Adieu France, So Long Stability
French Socialist President Francois Hollande’s newly elected government is planning to raise taxes on big companies while deterring businesses from engaging in layoffs by making that process more costly.
Hoping to nudge companies into investing rather than paying profits to shareholders, the government plans to impose a new 3% tax on dividends. Other plans include raising levies on capital gains, a special tax on banks and on energy companies, as well as imposition of government policies requiring the sale of profitable businesses in lieu of closure.
France’s Socialist government will dictate that it is illegal for a profitable, privately owned business to close its own doors.
So much for having the French people engaged in business activity. This less business-friendly government is going about the business of smothering France’s economy.
The prospects of trying to do business in France’s new economic environment resulted in margins tumbling, cash flow dwindling and orders collapsing. The uncertain outlook has postponed or cancelled investment and hiring.
Medef President Laurence Parisot told a news conference “The first source of financing for companies’ projects comes from private investors. Increasing tax on dividends runs the risk that private investors either invest less or elsewhere. We’ve had many meetings with the staff in ministries to explain what’s happening, but we are becoming deeply distressed. We fear a systematic strangling. Let’s be careful not to transform our country into a super-rigid enclave completely out of touch with the functioning of market economies as found everywhere else.” Parisot said.
Statistical data from the INSEE agency shows that business confidence fell in June to the lowest level since 2009, when France’s economy first showed signs of emerging from the nation’s worst post-war recession.
Hollande was elected last month after pledging to fight unemployment and revive growth. What he and his government are planning is not the way to go about achieving those goals. Attempting to resolve an economic dilemma that nanny state entitlement spending caused by destroying the tax base through imposition of business strangling regulations and taxes, while increasing the amount of spending done on entitlement programs is like trying to get a drunk sober by giving him a case of champagne. It’s going to have an effect opposite to the one desired. It is only going to make matters worse.
The way to balance a government budget is to stimulate private sector economic growth. That is what creates the tax base required to fund the government. Making it more difficult and more expensive to conduct business in the private sector is counter-productive to balancing any government budget.
By following economic policies similar to those Hollande plans for France, the United States is currently experiencing 1.8% economic growth. At this same point in President Ronald Reagan’s first term in office, his economic policies had stimulated the private sector U.S. economy to a 7.2% growth rate.
Can you say duh?
Both America and France could learn a thing or two from the economic policies of Ronald Reagan. In the case of the current White House occupant, that does not include hollow, unfounded, meaningless claims that you are much like President Reagan. It makes no difference whether those claims are made by you or your eager, obedient lapdogs in the institutionalized “progressive” left’s smear machine, referred to by your dumbed down, ill informed “progressive” congregation as the mainstream media.
France has the second biggest economy in the European Union. If this is the best the French can come up with, it is time to bid adieu to France and to European Union stability.