Squaring the current budgetary circle does not require indecipherable theorems. Neoliberal theses on austerity are in the doldrums. Not only because the comparison between emerging from the 2008 credit collapse with draconian adjustments and the fiscal and monetary springboard that took us out of the great pandemic recession does not withstand an assault, but because it t’s still not time to adopt new accounting. corsets.
Social service checks, weakened by restrictive spending policies without penalties for tax evasion by large estates and corporations, have increased because of the growing need for aid created by inequality between rich and poor. As if this were not enough, the need to undertake urgent reindustrialization that returns essential manufacturing plants such as chip factories or critical raw material supply centers to national markets has been established as an economic criterion as an antidote to reduced productivity that threatens competitiveness and paralyzes economies.
All of this therefore requires more resources. Of course, without reaching the fiscal open bar of the Great Pandemic nor the monetary stimuli of its central banks. In other words, without returning to the IMF slogan of spending at discretion, but keeping the bills, during the health crisis, the economic authorities are trying to imagine formulas that increase public resources without abandoning the medium-term objective of budgetary balance.
France and the United Kingdom have touched the key to the double revision of expenditure and revenue. This last component, that of accounting assets, almost a taboo of neoliberal doctrine – and even more so if the increase in income comes from the tax pressure of the wealthy classes – is what their firms, both of new design, although d different ideology, signs, they become active.
France taxes wealth to remedy its deficit and debt
Michel Barnier’s government is preparing an economic policy with tax increases on businesses and wealth which is the epitaph of the tax cuts that Emmanuel Macron introduced seven years ago, when he entered the country. ‘Elysium.
The former commissioner and last European Brexit negotiator took on a huge challenge. Especially because the polls gave the Popular Front an unexpected victory with which it was able to attempt to present a motion of censure. But for this conservative politician, who will have the support of the far right of Marine Le Pen, France does not need austerity pills today. Barnier opened the door to an increase in tax pressure on wealthy people and businesses in order to create “a massive budget” to restore investor confidence.
In an interview with France 2 He ruled out that the tax burden weighs either on the middle class or on workers, underlined the urgency of reducing the French debt, to 112.3% of GDP, and called for “collective efforts” to reduce the expenses, without mentioning social services. “We must repair the situation, which excludes neither the rich nor businesses that operate properly.” Everyone “must contribute,” he added.
This is perhaps a wink to the progressive bloc to prevent it from overthrowing its executive. But the bar for its sovereign payments, of 3,000 billion euros, the budgetary hole of 6% – 9 tenths above official forecasts – with a risk of sanction for “excessive deficit and debt” by the European Commission, and a paralyzed economy forces us to modify the current trajectory, admits Barnier. In other words, bury the tax cuts for the fortunes and businesses that have made Macron’s mark. In fact, they earned him the nickname “president of the rich” among his detractors. Furthermore, these measures argue that they have not stimulated activity or transformed the eurozone’s second-largest economy into a refuge from massive capital flight from the City of London after Brexit.
We are talking about reducing the corporate tax rate from 33% to 25%, reducing pressure on industry, perpetuating the labor tax exemption for companies, the introduction of a single rate of 30% on capital income and the attempt to do so. The tax on real estate assets has been replaced by a tax on real estate assets of more than 1.3 million euros. This tax card has generated a divide in the state coffers and created the “emergency” that Barnier’s spokesperson recognizes: France “is serious” because to the mountain of debts are added payments for its interests which “exceed 50 billion per year” and because the majority of maturities “come from international markets”.
The market itself certifies France’s loss of credibility. “The question is not how long the Barnier government will survive, but when it will fall,” warns Benjamin Melman, of the Edmond de Rothschild firm, for whom “everything that moves forward will be done thanks to the support of investors.”
The specter of Liz Truss
The ghost of Liz Truss, the short-lived British Prime Minister who fell in October 2022, after only 44 days in office, due to stock market pressures and pressure on the pound sterling from the capital funds that conspired to dismantle the budget of Downing Street with mega-sales taxes on the rich and corporations and an increase in the welfare state, now flies over the head of Barnier, who witnessed the guillotine that took over the head of his then Brexit interlocutor.
The Montaigne Institute claims that Macron’s liberal tax cuts have widened inequalities and drained the Treasury of 15 billion euros. At a time when there is an urgent need to save 110 billion euros to reduce the debt in the coming years and consolidate the deficit, as required by the EU Stability Pact.
The consensus of French economists is favorable to an increase in the single rate on capital income to 35%, a temporary tribute to the extraordinary profits of companies, expressly abandoned in 2022 by the Elysée despite the millionaire income falling from the sky on the banks and energy companies, for but European partners like Spain have imposed taxes. Finally, reinstate the tax on the rich which, although nominal, “would bring at least 15 billion euros”, explains the report. think tank Gaul Terra Nova.
In the United Kingdom, the transfer of power to the Labor Party gives the Chancellor of the Exchequer, Rachel Reeves, a real ace up her sleeve to address a structural change in the economic model. It is not the only one because it can also play the card of taking off an economy – its GDP increased by seven tenths during the first quarter and by six in the spring. The OECD places the dynamism of the British economy above that of Germany, Japan and Italy this year and in 2025.
Reeves stressed that the budget “will be truly ambitious”, expansive, guaranteeing the capital necessary for the decarbonization of its productive fabric and with a marked social aspect.
“It is time for the Treasury to stop auditing investment costs and also recognize the multiple benefits” of expansive accounts. Despite the deficit of 22 billion pounds – around 26.4 billion euros – which it claims to have inherited from the long decade Tory. In theory, with another $16 billion coming from the change in investment treatment his team is considering that will have debt-calming effects, and another $31 billion as a contribution to tax increases on the rich and corporations – and others commitments included in the Labor manifesto – to which will add “financial stability and encourage investment”.
Kamala Harris listens to the siren songs of the Old Continent
The paradigm shift in the UK seems to please Stephen Phipson, CEO of entrance hall the manufacturing company Make UK which ensures that the future budget “addresses reindustrialization as an essential element of the strategy of economic, productive and competitive dynamism”. He said Reeves’ “investment budget” “focuses on British prosperity”.
The music that comes from across the Atlantic surely also sounds like a melody to Kamala Harris. In the United Kingdom, France and Spain, if the budgetary path finally continues, an expansive budget for 2025 and a financing model that strengthens social shields and solves the problem of access to decent housing.
Essentially, because it fits with his Democratic economic agenda that he says he will establish in his “first 100 days in office” if he wins the November presidential election and which will focus on cutting costs and stimulation of opportunities for the middle and lower classes. social classes of the country, to which he will extend the 2017 tax cuts of his rival, Donald Trump, beyond 2025, when their validity will expire. In exchange, he will increase taxes on wealth and large corporations, whose profits would cover the $1.7 trillion his proposals would increase the U.S. deficit over ten years.
The Democratic candidate pledged to provide subsidized early childhood education loans to low-income families who would receive a maximum of $2,000 a year to reduce medical prescriptions. Its commitment on taxation consists of not touching the pressure on incomes below 400,000 dollars per year, to increase the corporate rate from 21% to 28% and the maximum tax on personal income from 37 % to 39.5%, and to introduce a single tax of 25% on wealth. more than 100 million, which would include capital gains. All this – he underlines – “would make it possible to increase the collection to 5 billion over the next decade”. Harris will also create a $40 billion fund to boost new housing construction.
