Dr. Paul Krugman has a great piece about the rise of France from the ashes of the Economic Apocalypse known as the Eurozone. France has recovered economically, and they did it without massive government cuts, without a bailout, and with an election that was more like a referendum on the rich. Oh yeah – and their debt to GDP ratio is lower than the U.S.
So how did they do it? They raised taxes on the rich to assure a social safety net. They had some government cuts, but nothing like the U.S. or infinitely worse, Greece. The result? A GDP growth that’s on par with the U.S., and lowering debt. Unemployment is also down in France. The pictures…
Debt to GDP of France (90%) compared to the U.S. (105%):
French GDP growth:
Yes, that a NEGATIVE 3% during the recession, and a 1.7% increase now. That’s a gain of 4.7% GDP in a couple of years. The United States should be so lucky!
So the moral of the story is that yes, you CAN have economic growth by taxing the rich, you CAN lower the debt by taxing the rich, and you CAN have a good social safety net without killing the country.
Dr. Krugman’s piece was more about the nay-sayers in the political economy side, and I can’t really add anything useful to that. Basically though, France is Keynesian Theory in action. It works.