Even the French socialists now supporting tax cuts and spending restrictions

January 23rd, 2014 at 3:00 pm by David Farrar

The NY Times reports:

President François Hollande startled the usually staid world of European economic policy with proposals to take in a centrist direction with tax cuts for companies, reductions in public spending and a business-friendly tone.

That’s a huge turn-around. His initial policies were to massively hike taxes and spending. They have been a disaster, and his popularity at an all time low. So good to see a retreat from them.

Mr. Hollande’s proposals include a cut in payroll taxes that he said would reduce the costs of business and independent workers by 30 billion euros ($41 billion) by eliminating the amount paid by companies and independent workers for the family allocation, a tax that finances an allowance for each child after the first as well as an array of other family benefits.

The family allocation and other benefits are core elements of France’s social programs and have been credited with contributing to it having one of the highest birthrates in Europe. The allowance is income blind, going to all French families.

Mr. Hollande also said he would cut spending by €50 billion but did not specify where.

30 billion of tax cuts and 50 billion of spending cuts. It’s a start.

The current policies have been a disaster. Quarterly economic growth for France for the last ten quarters is below and NZ is in brackets:

  1. 0% (0.8%)
  2. 0.2% (0.9%)
  3. 0.1% (0.7%)
  4. 0% (0.9%)
  5. -0.2% (0.2%)
  6. 0.2% (0.2%)
  7. -0.2% (1.3%)
  8. -0.1% (0.5%)
  9. 0.6% (0.3%)
  10. -0.1% (1.4%)

 

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24 Responses to “Even the French socialists now supporting tax cuts and spending restrictions”

  1. OneTrack (3,117 comments) says:

    How much has it cost France so far to have a left-wing government in power? Two and a half years of pain for the average Frenchman before even Hollande realised the tax and spend model wasn’t working. How long will it take for our local variants to connect the dots?

    Or will they, and their ideology, stick it out until the bitter end?

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  2. Flyingkiwi9 (54 comments) says:

    Following this trend its important the government thinks about the jobs!

    Raising the minimum wage and increasing taxes will be absolutely crucial! Those dirty crony capitalist policies don’t work!

    /the typical left wing response

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  3. All_on_Red (1,584 comments) says:

    It gets better than that. according to the below Hollande is turning his back on Keynes theories.

    President François Hollande, proclaimed: “L’offre crée même la demande”, which translates as ‘supply actually creates its own demand’.
    This is Says Law which is completely against Keynes saying “demand creates supply” which was the whole reason for the stimulus spending.
    “The stimulus packages of 2009 are today’s debt and dying economies. There will be no recovery until demand is again constituted by actual value adding supply. The Socialist President of France, who more than anything else would have liked to spend the French economy into recovery, having personally experienced the consequences of trying to use Keynesian economic policies, has concluded that economies are not driven by demand.”
    http://catallaxyfiles.com/2014/01/22/says-law-and-francois-hollande/

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  4. lastmanstanding (1,297 comments) says:

    Yet another failed Socialist country. Let this be a lesson for those intending to vote for a Socialist Government Lab/Greens/Mana/NZ1 come November. Want a return to the 70’s early 80s? Vote Socialist.

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  5. burt (8,275 comments) says:

    The number of sustainable socialist economies is still stuck at zero – when will the lovers of big government ever learn that socialism is a failure.

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  6. All_on_Red (1,584 comments) says:

    France has not had a budget surplus for 60 years

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  7. lazza (381 comments) says:

    “Sacre Bleu Peirre, ziz Monsieur Hollande homme … izz veerry good at the (How You Zay?) … Rumpties Pumties but izz as useless as a perforated Francais Letter at (How You Zay?) … anyzing else … Non?

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  8. Yoza (1,879 comments) says:

    Quarterly economic growth for France for the last ten quarters is below and NZ is in brackets:

    0% (0.8%)
    0.2% (0.9%)
    0.1% (0.7%)
    0% (0.9%)
    -0.2% (0.2%)
    0.2% (0.2%)
    -0.2% (1.3%)
    -0.1% (0.5%)
    0.6% (0.3%)
    -0.1% (1.4%)

    So in spite of New Zealand’s ‘rock star’ economy status we are marginally ahead of a massive tax regime like France because we have a major rebuild going on in Christchurch. This is a pitiful indictment on National’s continuation of the neoliberal agenda.

    [DPF: Marginally. You fail Maths. Total GDP growth for France over 10 quarters is 0.5% and NZ is 7.2%. Don't give up the day job]

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  9. burt (8,275 comments) says:

    Yoza

    That’s right – nothing wins votes like promising the voters access to other peoples money. National in keeping most of Labour’s policies continue to do this and so our performance will also be pretty shabby.

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  10. SPC (5,643 comments) says:

    All_on_Red, an alternative conclusion is that national government now has less impact on economic outcomes than he thought. Policies that advantage the nation within the EU are more important than domestic policy. Thus emulating Ireland on company tax – limbo dance race to ground zero to follow (so local companies pay as much tax as the multi-nationals).

    Lower company taxes means higher VAT or higher income taxes. But the wealthy can avoid high income taxes by re-locating.

    But if the answer is lower spending – the advanced western economies reducing step by step their community provision programmes down to brave new developing world levels, then the wealth and income divide within the West will grow further than it has.

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  11. bhudson (4,740 comments) says:

    Forget Hamnida/Samuel Smith. The moves by Francois Hollande were enough to have Paul Krugman label him a neolib.

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  12. Harriet (4,988 comments) says:

    “…France has not had a budget surplus for 60 years…”

    Aus Labor hasn’t had one for 30yrs —— and no one mines France!

    Socialism anywhere you look is nothing more than the re-direction of capital – taken from those who can invest it to those who only spend it.

    No country with socialism can ever advance at the rate of countries without socialism as capital is mis-directed.

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  13. Recidivist_offender (28 comments) says:

    Tax is good. I want the top tier tax rate returned to pre-rogernomics 66%.

    High taxes creates incentive for me to work harder and innovate. Personal profit creates apathy and maintains the status quo.

    I will stop offending and become a successful entrepreneur when tax rates are dramatically increased.

    I love big government and regulation. Red tape is my friend. When we reach adulthood, the government takes over the role of our parents and disciplines and controls us. GOVERNMENT KNOWS BEST. ANYONE WHO CRITICIZES THAT IS ESSENTIALLY A WHINING REBELLIOUS SPOILT BRAT WHO LOVES TO GET THEIR OWN WAY.

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  14. Yoza (1,879 comments) says:

    [DPF: Marginally. You fail Maths. Total GDP growth for France over 10 quarters is 0.5% and NZ is 7.2%. Don't give up the day job]

    Yes, marginally. .72% per quarter on average versus .05% per quarter on average. So with record payments for milk solids and the insurance money for the Christchurch rebuild New Zealand is comparatively marginally ahead of France in terms of economic growth – take out the Christchurch rebuild and a drop in prices for dairy products and growth in GDP starts looking pretty feeble.

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  15. All_on_Red (1,584 comments) says:

    Comrade Yoza,
    Now now , you have been at the communal Wodka again. You’re supposed to be stirring the bathtub not drinking the product.
    .72 divided by .05 is 14.4 So we have had 14 times better results than La Belle France.
    As DPF says, math fail.
    Back to weeding the potatoes for you.

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  16. Yoza (1,879 comments) says:

    Go back 24 quarters, 2008, and the variation becomes more marginal still:

    Average economic growth per quarter for France: .016 %

    Average economic growth per quarter for New Zealand: .296 %

    There is no real comparison between the two economies. I would argue that global economic variations are a greater threat to New Zealand than they are to France, mainly because too large of a proportion of New Zealand’s economy is owned by private foreign interests (Aussie banks) and we are too dependent on dairy exports – that and compared to New Zealand, France’s economy is huge.

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  17. All_on_Red (1,584 comments) says:

    .296 divide by .016 = 18.5 times.
    It’s actually better!
    Goodness me. I hope you aren’t doing the accounts for the Collective.
    What a fail.

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  18. OneTrack (3,117 comments) says:

    yoza – “and a drop in prices for dairy products and growth in GDP starts looking pretty feeble.”

    Yes, dairy is keeping the country in the black, and what do the Greens want to do – cut the dairy herd by 20%? That’ll get us up there with … France (but without a hard working neighbour to bail us out).

    They really do want to take us back to 1839, dont they.

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  19. Yoza (1,879 comments) says:

    14 times greater than next to nothing is as meaningless as 18 times greater than less than next to nothing.
    As for OneTrack’s point; the dairy industry needs a large variety of factors beyond the control of politicians and Fonterra execs to provide a large enough return to keep New Zealand ‘in the black'; having such a large portion of the economy dedicated to servicing the dairy industry is a threat if there is a significant drop in demand; the present returns from dairying do not take account of the future costs of cleaning up environmental problems that are a direct consequence of intensive dairy farming; we do not know how large a tax future foreign markets will demand we impose on our dairy sector as a consequence of dealing with industries which contribute to global warming.

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  20. BlairM (2,341 comments) says:

    Good on him. Shows even the staunchest socialists can learn when they actually have to hold the levers of power. Meanwhile, in the US, Obama continues to double down.

    We shall overcome.

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  21. Tom Jackson (2,553 comments) says:

    I’m going to call bullshit on this.

    UK Growth figures for the last few quarters from the OECD aren’t much better, and the UK can print its own money.

    -0.1
    0.0
    -0.4
    0.8
    -0.1
    0.5
    0.8
    0.8

    Germany

    0.1
    0.7
    -0.1
    0.2
    -0.5
    0.0
    0.7
    0.3 .

    Netherlands (worse than France)

    -0.7
    -0.2
    0.5
    -1.0
    -0.6
    -0.3
    0.0
    0.2

    Spain and Italy are much worse than all of them.

    All the data shows is that the Eurozone is doing worse than most other places, and the Southern and Eastern areas of Europe worse than the West and the North.

    Trying to blame this on the Hollande government is moronic due to the fact that the malaise covers many countries with different governments.

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  22. Tom Jackson (2,553 comments) says:

    This is Says Law which is completely against Keynes saying “demand creates supply” which was the whole reason for the stimulus.

    Not really. Keynes’ point was that a general lack of demand for goods was not a general lack of demand per se, but evidence of a general demand for money over other goods. This could cause a liquidity trap.

    A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels.

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  23. KiwiGreg (3,255 comments) says:

    “Mr. Hollande also said he would cut spending by €50 billion but did not specify where.

    30 billion of tax cuts and 50 billion of spending cuts. It’s a start.”

    There’s your non sequitor right there. All he’s done is announce some tax cuts. Structural reform, including and especially their labour laws would be required over at least one election before I’d contemplate investing there.

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  24. All_on_Red (1,584 comments) says:

    Tom,
    The comments you list are contradictory. You say that the liquidity trap fails if interest rates aren’t lowered and then say it fails if they are lowered…
    Firstly the stimulus and injection of liquidity HAS lowered interest rates. And still there was no increase in demand . (The US is a good example)
    Priming the pump with cash has not stimulated supply.
    Says Law aka The Law of Markets is clear that increasing supply creates it own demand. A good example of this the US private sector fracking for shale gas. They increased the supply, the market responded by buying more of it (demand). The result is that other fuels have dropped in price as demand for them dropped.
    This is how a market is supposed to work.

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