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Home Publications Blogs Beat the Press What Economic Theory Is the NYT Pushing on France?

What Economic Theory Is the NYT Pushing on France?

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Thursday, 01 November 2012 05:01

A NYT article on the problems facing France's president Francoise Hollande included several peculiar assertions. At one point it noted Hollande's efforts to meet a deficit target of 3 percent of GDP (strangely labeled as "economic rigor") and then tells readers:

"Others complained that Mr. Hollande’s decision to meet the target by raising taxes and freezing spending, rather than cutting it, would throw France into recession, even as growth, so far elusive, would by itself provide more tax receipts and jobs."

There is no obvious economic theory whereby spending cuts would be less contractionary in the short term than tax increases on the wealthy. If Hollande cut spending by 30 billion euros rather than raising taxes by the same amount, the spending cuts would almost certainly do more to cut jobs and reduce growth. (It might have been useful to disclose the identity of the "others.")

The piece later tells readers:

"He [Hollande] has also sent mixed messages — vowing that France will not undergo austerity while raising taxes on companies and the rich, and at the same time trying to show that he is fiscally responsible to the markets and his euro zone allies."

It's not clear what the mixed message is here. It seems that Hollande is trying to reduce France's budget deficit by imposing taxes on people who have money rather than hitting ordinary workers and retirees. There is nothing obviously contradictory in this picture.

 

Comments (5)Add Comment
He said/She said isn't "news analysis"
written by Robert Salzberg, November 01, 2012 7:48
The NYT piece is labeled under the heading "news analysis". The first paragraph is devoted entirely to an extended metaphor and the next 3 paragraphs are composed of he said/she said statements. The first actual policy statement comes in the 5th paragraph about halfway down the first of 2 pages.

The most remarkable thing about the NYT piece is the almost complete lack of any coherent news or policy analysis.









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written by skeptonomist, November 01, 2012 10:04
Here is where simple arithmetic, which Dean often calls on, could be used to advantage. If banks, rich people and corporations have lots of money which is not being used constructively, which is certainly the case in the US, taxing that money is not harmful and would tend to reduce deficits. If all or part of the money is spent, say on infrastructure projects, or just given to the unemployed, this would tend to boost demand and improve the economy. The key is arithmetic applied to the distribution of money; money must be subtracted from those who have it and are not using it, and added to those who currently do not have it and would spend it immediately. This is a matter of economics, not morality.

People on the "liberal" as well as conservative sides of the argument seem very reluctant to admit that bad distribution of money is the problem now, and that redistribution is necessary. There is really no way to redistribute other than by taxation.
...
written by urban legend, November 01, 2012 4:37
And this is not redistribution of money honestly received, but correcting a maldistribution based on the exercise of political and economic power. (Think CEOs appointing the boards who determine the compensation of CEOs and other corporate officers.) Some are the malefactors, but even the majority who are not have received a windfall they don't deserve.
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written by SqueakyRat, November 01, 2012 5:18
Hollande's first name is Francois, not Francoise, being a dude.
he's not a dude, he's french ;)
written by pete, November 01, 2012 5:30
Anyway, cutting unproductive French bureaucrats, essentially transfer payments, probably is not contractionary. Now if they were doing something, like paving roads or invading Afghanistan, then it might be productive ;) agin....Indeed, cutting regulations and dumping the enforcing bureaucrats ought to have a double whammy effect.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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