Sunday, October 28, 2012

What Big Business Wants

Employers of the Association française des entreprises privées, among whom one finds most of France's largest employers, have submitted a plan that they say will help to restore growth. It calls for a 30-billion euro reduction of social charges on the wages of workers earner twice the SMIC or more, to be paid for by an increase in the VAT from 19.6 to 21%. They also want a reduction of the corporate tax to align with the rate paid in other European countries. They also advocate a "pragmatic" approach to the search for shale gas.

This is such a modest and workable program in an age of unprecedented policy proposals that it is hard to see why the government wouldn't grant all the requests, just to be able to say, no matter what happens, "See, we gave you all you asked for." What's more, the proposals make sense.

Of course, Hollande has already dug in his heels against fracking, I think erroneously and prematurely. And he has already indicated a preference for the CSG over the VAT as a replacement for payroll taxes, although it's hard to see any insuperable objection to either, or to a combination of both.

If only such comity existed in the United States. The Socialists, already in trouble with their own electorate, however, may see a trap here and reject the proposal out of sheer political wariness. They shouldn't.


Alastair (Nantes) said...

I have to say, I completely disagree. VAT hits the poorest hardest.
Equally, this is going to benefit the highest earners (or rather their corporation employers).
So, take from the poor, give to the rich. see no problem with this?
But, of course, I don't live in the USA any longer where such outrageous class warfare is just standard talking points.

Anonymous said...

Art I don't know wether you're being sarcastic or sincere.
30 billion, modest? And that's 30 billion removed from pension funds and health insurance, paid for by making the VAT higher, which hits people the more the poorer they are. In fact this makes no sense, especially if you take into account that French companies main problems are #1 access to small business loans from banks and #2 R&D.

Here are some reactions from the French leftblogs, going from moderate to closer to the left of the PS.

As for the reaction on the right, comparing and contrasting will quickly show that this column wasn't an olive branch nor a bipartisan effort...

Mitch Guthman said...

Okay, that's what they want. What are they willing to give to France in return?

FrédéricLN said...

I've been quite surprised by that unprecedented unity (since 10+ more years) of the advocates of the business community, asking for these 30 billions. Yet they know these cannot be net cuts: the 30 billions will have to be paid elsewhere, and at the end of the day, the advantage for the companies will be tiny (if it's as high as 10 billions, that's 5 o/oo of GDP, ie 3 months of regular growth).

Since 1-2 years, the same advocated were pleading for a broader, less French-social-systems-oriented, picture of competitiveness in the global economy. French "nombrilisme" is the key issue; I'm quite sure that as soon as our decision-makers and media just start asking the question "how can we succeed at world level?", a good half of the way will have been accomplished.

So, why push the 30 billions transfer issue? My guess is the following: the advocates of business understood that deeper, broader, and more relevant orientations remained unheard in the political debate, because journalists/leaders qualify such orientations as "consensual", which is the sharpest criticism in our French politics (it means something like "void" or "lacking substance").

If they wanted to raise the competitiveness issue, to put it at the center of the debate / on the media stage, they needed a big figure such as 30 billions.