Four days ago French Prime Minister François Fillon announced plans to introduce a one-time tax on top earners as part of a package to stimulate aggregate demand and to reduce the national deficit. The proposed measures are slated for presentation in parliament this October. Whether or not such legislation is ultimately adopted, the United States could learn from the French. I toast the French for their willingness to confront a seemingly intractable economic situation with evenhanded policy premised on equity, evidence, and honesty.
Highlighting the impermanent nature of plans to tax France’s wealthiest individuals, Fillon explained that a contribution of 3% would be imposed on annual income (income tax) and an additional 1.2% on capital (capital gains tax) in excess of the 500,000 Euros, or the equivalent of $721,000 U.S.D. (Capital Gains Tax currently stands at 19% in France and 15% in the United States). According to a recent KPMG report emerging from the U.K., France would still sit outside the top-10 highest tax rates in Europe despite its proposal. Sweden has the highest rate of income tax at 56.6%, Denmark 55.4%, Netherlands 52% and the UK 50%, tied with Belgium, Austria and Finland.
Expected to generate in the vicinity of 200 million Euros ($290 million U.S.D.) in additional revenues for the state next year, the temporary levy will be abolished once the country’s deficit returns to 3% of gross domestic product (GDP). Framers of France’s multi-tiered plan aim to reduce the country’s public deficit to 5.7% of GDP this year, to 4.5% in 2012 and to 3% in 2013. While France has already adopted measures to reduce its public deficit while it rests at 5.7% of GDP, the United States has done very little to reduce ours which currently stands at 9.6% of GDP, and more importantly, to generate an aggregate revenue stream which will allow consumers to purchase goods and services that our economy is capable of producing.
Instead of levying a modest tax increase against our nation’s top 0.3% of income earners we’ve chosen to reduce our deficit (forget about creating jobs!) by autocratically establishing a bipartisan Congressional Supercommittee (read: gang) whose members claim that new taxes won’t be part of any deficit reduction package. And it’s not only the usual Republican suspects intransigently refusing tax increases, it’s also the Democrats. “Let me be very clear: Even in the Biden committee, none of us ever talked about raising tax rates, we are not there,” Jim Clayburn (SC-D) said recently on MSNBC’s “The Daily Rundown.” The Super Congress, which was approved in early August, will establish a new level of unaccountable government and will strip elected representatives of the right to amend legislation or filibuster on whatever issues it deems fit, not merely limited to the debt situation. The Supercommitte – a body of twelve members (six democrats, six republicans)—is composed of nine white congressmen, one white congresswomen, one Black congressman, and one Latino congressman. It goes without saying but it is likely better said anyway: such a composition in no way reflects the demographics of the United States. As an aside, citizens of this country should be aware that of the 435 House members only 75 are women (17%) . And of the 100 Senators, only 17 are women. A greater percentage of women and/or people of color certainly do not, of course, guarantee the passage of radically democratic legislation, but at least such an arrangement would allow us to remain more faithful to the democratic ideal of commensurable representation.
The Super Congress must slash $1.5 trillion or more in costs in the coming decade, enough to match increases in the government's ability to borrow enough money to pay its bills through the beginning of 2013. It requires a bipartisan majority of at least seven of the committee's twelve members to recommend legislation to be presented to the whole Congress for a yea/nay vote by December 23rd. The select panel has until the day before Thanksgiving to complete its deliberations. And there are noteworthy incentives for the Super Congress to reach agreement. Perhaps most crucial, if it fails to produce deficit savings of at least $1.2 trillion, or if the House or Senate votes down its recommendations, severe across-the-board spending cuts would trigger automatically. The term “automatic” is patently inconsistent with the notion of a deliberative democracy, is it not?
So while France’s affluent are standing in solidarity with workers by volunteering unprovokedly to contribute more by way of taxes, we’re busy launching a democratically unaccountable super committee whose composition is utterly unreflective of the gender and racial realities of our country and whose members unanimously refuse to consider a modest increase in taxes on the wealthy to help reduce our deficit, and more importantly, to create the type of effective aggregate demand necessary to revivify our economy. (Faster growth often leads to a more easily controllable debt in the long term.) Blaise Pascal, a 17th century French factotum, once suggested that “justice and power must be brought together, so that whatever is just may be powerful, and whatever is powerful may be just.” Perhaps France’s model for deficit reduction and demand-side economics should chasten us into examining both our national arrogance and recalcitrance. “Trickle down” economics doesn’t work (http://www.christopherfrancispetrella.net/2011/07/broken-record-republic...) and a refusal to acknowledge what years of research and policy implementation clearly substantiate is both dishonest and infantile. Can we admit to our mistaken economic assumptions and missteps for the sake of the suffering masses? (Alan Greenspan did it in 2008 in front of Congress: “I discovered a flaw in the model that I perceived is the critical functioning structure that defines how the world works. I had been going for 40 years with considerable evidence that it was working exceptionally well.”) For the need to be right, as writes Albert Camus, is the sign of a vulgar mind.