Sunday, March 30, 2008

"Subterfuge and Dissimulation"

François Hollande has denounced the government's "subterfuges and dissimulations" on retirements and the deficit. No surprise there. That's his job. He's rather more reticent when it comes to putting forward his own proposals. His complaints about the deficit suggest that he favors an increase in taxes and social contributions, while his complaints about slowing growth suggest that he would prefer a fiscal stimulus policy. Of course if pressed, he would probably say that the government's TEPA package, passed last year, put the fiscal stimulus in the wrong place, with which I would agree, but we'd still be facing the problem of a deficit creeping up toward the 3 pct SGP limit and a debt around 64 pct of GDP, already over the 60 pct limit, so the EU reprimand that Hollande foresees would have been just as likely had Royal been elected.

One government dissimulation that Hollande avoids has to do with purchasing power and unemployment. The government has been quick to take credit for declining unemployment and equally quick to shirk blame for falling purchasing power. But falling purchasing power is just another way of saying declining real wages, and, other things equal, declining real wages encourage higher employment. The success and the failure may not be unrelated. It would be inexpedient for Hollande to make this point, however. It's one thing to say that increasing the retirement age will not increase the workforce participation rate of "seniors" (over-55: can I really be a senior?) absent new job creation; it's another thing, particularly for a Socialist, to say that declining real wages might lead to the creation of new jobs. Or then again, maybe this won't lead to new jobs, to the extent that higher prices are the result of adverse supply shocks rather than increased demand. But what does the PS propose in that case?

Without an interpretation of the conjuncture, it's impossible to tell from Hollande's remarks what he's thinking. All we know is that he doesn't like what the government is doing. But as I said, this is part of his job description, so his sniping conveys no information. Voters recognize this instinctively, which probably explains why there is so little interest in what Socialists are saying, and won't be, until they commit themsleves to a program and a candidate--or throw in the towel and search instead for a way to captivate the media, which was the formula that Sarkozy exploited with such success in his run for the presidency.


Anonymous said...

Totally off-topic comment:

Arthur, not long ago you were asking about the coverage of the Obama speech in France. This morning there was a discussion/debate on radio about the US campaign, with a great focus on the Philadelphia speech.


Radio Show:

Unknown said...

Thanks for the reference.