Should We Become Like France?
Here are two facts about the French economy. First, gross domestic product per capita in France is 29 percent less than it is in the United States, in large part because the French work many fewer hours over their lifetimes than Americans do. Second, the French are taxed more than Americans. In 2009, taxes were 24 percent of G.D.P. in the United States but 42 percent in France…
If American policy makers don’t rein in entitlement spending over the next several decades, they will have little choice but to raise taxes close to European levels. We can then see whether the next generation of Americans spends less time at work earning a living and more time sipping espresso in outdoor cafes.
The economic situation I see France headed into in the next 10-15 years is one where the government will almost force people to work more and then maintain high taxes to keep propping up their welfare state. One would think that people working more hours would lead to higher tax receipts for France without the need for the current level of taxation – it will, but the the welfare state, mounting debt, and other things will gobble up that tax revenue.
It’s going to get ugly: In the next 15 years, France and other European countries are looking at facing everything mounting debt, suburban decay and instability (i.e. the riots from a few years ago), and even national security crises. The demands placed on the people will be higher.
I know that sounds dark, but it just seems like that is the troubling trend in Europe and I don’t think they have a bright future.
No. We should not become like France.
It’s easy for busybodies to advocate for social protection that is mandatory; think of Social Security. The government has an interest in requiring people to set aside money while young to pay living expenses when old. Each little mandate seems harmless. The question is when to stop and let people take their own risks and suffer the consequences if they are wrong. If you push the envelope of social insurance too far the country becomes a welfare state. When a large percentage of needs are covered by the state, taxes have to be high. When taxes are high, the cost of leisure is lower and people demand more of it. For example, if a marginal tax rate is 55%, the pay lost by working an hour less is 45% of hourly pay — so people work less. Taxes also inhibit risk taking and business development. If a larger percentage of income is lost to taxes, the risk-reward ratio is tilted towards taking less risk.
France is a great place to visit but I wouldn’t want to live there.
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