The French “Get it” – Why Not the US?

Posted on September 12, 2013 by

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The French government finally “gets it”. Or they have been forced to get it. In response to the euro-zone debt crisis France has been increasing taxes to cut its deficit. But the French economy has hit the wall. In France Says It Will Miss Budget Deficit Targets published in The Wall Street Journal, William Horobin reports that the French economy is not seeing predicted growth rates. Because the economy is weak, deficit targets are not being met as tax revenues fall short of predicted amounts. Lower growth means lower incomes means lower tax revenue means higher deficits. “Mr. Moscovici, [France’s Finance Minister] who made headlines over the summer by acknowledging that the French are fed up with taxes, said the time had come to focus more on spending cuts than on tax increases.”

The French have been forced to get it – that higher taxes constrict an economy and at some point, a “tipping point”, the tax burden becomes so onerous that there must be changes. The French get it while the US marches with ever increasing speed into the same dark economic hole because the French economy is deeper in the hole than the US economy. The US should be able to see that our economic policy path leads to the French result, but we do not or cannot make the connection. Dodd-Frank and Affordable Care saddle our business not only with higher taxes but with a crippling uncertainty on the economic regulatory environment.

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