The Rebellion of the French CEOs

Discussion in 'Clean Debate Zone' started by Wiseacre, Nov 18, 2012.

  1. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    You want to know what's going to happen here if Obama gets his way? Just look at France, who is a bit ahead of us on the shift to the left.

    snippet:

    " Nearly 100 French CEOs, among them the heads of Accor, the hotel chain, Air France, Carrefour, L´Oréal, Peugot, Siemens, SociétéGénerale and Veolia, the giant waste and water utility, are urging socialist President Francois Hollande to reduce government spending by 60 billion euros (about $76 billion) over the next five years, and reduce payroll taxes by 30 billion euros over the next two years. The cost of government, they say, has reached “the limits of what is bearable.”
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    " Government spending now amounts to 56 percent of GDP in France, more than double what it is in the United States. To pay for this profligacy, the government's 2013 budget proposes taxing top earners at a 75 percent rate and those earning more than 150,000 euros, or about $191,000 per year, at 45 percent. Other taxes also are going up (on dividend income and certain capital gains, for instance). All of which has pushed France’s wealth and jobs creators – its business leaders – to the point of desperation.

    Some are even voting with their feet. Bernard Arnault, head of the luxury brand LVHM (Louis Vuitton-Moet Hennessy) and the country’s richest man, is seeking a Belgian passport. In response to critics, he claims he’ll continue to pay taxes in France, but it’s obvious that he’ll eventually move across the border. "
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    "President Hollande thinks the solution to his country’s severe deficits, huge debt, loss of competitiveness and economic stagnation, is more tax revenue, more financial stimulus, and more government generally …. you know the drill. But France’s fiscal problems, like our own, are a symptom of too much, not too little, government. "
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    " The correct way to measure France is to compare it to Germany, not to Greece or Spain. In 2000, France’s exports amounted to 55 percent of Germany’s exports. Today the figure is 40 percent.

    The reason for this is not difficult to ascertain: The cost of government-mandated benefits –a major complaint of the CEOs – amounts to more than 50 euros for every 100 euros paid in salaries, almost twice as much as in Germany.

    France’s decline mirrors that of Europe as a whole. Every decade since the 1970s the economic performance of the 27 countries that make up the European Union has deteriorated. In the 1970s, economic growth averaged 3.1 percent. In the 1980s the figure was 2.5 percent. In the 1990s it was 2.1 percent and in the last decade, 1.4 percent. "

    Read more: France: Rebellion of the CEOs | Fox News
     
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  2. oldfart
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    oldfart Older than dirt

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    Let's see. Fox News is reporting that French executives want lower income taxes on people who make $191,000 or more. And this is important because.........
     
  3. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    Actually they want lower taxes AND less spending because the french economy is going down the drain thanks to the socialist policies over the past several years. Which is why it's important. Cuz under Obama we're going in the same direction. Apparently democrats are too damn stupid to learn from the mistakes of others.
     
  4. Katzndogz
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    Katzndogz Diamond Member

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  5. Meister
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    Meister VIP Member Supporting Member

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    Libs think we can take proven failed policies of other nations and make them work.
     
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  6. oldfart
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    oldfart Older than dirt

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    Well, that's certainly a roundabout way to start a discussion of austerity in America. Given the current smashing success of deficit reduction in the Eurozone in general and France specifically, I'm not sure why you would want to start there. Especially with France, which before the financial collapse had no unusual signs of fiscal distress. Until now, France has been a full partner in the austerity craze and has reaped the same results that everyone except Germany has experienced as a result. Since Sept 2009 when unemployment peaked in the US at a bit over 10% and was almost the same in the 17-nation Eurozone, the US unemployment rate has declined to 7.9% while the Eurozone rate soared to over 10.5%. What happened in late 2009--early 2010? The Eurozone adopted austerity. What do you think explains the divergence, other than austerity?


    Oh, and guys, this is the CDZ. Lose the invective. Calling names does not support your argument.
     
    Last edited: Nov 19, 2012
  7. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    European austerity was and is still mostly tax increases, that's a big reason why it ain't working over there. Interestingly enough, the democrats didn't push through a tax hike here when they had the chance back in 2009; a bit odd don't you think? They had a filibuster proof Senate and a Pelosi-led House, but still didn't do it. Hard to blame the repubs for that, no? Could be the fact that they didn't raise tax rates here kept us from a double dip IMHO. Or at least one factor anyway.

    Public spending is so high over there that private industry is crowded out, which is one reason why we're not yet in the same pickle they are. And many of those countries have structural labor problems, which keeps costs too high. We've got that problem here too, in some states. Look at the recent Twinkies saga, in some cases unions are striking themselves out of a job.
     
  8. oldfart
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    oldfart Older than dirt

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    I don't think the Greeks and Spanish were rioting over tax increases for the wealthy. They were more likely upset with layoffs and pensio reductions. The same can be said of Great Britain. Where did you get the idea the Europeans were relying mainly on tax increases? Just curious, most I've read focused on budget cuts.

    At the time Democrats were scared shitless the economy was going down the toilet and classic Keynesian theory says that you don't raise taxes in a downturn. Personally I would hve no problem making the timing of tax increases contingent on economic recovery. But that's just me.

    Oh,boy. So much error, so little space to correct it. Say's Law was refuted two hundred and fifty years ago. Apparently quite a few folks didn't get the memo. If you want to debate the "crowding-out theory", I'm game but I think it's a side issue to this topic. You could be referring to more than one thing by your reference to "structural labor problems". Is this a reference to a theory of structural unemployment, or a labor cost argument? I'll let the Twinkie case stand on its own merits: labor union abuse, bankruptcy law abuse, or really bad management?
     
  9. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    First of all, Say's Law has never been refuted; Keynes disputed it back in the 1930s, but that doesn't mean Say's Law should be considered as false or in error. Most of economics is theory with very little proof, and BTW that wasn't 250 years ago. And BTW when did I mention Say's Law?

    I was primarily referring to labor costs as being too prohibiting to economic growth. Labor laws in many European countries are so restrictive that many companies deliberately hold down the number of employees to below a certain number to avoid exorbitant costs in other areas than wages. That don't help grow the economic pie.
     
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    Last edited: Nov 26, 2012
  10. oldfart
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    oldfart Older than dirt

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    Good idea. Separate threads are much easier to follow.


    Agreed. As a first approximation, I like the cyclically balanced budget where deficits in hard times are offset by surpluses in good times.

    I was winging it from memory and got a bit off on the dates. Say published hiswork in 1803 and James Mill expanded on it in 1808, so it's a little over 200 years old. With the additions of John Stuart Mill and David Ricardo, Say's work became the foundation of Classical macroeconomics until 1930. I admit to having misspoken by referencing Say's Law from which the "crowding out" theory arises as if the two were synonymous. You did not mention Say's Law.

    Say's formulation was that production also created its own demand, so that a general glut of goods (or an overall lack of demand)could not happen. Descended from this were a number of further implications including Walras Law which was first expressed by John Stuart Mill in 1844. This held that in a general equilibrium model that the sum of all excess market demand and excess market supply must tend to zero and that efficient markets therefore drive prices to levels where the ultimate equilibrium solution has no net excess demand or supply. Thus long-term involuntary unemployment was not possible in the Classical model. The best source on the formulation and critique of Say's Law remains Oscar Lange's 1942 article "Say’s law: A restatement and criticism" found in "Studies in Mathematical Economics and Econometrics, in Memory of Henry Schultz, pages 49–68. University of Chicago Press.

    Another implication of Say's Law and Walras Law is that since the economy in general equilibrium has no involuntary unemployment, any increase in demand (especially government demand) will cause prices to rise and interest rates to rise (assuming a gold standard). This is the theory that public spending for any purpose "crowds out" private investment.

    Of course the presence of persistent unemployment caused many, most notably Marx, to question the validity of this approach. So by the mid-eighteenth century both the Classical formulation and the critique of the "crowding out" theory were established and many writers were attempting to explain the presistence of unemployment by resort to blaming government action such as poor relief, wage stickiness, labor unions, and monopoly power in industry for the failure of the market to tend to full employment. The arguments were much the same as we see today.

    But if general equilibrium does not automatically asure full employment, then increases in government demand may result in firms hiring labor and expanding production rather than raising prices. And if there is no gold standard the monetary authority could exercise accomodating monetary policy to keep interest rates stable, thus short curcuiting the mechanism that purportedly created "crowding out". This was the essence of Keynes argument in 1930.

    My view is that the assumptions needed to make the "crowding out" effect work are so restrictive as to be mostly a curiosity. You have to assume full employment, which Classical economists did by invoking Say's Law. You also have to fix the money supply, which is what the gold standard did. I would put this situation on one end of the spectrum and the liquidity trap on the other. Most of the time (but not now) we are somewhere inbetween and the degree of "crowding out" is dependent on the elasticity of the I--S and L--M curves of Hicksian analysis. The basis of my remark that Say's Law was refuted almost from the start was the vast amount of intellectual energy expended on explaining why it was at odds with observed fact (poor laws, unions, monopolies, sticky wages and all). If you are up to some heavy lifting, the go-to book in this area of general equilibrium and Keynesia theory is Axel Leijonhufvud, 1968. "On Keynesian Economics & the Economics of Keynes: A Study in Monetary Theory", Oxford University Press.

    Thanks for clarifying. My one comment is that theory of international trade rests not on absolute advantage but on comparative advantage. Thus countries that cannot produce as efficiently as others can still be competitive in the world market as long as their prices encourage other countries to purchase from them and concentrate on more profitable sectors where they have larger comparative advantage. Europe has been on both sides of the equation and the current crisis o the Eurozone is more of a trade imbalance than a fiscal problem, brought on by the introduction of a common currency without enough thought to the trade and investment consequences. A good subject for another day!
     
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