvoir d'Achat,” or “Work, Jobs, Purchasing Power”), a broader package of tax and regulatory reforms. Economists still argue about the impact of the law, especially since it only began to be implemented on the cusp of the 2008 financial crisis, which complicates any sober-minded evaluation.

Left-wing economists argue that the policy did nothing to help employment or purchasing power, and that it was a total waste of money. This is almost certainly an exaggeration, but even conservative economists tend to agree that it didn't offer the kind of economic kickstart that was hoped for at the time. The law ended up only spending 6 billion euros on overtime tax cuts, or 0.31% of France's 2007 GDP—not a massive fiscal impact. And the 2008 macroeconomic shock ended up swamping any potential positive effect on unemployment. François Hollande scrapped the policy when he came into power in 2012.

Does that mean it's not worth pursuing in the US? Well, hopefully we won't have a global economic crisis the year after the election. And reducing taxes on work may be one of the only things that the Grover Norquist and Oren Cass wings of the Party can agree on. It would certainly help manufacturing competitiveness. We think it's a very good idea.

Policy News You Need To Know

#AI – OpenAI has introduced new AI models supposed to be particularly good at reasoning: o1-preview and o1-mini. Unlike previous models, o1-preview utilizes a "chain of thought" approach, allowing it to break down intricate tasks into smaller steps, mimicking human-like reasoning processes. This innovative model excels in STEM fields, demonstrating impressive performance in areas such as competitive programming, mathematics, and scientific problem-solving. O1-preview uses reinforcement learning techniques, enabling it to solve problems independently by learning from rewards and penalties. Here's an eye-opening thread from researcher Daniel Jeffries showing just how impressive o1-preview and its little brother o1-mini are. Worryingly, OpenAI claims it has also implemented new safety mechanisms, significantly improving the model's resistance to jailbreaking attempts and adherence to so-called “ethical guidelines.” This is problematic because, of course, in many cases the so-called ethical guidelines just mean “Spout left-wing propaganda and refuse to say politically-incorrect things even when they're true.” Users have figured out ways to get around those guardrails, but if OpenAI is much stronger against those, and becomes the AI standard, which it clearly wants to do, then this is a big problem. The best way to prevent against an embedding of left-wing religion into everything that has AI in it (which will soon be everything, period) is probably to support open source AI, which conservatives in Congress have done. 

#TaxReforms – ATR: New York Will Face 43.9% Capital Gains Tax Under Kamala Harris Tax Plan. Harris has decided to run as a moderate this time around but there is nothing moderate about her tax proposals.

#Immigration – CIS: American Community Survey Shows Record Size and Growth in Foreign-Born Population in 2023 – Other Census Bureau data shows growth is even larger.

#AmericanManufacturing – NYT: Boeing Workers Walk Off the Job in First Strike Since 2008 Interestingly, the workers decided to go on strike rejecting a package that was approved by their union leaders.

#DEI – Striking new report from Claremont's William Thibeau on the implementation of DEI across the US military. This racist garbage threatens US military readiness and warfighting ability and needs to be expunged. 

#Voting – Like you, we are learning that, apparently, ballot petition fraud is rife in Florida. Governor DeSantis is tackling the problem in the way only he can. The reason we mention this state issue is because it's just one more indication of how broken or at least fragile the mechanics of voting are in the US relative to other advanced first-world democracies, and there is one party that is inexplicably opposed to reforming it.

#FreeSpeech – We already mentioned FIRE's report ranking US universities on free speech. It's still worth noting that the Ivy League schools are the worst on the list. This is unacceptable on two fronts. The first is that these are taxpayer-subsidized institutions, and American taxpayers should not be subsidizing this un-American garbage. The second is that these schools are supposed to be training the next generation of the leaders of America, and they are clearly inculcating them in un-American values. This is...problematic, as the kids say. But again: these are taxpayer-funded and -subsidized institutions. Policy absolutely has a role in fixing this.

Chart of the Day

From CIS: “American Community Survey Shows Record Size and Growth in Foreign-Born Population in 2023”

American Community Survey
American Community Survey
American Community Survey

Meme of the Day

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