France has the lowest retirement age of any EU country, the second highest expenditure on social benefits, and a large debt burden.
Raising the retirement age by a couple of years is obviously unpopular, yet arguably sensible - but trying to do that was what caused the last set of violent protests.
Right, exactly
For sure, the cognitive dissonance between those who understand basic economics and those who don't. Those who do understand that some of these facts are indicators of a coming crash, and the ones who don't think they're good because they like "free" stuff and don't understand how anything works or gets paid for. We can see where this goes, whether we want to or not, by watching France over the next two decades as it drives the leading edge of the upcoming long-term recession across all large Western economies.
That doesn’t sound like a bad thing
> a large debt burden.
Compared to?
It's EU peers.
If France wants to support Ukraine and rebuild it's army, it will be required to borrow heavily to purchase arms.
If France wants to rebuild manufacturing supply chains domestically, it will be required to borrow heavily to invest in infra.
The above two will be in the tens to hundreds of billions of Euros range.
France ALSO spends tens to hundreds of billions of Euros on social services.
France ALSO needs to pay it's existing interest on debt, which is in the tens of billions of Euros a year and rising.
France needs to cut 2 of the first 3 choices - they cannot cut the 4th one due to EU regulations and if France does not want to become the next Argentina.
Clearly they recognise a need for reform because they vote for politicians who run on a reform platform. Yet as soon as said reformer tries to change anything at all, it's back to the barricades.
Reduce benefits? Riot!
Increase tax rates? Riot!
Extend the retirement age? Riot!
Increase immigration? Riot!
Somehow the tax rates for top 1% never go up.
Genuine question: what is the effective tax rate on France's top 1%?
Tax on income is not the problem, it's tax on wealth gained through asset value increase.
Investment income is flat taxed.
And inheritance taxes, which are very high in France.
If you want to increase taxes, consider taxing income more and capital gains at a progressive rate. Although I haven't seen good data on effects of say a 70% capital gain tax, might hurt th,e economy. I did some reading on this subject last month and the sweetspot was around 20% to 35% on that classification of income.
Do you want to take people's wealth and cap it? IE, nobody is allowed more than $5 million? What are you advocating for instead?
Would this actually cover France's deficit?
America's $6.75tn budget [1] would blow through our $140tn private wealth in 21 years. Even Norways $0.11tn budget [2] blows through its $1.6tn of private wealth in 14 years.
Perhaps the better metric is deficit as a fraction of private wealth? If that looks unsustainable, the problem is in publicly-held assets and services.
[1] https://fiscaldata.treasury.gov/americas-finance-guide/feder...
In the last 5 years French public debt has grown $750b [1]
Had that growth in wealth been taxed at the rate income was taxed (45%), that would have seen France's debt decrease - even with the covid mess.
[1] https://www.ceicdata.com/en/indicator/france/national-govern...
It's really impossible to say what's the effective tax rate of these people. Their real wealth is not in the money, of with they have plenty, but rather in endless opportunities.
That's not solvable with tax policy. The solution to that is DEI, but HN froths at the mouth when those 3 letters are pronounced.
Also, the USA is in the same spot. Although better as their tax burden is so low, so raising it higher is easier when it comes to the math side of things.
I disagree, a lot of people here are quite aware that we are in very difficult financial situation, from all side of the political spectrum. The main issue is that there is a very big disagreement on how to solve it (i.e how/who to tax more, and where to cut spending). And with a fragmented national assembly, everything is at a deadlock right now.
The left seems to want things we all want, but we're unsure how to afford them. They never seem to have math to back it up as taxes can only go up so much, and they are already some of the highest as a percentage of GDP in the world.
Can you point me to a real proposed solution by either side?
Is this the right metric: "Tax revenue (% of GDP)"?[0]
If so, France ranks 28 at 23.1% of GDP. The highest non-island developed country is Denmark at 31.4%. Denmark's GDP per capita is 1.5x France. New Zeland's GDP per capita is similar to France and their GDP to tax rate is 29.6% which is the fifth highest. Does New Zeland face similar problems as France? I think I agree with your implication that simply increasing the tax to GDP ratio is not a magic bullet.
In general, the data here is really interesting. Germany and the US have a pretty similar value, both averaging at about 11% in recent years. I would have assumed that Germany would have a higher rate. I wonder if this data is misleading somehow or if my assumptions were just wrong here. I guess one variable missing here is government debt, which is not a tax but is still used to pay for government expenses.
[0] Global: https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?most_...
France over time: https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?most_...
I'm not one to cheer for absurd taxation (which is a French specialty), but I understand why this setup does ruffle some feathers in France.
We don't have issue with the math, we just disagree on what to fund to balance things out.
An example, 200+ billion euros are given yearly to large companies as tax breaks and the like, without the government asking anything in return. The senate had a report about it recently [https://www.publicsenat.fr/actualites/economie/un-cout-annue...].
Another example, the military and defense get a huge increase in budget. schools, hospitals, research, nearly every public service get a budget cut instead [ https://www.force-ouvriere.fr/non-aux-44-milliards-d-economi...].
Man, that must feel like the rug pull of the century for French taxpayers, given that despite these tax breaks, French companies like Airbus and ST are incorporated in the Netherlands and paying(more like, NOT) taxes there instead of France.
I'd be pissed too, and I'd want my money back.
Unless of course the purpose of those tax breaks was actually to keep some jobs in France and not see more of them move to cost efficient places like eastern Europe or north Africa.
If you build/design your products here then you use EU's trained labor, EU's infrastructure, EU's legal system, EU's defense, etc. then you should pay your fair share to support these facilities that help you be a billion dollar corporation.
But I have a hard time understanding how politicians figured that countries with widely varying tax regimes inside an economic union would work out for the countries with a taste for high taxes.
It makes no sense to me. Of course companies are going to choose the most favorable location to incorporate. Counting on companies to be "fair-play" or whatever the politician word-of-the-day is seems completely braindead to me. Unless there were some kind of backroom deals going on, which wouldn't surprise me one bit coming from the EU nomeklatura, and now they're trying to conceal it by blaming "the rich" / "corporate greed".
According to the votes that Le Pen and Melanchon are supposed to get, I would not say "a lot of people".
English people: "oh bother, guess I'll just watch football"
French government: "we are levying a .0053% tax on stinky cheese"
French people: "we are on our way to the capitol with rocket launchers and we will light on fire every speed camera we encounter on our way"
They're like Europe's Portland but without the prevalence of piercings and hair dye. Beautiful really.
> Clearly they recognise a need for reform because they vote for politicians who run on a reform platform.
Meh. Macron, and his party, was not really running on a reform platform. He was the typical, business centrist candidate.
And the national assembly is very divided right now, and the government is systematically from a minority party (so neither from the left union, or the extreme right RN), which are not running on a reform platform (quite the opposite).
There is proposition about reforming taxes to taxes the wealthiest, something with some popular support, but no party that support this kind of reform as the power to make it happen right now.
We are in a deadlock since the dissolution of the national assembly by Macron, and we probably will be until the next presidential election, or a new dissolution that would give a big majority to one party which would pretty much ensure them control of the government.
The french system is really not made for a fragmented assembly. This is not what you can find in more parliamentary system where coalition form the government. A fragmented national assembly is basically a deadlock in France's fifth republic system.
A naive look tells me if a majority can agree to support a government then it can work, and it not not. What "system setup" helps or hinders a majority made up of different parties? To me it seems the important part is the willingness of parties to compromise. Which may or may not be there regardless of the "system setup".
Mostly because it is a different system. The parlement in France doesn't elect the government. The president choose the prime minister, and the prime minister form the government.
The parlement can, at basically any point, vote to "censor" the government, effectively terminating it if a majority is reached (they do stay in position until a new government is formed, but can only take care of the "affaire courante", i.e simple daily affairs, no big laws, reforms, policy changes, ...).
Indirectly, this means that the parlement can have a lot of power over who will be in the government. If one party has an absolute, or almost absolute, majority in the parlement, it more or less mean that they can decide who shall be in the government.
Due to the way our election works, the party of the president usually has the majority in the parlement. This is even more true since Chirac changed the duration of the presidential mandate to match the duration of the parlement mandate (and their elections are very close). This usually give a lot of power to the president, effectively making him the sole judge of who shall be in the government (since he choose the prime minister and the parlement member of his party follow his lead).
But what we have right now is a very unique situation. Nobody has even close to an absolute majority in the parlement. The left "union" (which is not really united, but that's another story) control roughly ~33% of the seat, the extreme right party control ~21% of the seats, the presidential party control ~15%, and the rest are various centrist and right wing party.
The issue is that there is no way to get a solid absolute majority with this assembly. For the left, even if they were to compromise heavily and add as much center-right as possible in their coalition, it would barely give them a majority, and the government would have to compromise so much, it would piss off all their voters, which would be a political suicide for the next presidential election. Nobody want to ally with the extreme right except a few members of some right party, which would never give a majority (and the RN would only go to the government if they don't have to make any important compromise, for the same reason). So, you have to remove the two biggest block. And so, even if all the other party would somehow make a coalition (which is more or less the government we had since the assembly dissolution), it would still give less than ~45% of seats in the parlement, not enough to ensure that your governement would not be censored (which is what is happening, we've had like 3 or 5 government since the dissolution, i can't even remember all of them).
This is an unprecedented situation in France and basically the achilles heel of the fifth republic. Our system cannot function without a clear majority in the national assembly, and the way the assembly is divided right now makes any majority coalition impossible (or a political suicide).
Fewer rich people would be my guess.
Fundamentally the French economy isn't producing enough to support the current level of pension spending, due to a continuously falling ratio of workers to retirees.
Of course an influx of immigrants will cause other issues. But if wealthy people need more population to keep their wealth up, I don't think they care.
France overspent in the 2000s and 2010s due to populist politics, and now the chickens have come to roost. Something needs to give in France, otherwise it'll become an Italy 2.0.
It's part of the official discourse.
I mean, try it with yourself. Imagine that you take your current salary, keep it for 10 years, and have 100% of your spending covered? How life changing would that be to you? Probably a lot.
Understand that the non-wealthy wouldn't get anything new, it would just be a continuance of their current services and benefits. They've have 10 years to increase their GDP by 50% to get the tax revenue to get to a balanced budget. That's simply not happening without obscene inflation, with the corresponding increase in government spending on goods and services, keeping them out of whack.
The thing is people don't care about how many rich people there are out there, as long as they can get a good life out of their labor (good job, good house, etc) but since capitalism has optimized these out of the reach for most people nowadays, then they start to blame rich people for everything, with the definition of the word 'rich' here being very fluid, ending up to mean just about everyone who has more than they do, and not just your Bezos, Musk and Saudi kings, so any taxes on the "rich" ends up only on the hard working middle class again.
This is the goal not the problem.
French voters need to get it in their head that they need to accept their government tightening belts, otherwise they will have no say on what gets cut.
In France, the people maintain the right to distruptively object to government actions and laws. What seems to us to be a criminal act may have (depending on circumstances) more popular legitimacy than the laws themselves. Or it may not, depending.
It's the younger generation that is hurting because they do not own real estate and stocks so they have not benefited from wealth creation via money printing and ZIRP era.
My guess is that this will happen in the US soon as well. Entry level jobs are threatened by low investments due to tariffs, high interest rates, and the perceived notion that AI is taking their jobs. Young couples can't afford to buy a home to start a family because interest rates are 3x higher than a few years ago while home prices went way up since covid - not to mention ever increasing real estate tax, home insurance, etc. Now the tariffs will make everything much more expensive for the working class. Tariffs go into paying down national debt while the rich get a tax break via BBB. Tariffs disproportionally affects the poor.
It's hard to be a 22 year old college grad right now. Not as bad as 2008 but definitely harder than in the last 15 years.
PS. Everyone living in the west missed it but the 2019 Hong Kong protests were more about wealth inequality even if the trigger was the China extradition law. This was never mentioned in western media. I was living there during the protest. Young Hong Kongers felt hopeless because real estate prices to income ratio was the highest in the world at the time. By far. They didn't want to live in an apartment the size of an American bedroom with a family of 4 and spend a lifetime trying to pay it off - if they could even muster up the downpayment for it. Unlike Americans who can move to a more affordable city or state, young Hong Kongers had no where else to go. This pent up frustration for young Hong Kongers boiled over into months long riots.
I've wrestled a bit with how to prepare financially for what could lie ahead but decided that there was really no harbor that is sure to be safe. I'm prepared to basically be poor and die from a thing that could have been prevented with some measure of health care.
I'm usually an optimist by nature, but I've never been so with regard to the economy and the growing wealth inequality. There is no soft landing for either in my mind.
Get some gold (ideally a bit of physical gold but also put some of your investments into gold or broad commodities ETFs) as a hedge against inflation/monetary devaluation, keep some of your wealth in cash or short-term/liquid bonds/treasuries/money market funds if you predict an equities and real estate crash, buy some real estate or real estate ETFs to get a bit of real estate exposure if you have zero, buy stocks if you have none. Shift a bit of your equities into international ETFs if you only have US stocks.
Splitting up into equal buckets of cash, real estate, stocks, bonds, gold/commodities, hell even a bit of crypto, hell buy some goods upfront to hedge inflation like dry, shelf stable food - this is ultimately gonna be a less volatile ride than just sitting around and doing nothing.
"We're fucked but there's nothing we can do" is a defeatist attitude if you sense financial turmoil but can't predict what type, just don't put all your eggs in one basket, and maybe reduce your diversification once you sense things are getting better.
Still, my sense is that there won't be any safe havens. It will be global, it will be stocks, everyone will be poorer so real estate will be unsellable, inflation destroying cash holdings…
Serious question (I am no scholar on history), where were the safe harbors during the Great Depression?
My ignorant notion is that there were none. But if you held on to your stocks for a couple decades, you did fine … just not during those two decades though.
Serious question (I am no scholar on history), where were the safe harbors during the Great Depression?
Personally I'm preparing for this by aggressively paying off our mortgage, putting less money into the market. Also avoiding lifestyle inflation and even cutting back here and there. It's all about reducing fixed cost so that if shit hits the fan, we can absorb the higher cost or lower income as much as possible.
As it should. The younger generations have been and are actively being fleeced by the older generations. The scary part is that it's all but flaunted at this point, with the tactic of choice being to gaslight younger people into thinking it's all their fault. That's the stuff of revolution and frankly, I think it will do the U.S. a world of good to see that level of rebellion.
I often think about why this is happening now without invoking the default "evil rich people" hypothesis. I think it's because world population increased so fast in the last decades that there is simply not enough resources, land, high paying jobs for everyone to achieve a comfortable life. And because the population is so high and the world so connected, it's easier for a single person to accumulate wealth because talent or sheer luck. IE. build the right app at the right time and get rich almost instantly. Society seems to be self correction mode by not having nearly as many babies recent years.
What do you mean? In the French protests, the "evil rich people" hypothesis is very present. Every other protester was brandishing "tax the rich" placards.
So I really don't get your original point in this context.
An interesting factoid from the Roman Empire is that in their later years there was a major fertility collapse to the point that various laws were passed in order to try to motivate fertility in various ways, and they ultimately failed.
I don't know what to take from that yet, if anything, but I think it's obvious that we've similarly entered well into an 'end of empire' type era, and fertility rates have also again collapsed. So again, I think it's simply interesting to ponder.
On the contrary, (in the US) I think there is at least enough land and resources (including food) that a modest haircut on the ultra-rich would go a long way for the lower-middle classes.
On the contrary, (in the US) I think there is at least enough land and resources (including food) that a modest haircut on the ultra-rich would go a long way for the lower-middle classes.
https://apnews.com/article/real-estate-housing-market-home-p...
https://www.in2013dollars.com/us/stocks/s-p-500/1997?amount=...
I feel like "wealth inequality" is such a useless frame that it makes me wonder if the politicians harping on it are using it as a dodge to avoid the real issues.
Suppose a middle class lifestyle requires wealth 100 and below 50 is poverty. If the 25th percentile is at 40 and the 99th percentile is at 400, that's very bad, even though it's "only" a factor of 10. If the 25th percentile is at 200 and the 99th percentile is at a million, that's not ideal, but it's certainly better. So the ratio is basically a red herring and what matters is how the people at the bottom are actually doing.
Meanwhile most of the underlying problem with "wealth inequality", both in terms of cause and harm, is actually market consolidation. If you were an early shareholder of a trillion dollar corporation then you're probably a billionaire, but you wouldn't be if trillion dollar corporations didn't exist because there were 100 companies each of 2% the size instead of 2 companies each the size of countries, and moreover the problems come from the existence of a trillion dollar corporation which can then run roughshod over everybody because they don't have enough competition to keep them honest. Which isn't solved in the slightest bit by leaving the corporation the same size but causing it to be owned by mutual funds or foreign investors instead of domestic founders. But people keep proposing taxes as the solution to it, which is exactly the thing that doesn't fix that.
> Young couples can't afford to buy a home to start a family because interest rates are 3x higher than a few years ago while home prices went way up since covid
Current interest rates are in line with historical norms; ZIRP was an aberration. And in general higher interest rates result in lower housing prices, because you don't have people taking out huge low-interest loans and bidding up the prices.
The problem right now is that the transition from ZIRP to normal interest rates sucks, because it creates short-term gridlock. Somebody who would like to sell their house and move can't do it because the payments on a new, higher-interest mortgage are higher than the ones on their old low-interest mortgage, and then they can't afford it so they don't sell their house, which keeps supply off the market.
The best way to fix that is to solve the gridlock with new supply, but we mostly prohibit that through zoning. But it'll happen either way because eventually those low-interest mortgages age out (i.e. get paid down) and then the gridlock breaks and prices come down, it just takes longer and causes more damage in the interim.
And either way the result is going to be a reduction in housing prices, which people are going to call a "housing crash" and complain about it. But the issue isn't prices going down, it's that ZIRP causes a bubble. That's a sunk cost; we're already in it. Returning to ZIRP is only an attempt to re-inflate the bubble, which is just kicking the can down the road. And, of course, you can't use ZIRP if you're trying to fight inflation, which is why causing the bubble to begin with is bad -- once you have enough inflation to make ZIRP untenable, the bubble ultimately has to pop, and trying to fight it (which is what we did in 2008) only makes it worse.
Content warning, this graph is distressing:
https://fred.stlouisfed.org/graph/?g=1Mdsa
The peak in 2007 was the massive housing bubble that crashed the economy.
Also, migration & outsourcing…
Meanwhile the hype is causing things to be converted to "AI" even when it isn't any more efficient, which lowers labor demand (suppresses wages / increases unemployment, bad) and increases power demand (higher electricity prices, bad) and to the extent that hype causes adoption of inferior solutions, lowers efficiency (worthless AI customer service, bad). Some of the AI stuff is useful but the hype is causing folly.
Migration isn't particularly deflationary, especially with respect to housing prices since the new residents then increase housing demand, which is fine when construction isn't constrained by zoning but bad when it is, and right now, it is.
Most of the outsourcing that can reasonably happen already has, in large part because the US housing market (and therefore cost of living) has been out of whack for a long time, which makes US workers less competitive despite what would otherwise be various countervailing advantages. Things are made in China because they fit on a container ship, but that happened decades ago. Nurses and landscapers and firefighters and plumbers are still domestic and that isn't likely to change.
Not just recently -- always.
Prevention measures are sometimes well accepted, like minimum wage, but sometimes it comes to really stupid regulations like removing Advanced Math classes from Californian schools -- they are all aimed at preventing inequality.
Ask Greece.
The funny part is, regardless of which social, cultural or economic model you want, the one that everyone hate is the inequality.
The problem is, as we've seen, our government is cutting taxes and raising spending no matter where we are in the business cycle. That's a very easy problem to solve, if there is the political will, but right now, there isn't.
ktallett•2h ago
bell-cot•2h ago
Perhaps France's ruling classes are especially inclined to ignore the concerns of the poor and working classes, and the latter often feel that forceful resistance is their only option?
JumpCrisscross•2h ago
vdupras•55m ago
googlryas•1h ago
Is the average londoner worse off than the average Parisian? What about the average British person vs the average French person? I just pick the UK because it is nearby, approximately the same population and same GDP
ktallett•48m ago
astrolx•1h ago