France took a hard left turn yesterday with the election of Socialist Prime Minister Francois Hollande, the first socialist candidate to win the presidency in nearly two decades. The result, which had been forecast since Hollande’s narrow victory over incumbent Nicolas Sarkozy in the first round of voting on April 22, puts France on path of increased government spending and higher taxes even as the country’s debt climbs and its economy stagnates.
Hollande campaigned on a platform of class warfare, and all indications are that he will govern that way. While Europe’s mainstream left parties have made peace with capitalism, Hollande remains an unreconstructed tax-and-spend socialist. Showing little regard for the country’s debt problems, he has promised a government spending splurge to the tune of $26 billion over the next 5 years; this even as he improbably claims he will lower the deficit to 3 percent by next year. A self-confessed hater of the wealthy – “I don’t like the rich,” he once declared on television – he has also pledged to enact a confiscatory 75 percent income tax on the highest earners, as well as a separate “wealth tax” on assets and a bevy of new taxes on estates, banks and big corporations. Where president Obama has dressed up his redistributionist schemes in the guise of “shared sacrifice,” Hollande is upfront about his intent to soak France’s shrinking share of high-income earners. “If there are sacrifices to be made, and there will be, then it will be for the wealthiest to make them,” he announced in the days before the election.
While that message clearly resonated with Hollande’s leftist supporters, a new war on wealth is the last thing France needs. The hard truth is that France has lost its competitive edge in recent years. Symbolic of the decline is France’s rigid labor market, a persistently high rate of unemployment rate that stands at a 13-year high of 10 percent, and a yawning trade deficit that topped $91 billion last year. Debt is a major drag on economic growth. French public debt has spiked to 90 percent of the country’s annual output, with the consequence that interest payments are now the second highest government expenditure after education. France’s finances are now in such perilous shape that in January the credit rating agency Standard and Poor’s took the drastic step of stripping it of its triple-A rating. Against this bleak background, Hollande’s plans to penalize businesses and other wealth producers with crippling taxes is a disaster in the making.
The most charitable take on Hollande’s agenda is that it is a gimmick rather than a political roadmap. Some of his advisors have already said that the 75 percent tax, for instance, is mostly a “symbolic measure” that Hollande would not pursue once in office. But that is a dangerous gamble because Hollande and the Socialists could soon have a chokehold over French politics. Socialists already control all but one of France’s 22 administrative regions, and the upcoming June parliamentary elections may seal their majority status for some time to come. At that point, there would be few restraints on Hollande’s ambitions.
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