●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Until the 99% understand the need for federal deficits, the 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
France’s economy is in the toilet, but the French have a great plan to revive it.
France slaps 7 billion euros in taxes on rich and big firms
By Daniel Flynn | Reuters
PARIS (Reuters) – France’s new Socialist government announced tax rises worth 7.2 billion euros on Wednesday, including heavy one-off levies on wealthy households and big corporations, to plug a revenue shortfall this year caused by flagging economic growth.
In the first major raft of economic measures since Francois Hollande was elected president in May promising to avoid the painful austerity seen elsewhere in Europe, the government singled out large companies and the rich.
Translation: It works this way. We take 7.2 billion euros out of the economy to grow it. We would like to take 15 billion euros out of the economy, but that would grow it too much.
Hollande says the rich must pay their share as France battles to cut its public deficit from 5.2 percent of GDP last year to an EU limit of 3 percent in 2013 despite a stagnant economy and rising debt.
One of the highest state spending levels in the world has raised France’s debt by 800 billion euros in the last 10 years to 1.8 trillion – equivalent to 90 percent of GDP, the level at which economists say debt starts to hinder economic growth.
Translation: Government debt hinders economic growth by . . . well, we don’t know how. We just picked that 90% figure out of the air. We do know that:
GDP = Government Spending + Private Investment and Consumption + Net exports
So if we cut anything on the right hand side of the equation, GDP will fall, unless something else on the right hand side rises.
But increasing taxes reduces Private Investment and Consumption, so what’s left to grow GDP? We have no idea. What do you expect? We’re mainstream economists. We have no time for algebra.
Budget Minister Jerome Cahuzac said that, while the initial focus this year was on tax rises for the wealthy, the government would progressively rein in its expenditure from 2013 onwards.
Translation: We’ll cut Government Spending, Private Investment and Private Consumption. That’s how we’ll increase GDP. Fortunately, our citizens don’t understand algebra any better than we do. Hey, you Americans have nothing to laugh about. Your politicians want to do the same.
Having promised to freeze central government spending without cutting staffing levels, Hollande will now face the difficult task of convincing France’s powerful public sector unions to accept a cap on pay rises and promotions.
“I think the unions accept this idea of rigor,” Civil Service Minister Marylise Lebranchu told RTL radio, insisting that the measures would not amount to draconian austerity.”
Translation: Just because we plan to starve France of money, don’t you dare call it “austerity.” We now call it “rigor.”
Prime Minister Jean-Marc Ayrault on Tuesday slashed this year’s official GDP growth forecast to 0.3 percent from a previous estimate of 0.7 percent, and to 1.2 percent in 2013 from 1.75 percent previously.
Translation: Please don’t ask how I got those numbers, as I have no idea. They asked me for numbers, so I gave them numbers.
The Medef employers union has already said that measures such as a new 3 percent tax to be paid by companies on dividends distributed to shareholders would strangle already weak profit margins. The Socialists say this levy is aimed at encouraging firms to use their cash flow for capital investment.
Translation: Here’s how you build an economy: First you fine companies for paying dividends, then you increase taxes on profits. Anyway, people who receive dividends don’t buy goods and services to grow the economy, do they?
“We are sorry to see an increase in corporate taxes at a time when they need to be lowered, as the only way to make our economy more competitive,” said Medef chief Laurence Parisot.
“It is completely false to say that the tax increases will just hit the rich,” said Gilles Carrez, president of the National Assembly’s finance commission. “The bulk of the new taxes will hit the middle class and today we have the proof.”
Translation: As everyone knows, increasing taxes makes business grow and actually helps the middle class find jobs and be given raises. The European Union told us so.
Prediction: The EU will do everything possible to avoid doing the right thing: (They should give, not lend, euros to the euro nations.) When even Germany joins the PIIGS in suffering from austerity (aka “rigor”), the EU at long last, may find its path.
Or better yet, the French should re-adopt the franc.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports