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The French Example

It’s summer, and time to talk national budget!  No, not here in the USofA – we haven’t actually bothered to have a real budget in 3 years or more.  We’re talking about France, a nation with a bold new Socialist government and determination to move ahead into the future.  A future full of socialist visions of strong growth and commitment to reducing the deficit … wait a minute …

The fun thing about Europe these days is that it provides us with endless examples of alternative ways to run things.  By “alternative”, of course, we mean things that are utterly impossible to describe even as they seem vaguely familiar.  Yet, in the case of France, we might be looking at something like the future if we do manage to get a Democratic US House in the next election along with a second term for Obama.  It only gets weird when you think of the left as the responsible ones who are actually trying to make things work.

The situation is this – Francois Hollande was elected President in May and recently his Socialist Party won a clear majority in Parliament.  They can do anything they want, at least as far as all the constraints of Euroland allow.  They ran on restoring growth to the Euro picture and a sense of shared prosperity for everyone – something you can expect from a party that calls itself “Socialist”.  What they intend to deliver in the budget proposed last Wednesday is a reduced budget deficit through increased taxes on the incomes of the wealthy, financial transactions, and a one-time hit to oil companies.

Something about this doesn’t add up, as it is nearly impossible to imagine more growth without at least some more spending.  But that’s not in the cards, given the arrangements in Euroland to keep deficits under control.  The new government inherited a deficit position at about 5.5% of GDP, roughly half the relative deficit of the US government but way out of line with Euro agreements.  They intend to close the gap the only way a party of their position can – even if they will never make good on their call for more growth this way.

Austerity is never any fun.

The progress of this government and its budget is interesting because the situation is not that different from the one here.   Granted, we have less reliance on government as a share of the economy (a full 56% of France’s GDP) but we have much more deficit to trim even without Euro agreements over our head.   Growth?   How do you inject a measure of growth into a budget that is already  deep in the red and nothing is happening?

France is dealing with their situation in the best way they can, but it’s clearly nowhere near adequate – especially from the perspective of campaign promises for more growth and opportunity.  It’s nearly impossible to see this working out as anything but a holding pattern that will eventually expose a division between old fashioned left-winged socialism and its pale modern reality as a party in power desperately trying to hold on and make something work.

Sound familiar?

Our Democratic Party is in a very similar position.  Our federal deficit has been something like candy over the last decade, injecting a constant stream of stimulus into an economy that careens between being hopped-up and crashing.  What we need is a balanced diet and plenty of exercise, but we first have to get off of the couch and make something happen.  Stimulus?  We’re over-stimulated and still incapable of functioning in any kind of productive way.

If the Democrats do sweep into power in November, a possibility that remains out there, we would probably see something similar to what the Socialists are trying to do in France.  No one can say what Republicans would do should Romney win, given that he has made a point of not talking about his plans.  But we do have a sneak peak at what one side would probably wind up doing, and we’ll get to see how it plays out in advance.

It’s not likely to be good.   France, and the whole Eurozone, is telling us something we probably don’t want to hear.  That is, of course, if we actually talk about a budget at all.

13 thoughts on “The French Example

  1. As of this morning the president is speaking of extending middle class tax breaks for an additional year, but ending the tax break for those making $250,000 or more.

    • I think it will have to go that way. Real tax reform would be nice, starting with a simpler system that isn’t cobbled together with “breaks” here and there, but generally it has to move that way if Obama is going to rally the left and get us all excited enough to make something happen. And if it does happen … well …

  2. “Our federal deficit has been something like candy over the last decade, injecting a constant stream of stimulus into an economy that careens between being hopped-up and crashing. ”
    Gold! 🙂 It’s been a while

  3. There are no good options for France or any other European nation. We are not in the bind they are yet but we sure will be at this rate. We should take France as a warning and not a prophesy unless it is too late. I hope it is not.

    • I think we’re already there, to be honest. If we move anywhere towards balance it will feel like austerity, and I can’t see us continuing the way we have without a real budget even one more year.

  4. It is pretty strange that they are so focused on balancing the budget. We are not even close to that. Maybe we should have our own currency agreement to make us do it or whatever it takes.

    • When I called for a Jubilee with debt forgiveness and a new international agreement on currency, I assumed that something like budget balance would come into it. So yes, I think we should have an agreement and perhaps that would give us the push we need to get this accomplished. But I wanted to put it in the growth framework, hence the QE with debt forgiveness as a first step. I would hope everyone could agree on it generally.

  5. More fiscal discipline is necessary.

    In terms of politics, Governor Scott Walker won the election several weeks ago. As a Republican I am proud of him. I am proud of those people who voted for reform. I don’t believe in recall elections. That’s mean. He won 60 of 72 counties. To me he is a hero. Wisconsin is in the heartland of America. He is probably a good sign for things to come.

    • I think Walker’s recall failed by the margin of people who think the idea of recall is ridiculous. Voters tend to be very practical first, or at least the swing voters (10%? 20%?) are.
      Fiscal discipline is fascinating, the more I think about it. Every developed nation has run a deficit of some kind for 30 years – and suddenly we all have religion about how bad that was? Seriously, if it’s bad (and I do think that permanent, structural deficits are) why did it take us so long? And how do we make sure we don’t do this again?
      The “Jobs War” around the globe gives every nation an interest in thrashing their currency, which has to stop somehow. The best way is to build up a system where the downside is very obvious. I don’t yet know how to build that regime into globalism.
      Another topic for another day.

  6. The US federal government regulates the economy; redistributes to poor people, retired people and veterans; and produces national defense. These are popular things, though not all 3 things with all sub sectors of the population. We borrow what we can’t finance through taxes. It’s fun to borrow for things we like. It’s like buying yourself a gift!

  7. Pingback: A New Beginning | Barataria – The work of Erik Hare

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