Friday, August 12, 2011

Baroin Joins the Tea Party, Economists Floored

Finance minister François Baroin knows who butters his bread. Nicolas Sarkozy has made "the golden rule" (not "Do unto others ..." but "Balance your budget at all cost") the watchword of his campaign, and Baroin has therefore become a spending slasher. But raising revenue is unthinkable:

«On ne touche pas à l'impôt sur les sociétés, on ne touche pas à l'impôt sur le revenu, on ne touche pas aux prélèvements sociaux et on ne touche pas à la TVA», a asséné le ministre. Il y a à cela «deux raisons», a-t-il ajouté : «c'est un choix politique assumé par le gouvernement de ne pas faire porter l'effort de réduction des déficits sur une augmentation d'impôts car c'est la solution de facilité».
You have to admire his faux forthrightness. The decision to cut expenditures without raising taxes is "a political choice for which the government assumes responsibility not to place the burden of reducing deficits on a tax increase, because that's the easy way out." So, instead, the burden will be placed on all those whose benefits will be cut and jobs eliminated as the government moves toward austerity without unduly burdening corporations or wealthy individuals. The distributional consequences of austerity are swept under the rug by casting the choice as one between "placing the burden on taxes" or resorting to the tough choice to cut expenditures. It's as if redistribution were between taxes and spending rather than between the better-off and the worse-off members of society. Baroin here seems to be borrowing his rhetoric from the Tea Party.

I suggest that he read the "Manifeste des Économistes Atterrés" (how to translate? Floored Economists? Dumbfounded Economists? Speechless Economists?), which was issued well before the current resurgence of crisis and which nevertheless raises questions that remain pertinent today.


Kirk said...

I'd go for "Stunned economists."

bernard said...

It will be fun to watch if Krugman remains as enamoured of France.

Alex Price said...

Nice analysis. I like "Dumbfounded."

ibrahim said...

Bi austerity policy implemented in many countries. France strong enough to be able to dispose of it
Yemek Tarifleri

Merlin said...

Obviously, with public expenditure at 56% PIB and income at 44%, you should not touch expenditure, but tax the richs.

And if you tax them enough, as long as you find enough of them that is, you can even increase expenditure that would benefit the poor. I mean socialist voters.

French people usually do literature. From time to time, they should try accounting. Nothing too difficult. Understanding that 2+2 equal 4 that sort of thing.