Debt and Deficits in the Socialist Republic of France

France, under Nicholas Sarkozy, has a budget deficit of 8% of GDP this year.  This is second only to that of Greece in Europe, according to The Economist in the text of an article in the issue of 19 - 25 June 2010.  Unfortunately, a graph accompanying the article indicates that Spain has a deficit of just under 10% of GDP.  Uhmmm....they can't get everything right, after all, The Economist endorsed Obama in the election of 2008, is a stout defender of catastrophic man-made global warming, and loves cap and trade legislation!  It always pays to read things critically and carefully.

France's public debt is 84% of GDP.  Despite the recent surge in U.S. public debt, our public debt is currently 57% of GDP.  It is not expected to be long before our debt is as bad as that of France.  But the Chairman of the Joint Chiefs of Staff is so worried about our debt that he is complaining about it, as is the Tea Party movement.  We are likely to make some substantial decreases in spending when the new Congress starts in January 2011.  The French do not seem to have the will to make substantial reductions in spending.  It starts with Sarkozy.

France is making some minor cuts.  It has raised the retirement age from 60 now to 62 in 2018.  The state pension fund shortfall in 2020 will be the equivalent of $55 billion.  It expects to save less than half that amount with the increase in the retirement age.  The top income tax rate is being raised from 40% to 41% in 2011.  In 2020, civil servants will have to contribute 10.5% of pay to their pension fund, rather than the present 8.1%.  France hopes growth will be vigorous and that will spur additional tax revenues.  Most observers believe the needed growth goal will not be reached.  Euro-rules require France to reduce its deficit all the way down to 3% of GDP by 2013. 

One of the factors making spending cuts hard and hurting growth is the fact that 20% of France's employees work for the government.  France is currently spending 56% of GDP, which is more than any other Euro-zone country.  Moody's has warned that France's rising debt may endanger its AAA credit rating.  Of course, Obama wants to duplicate these factors in the U.S.  How idiocentric is that?