The French boo Socialist François Hollande because of High Taxes and a Bad Economy

Posted by PITHOCRATES - November 16th, 2013

Week in Review

The Founding Fathers gave us a republic because they feared democracy.  Or mob rule.  In a republic you elect responsible people to represent you in government.  In a democracy it’s majority rule of the people.  Often when they are agitated or angered about something.  Which can trample on minority rights.  If the mob is angry over a group of immigrants working for a lower wage the mob can vote a ban on those immigrants.  Round them up.  And send them home.  Or imprison them.  This is the danger of a true democracy.  Anything the majority agrees on can become law.  Which is why the Founding Fathers gave us a republic.  And prayed that only wise men who shared their Enlightenment views would enter government.

Another danger of a true democracy is that once the people understand that they can vote themselves the treasury they will.  While responsible representatives won’t.  Until people start looking at government as a way to get rich.  And become professional politicians.  Instead of the part-time representatives the Founding Fathers envisioned.  Which transformed the republic into a democracy.  Only it’s our representatives that have descended into mob rule.  As professional politicians buy votes by giving the people generous government benefits that the state will soon be unable to afford.  Which is what is happening in France now (see French president booed at WWI ceremony posted 11/11/2013 on the Associated Press).

France’s unpopular president ignored jeers by protesters as he laid flowers at the tomb of the unknown soldier during a ceremony marking the end of World War I…

Shouts of “Hollande resign!” rang out and some demonstrators wore the red caps that have come to symbolize an anti-tax movement that has caused violent protests in Brittany in recent weeks…

Hollande’s popularity has sunk to record lows amid growing dissatisfaction over weak economic growth, high taxes and rising joblessness.

The French people voted the socialist into office because they wanted more free stuff.  Or wanted not to lose the free stuff they already had.  Courtesy of their social democracy.  Which promised cradle-to-the-grave government benefits.  But declining birthrates led to a falling population growth rate all over Europe.  Such that the number of people receiving those government benefits is growing while the number of people paying for those benefits is not.  French president Nicolas Sarkozy tried to be responsible.  While socialist presidential challenger François Hollande (the guy the French now hate) said the problem was that they weren’t taxing the rich enough.  And the other usual socialist claptrap.  Well, the socialist won.  He raised taxes.  The economy tanked as expected.  And now the French people hate him.

This is exactly what the Founding Fathers feared about democracy.  The French republic devolved into mob rule.  And tried to vote themselves the treasury.  Which leads to only higher taxes.  Or cut benefits as the state can no longer afford to pay for these benefits.  Which is where the French are now.  And the Americans will soon be.

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Even the French feel they are Taxed too Much

Posted by PITHOCRATES - September 28th, 2013

Week in Review

President Obama is sick and tired of the Republicans, conservatives and the people who don’t give him everything he wants.   The fiscal year ends Monday so he has to fight with the Republican controlled House of Representatives to get them to pay for his increased spending.  And because he’s spending so much we have to raise the debt limit again so we can borrow the money to pay for his out of control spending.  How he wished the United States was more like France.  They don’t have these problems.  Why, the French will even elect a socialist president.  While President Obama has to veil his contempt for capitalism France can just tax and tax and then tax again.  And no one bitches about high taxes.  Well, that may be changing (see Why do the French tolerate such high taxes? by S.P. posted 9/24/2013 on The Economist).

The government is planning an extra €3 billion ($4 billion) of taxes next year, which will push up the overall tax take in the economy to 46.5% and make 2014 the fifth consecutive year that the tax burden in France has grown. François Hollande, the Socialist president, was elected last year on a promise to tax the rich, with a scheme for a top income-tax rate of 75%. But the tax bill is now wearing holes in the pockets of not just the rich but the rest, too. Why do the French put up with paying so much tax..?

Historically, the French have tolerated high taxes as the price of decent public services and a proper universal safety-net. All those fast trains, first-rate hospitals and public crèches do not come for nothing, and the French are the first to defend a way of life subsidised by the public purse that can often only be bought privately in Britain or America. Moreover, the French make a firm distinction between taxes and social-insurance contributions. Only half of households have to pay income tax, but everybody pays social charges… Indeed, the longstanding tolerance for taxes has underpinned the solidity of French sovereign debt, since it is a fair bet that France’s government can efficiently collect the taxes it needs…

This social contract, however, could be on the verge of breaking down. Over the past year, as taxes on beer and cigarettes have risen, tax-free overtime abolished, tax deductions squeezed and tax-band thresholds frozen, even the French have started to grumble. Polls suggest that tax increases have become the top worry among voters, and chief reason for Mr Hollande’s calamitous popularity ratings. The sharp rise in taxes, which began under Nicolas Sarkozy, the previous president, as part of an effort to reduce the government’s budget deficit, is all the more resented at a time when the French are no longer convinced that their public services—underperforming state schools, overcrowded commuter trains—are so much better than those that cost less in other countries. What is the point of paying Swedish-style taxes (or more) if you do not receive Scandinavian-style public services in return?

The new mood has not passed the politicians by. Mr Moscovici acknowledged recently that the French are “fed up” with taxes. Mr Hollande even conceded in a television interview that tax increases have been “too much”. Most of the effort to reduce the budget deficit in 2014 will now fall not on tax increases but public-spending cuts. Mr Hollande has promised a “tax pause”, which will be part of the message in the 2014 budget.

Yes, even the French are tiring of constantly rising taxes.  Especially when they keep paying more for less.  Which is what happens with socialism.  High taxes are a disincentive.  When you have “decent public services and a proper universal safety-net” it takes away a person’s ambition to do more and achieve more.  They may want to.  But if half of their income from this extra effort goes to taxes why put in any extra effort?  After all, there are already “decent public services and a proper universal safety-net” available.  Why work twice as hard to have virtually the same things?

This is the price of the welfare state.  It makes people less willing to take risks.  To start a business.  To create something new that everyone will want to have.  Socialism kills the entrepreneurial spirit.  And stalls the engine of job creation.  With all those small businesses going uncreated huge amounts of wealth goes uncreated.  Wealth that they can never tax.  Tax revenue doesn’t grow to keep up with the growth in spending.  So they increase tax rates.  And find other ways to make people pay more taxes.  While the quality of services fall.  Just like they are in France.  Just as they are in the United States.

And they will only get worse in the United States with the addition of Obamacare.  Which will explode the deficit while throwing the country back into recession.  With a corresponding fall in tax revenue the government will look for other ways to make people pay more taxes.  It’s happening in France.  As it has happened in every other socialist country.  And will happen in the United States.  Because of President Obama’s veiled contempt of capitalism.  The kind of contempt for capitalism shown by socialist President François Hollande.

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France tried the President Obama Balanced Approach to Deficit Reduction only to see it Fail

Posted by PITHOCRATES - September 1st, 2013

Week in Review

All we heard during the debt ceiling debate and the sequester debate from President Obama is that we must have a balanced approach.  Tax hikes now.  And spending cuts later.  Which, of course, means no spending cuts.  Ever.  For why would they cut spending after they got their tax hikes?  Too many Republicans got snookered by past Democrats on that false promise.

President Obama assures us that if we raise tax rates it will solve all of our problems.  But if we cut spending that’s just stupid.  Because government spending creates economic activity.  According to the Keynesian economics playbook, at least.  And President Obama is a Keynesian.  In fact, he’s so much a Keynesian that some would even call him a socialist.  But Keynesian economics hasn’t worked in America.  It didn’t work in the 1970s.  It gave us a dot-com bubble in the 1990s.  And the beginning of the real estate bubble that burst into the subprime mortgage crisis in the 2000s.  So we’ve tried Keynesian economics and it doesn’t work.  And, as it turns out, Keynesian economics that borders on outright socialism doesn’t work either (see France signals shift to tax cuts in boost to business by AFP posted 9/1/2013 on France 24).

France’s Socialist government is hinting it may appease discontent at tax rises by putting more stress on spending cuts in its fight to control the budget and boost growth…

France has so far relied on tax hikes for about two-thirds of its fiscal adjustment. Most famously it hiked the tax rate to 75 percent on income above 1 million euros.

The reliance on tax hikes has also prompted warnings from the IMF and European Commission that it should focus more on cutting spending in order to avoid snuffing out the recovery…

France’s social welfare system is funded primarily by charges on labour, burdening businesses…

A threat to nationalise a French plant owned by steel giant Arcelor Mittal to protect jobs raised concerns among foreign businesses…

The latest purchasing managers surveys by Markit found that while business activity is picking up in the eurozone overall, it contracted at a faster rate in France this month.

Francois Hollande has been president since May 15, 2012.  That’s about one year and three months.  And in that time his socialist government raised taxes.  But barely cut spending.  Just as President Obama wants to do to reduce the U.S. budget deficit.  Despite the fact that it doesn’t work.  As France has proven.

The U.S. doesn’t have to try the President Obama way.  The balanced approach.  AKA, the all tax and no spending-cut approach.  Because France has tried it in a grand way only to see it fail.  It failed so badly that they’re talking about outright socialism.  Nationalizing industry.  Because the economic climate is so anti-business in France that there is no job creation.  Because there is no business growth.  Worse, the French economy is contracting.  That’s right, while the rest of the Eurozone is seeing growth France’s economy is going deeper into recession.  Because they’re doing what President Obama wants to do in the U.S.

It’s time we purge Keynesian economics from our governments for good.  It is the source of all the great financial problems countries are having all around the world.  All it does is empower those in power.  Elevating them to elite positions.  Where they enjoy a life of plenty and extreme comfort.  While their people struggle to provide for their families.  It’s time that we return to classical economics.  Save our money and live frugally.  Creating private investment capital from our savings via a sound banking system.  Where bankers practice good lending practices without governments passing their risks onto the taxpayers.  Which is what gave us the subprime mortgage crisis.  And the worst recession since the Great Depression.

Finally, governments have to spend less.  So we can cut tax rates.  Providing the spark to ignite private investment.  Which drives business expansion.  And creates jobs.  Which is what people want.  So they can provide for their families.  Not more benefits that the government can’t pay for.  No matter how high the government taxes them.

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France’s New Socialist Policies are pushing France back into Recession

Posted by PITHOCRATES - March 24th, 2013

Week in Review

The French brought back the Socialists to power in France with their election of Francois Hollande.  And they voted for him because he was going to stick it to the rich.  Raising the top marginal tax rate to 75%.  All the Keynesian economists said this would solve all of France’s problems.  It would reduce the deficit.  And increase confidence in the business sector.  Boosting the economy.  When critics of the move said this would drive the wealthy and their money out of France they said pish tosh.  They are patriots.  And will simply whistle a happy tune and pay this new high tax rate.  Time has passed.  And now we can see the economic results of the new Socialist policies (see Recession stalks France as business slump hits crisis levels by Leigh Thomas posted 3/21/2013 on Reuters).

French business activity shrank in March at the fastest pace in four years, defying expectations for an improvement and probably plunging the euro zone’s second-biggest economy into a recession, a survey showed on Thursday…

Separate figures for the services and manufacturing sectors showed that business activity was retreating even faster than economists polled by Reuters had forecast…

That would mean that France, which has already abandoned its 2013 deficit target due to the lack of growth, has entered its third recession since the financial crisis…

The increasingly dire state of French business is all the more alarming as consumers, traditionally a major driver of the economy, are in no place to pick up the slack.

Unemployment is above 10 percent and there is no sign that it will fall any time soon, which is weighing on consumer spending.

It also explains in large measure why President Francois Hollande’s approval ratings are at record lows less than a year into his term in office, which he won on promises to revive growth and boost jobs.

Apparently the Socialists and the Keynesian economists were wrong.

You don’t create economic activity by increasing the cost of business.  And lower the rate of return on investment.  You create economic activity by lowering the cost of business to making it attractive to expand business.  You increase the rate of return on investment capital to encourage investors to take more chances on new startup companies.  It’s not rocket science.  If you increase the price of groceries people buy less groceries.  If you increase the cost of gasoline people by less gasoline.  Because people have limited disposable income.  And the higher the prices are the less that disposable income can buy.

If you increase the cost of business it raises the prices on the goods and services they sell.  The higher prices cause people to buy less.  And if you raise the cost of investment capital by taxing rich people more that will increase the cost of financing for businesses.  Which they will pass on to the consumer in higher prices.  Somehow Keynesian economists just don’t understand this.  But people living under their bad economic policies do.  Because they are always getting by on less because of these rising tax rates.

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