I try to be self aware, so I realize that I have the fiscal version of Tourette’s. Regardless of the question that is asked, I’m tempted to blurt out that the answer is to reduce the burden of government spending.
But sometimes that’s exactly the right prescription, particularly for an economy weighed down by a bloated public sector. And, as you can see from this chart, the French welfare state is enormous.
Only Denmark has a bigger burden of government spending, but at least the Danes are astute enough to compensate with hyper-free market policies in other areas.
So is France also trying to offset the damage of excessive spending with good policy in other areas? Au contraire, President Hollande is compounding the damage with huge class-warfare tax hikes.
Here’s what the Wall Street Journal says about Hollande’s fiscal proposal – including the key revelation that spending will go up rather than down.
Remember all that euro-babble before the French election about fiscal “austerity” harming growth? Well, meet the new austerity, same as the old austerity, which means higher taxes on the private economy and token discipline for the state. Growth is an afterthought. That’s the lesson of French President François Hollande’s new “fighting” budget, which is supposed to reduce the deficit to 3% of GDP from 4.5% and represent the country’s toughest belt-tightening in three decades. …More telling is that two-thirds of the €30 billion in so-called savings is new tax revenue, and one-third comes from slowing spending growth. Total public expenditure—already the second most lavish in Europe—will increase by €6 billion to 56.3% of GDP.
The spending cuts are fictional, but the tax increases are very, very real.