Institute for Research in Economic and Fiscal issues

IREF Europe - Institute for Research in Economic and Fiscal issues

Fiscal competition
and economic freedom

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The Public Spending Trend Hampers The Economy

France is the best example of this economic truth. The French public sector is undermining the economy. It must be pointed out that in Spain and Ireland the crisis was due to a real-estate bubble. In France, the crisis is worsened by an obese bureaucracy. The trend is striking: the French public sector is growing faster than the private sector since 1987.

That is why the government share of GDP has a non-stop increase, whether the Right of the Left is in power. The spending trend seems unstoppable. Let’s consider the figures for 2013: the debt has reached 1833,8 billion euros, i-e 90.2% of French GDP. In this debt, the Government weights 1439.9 billions, i-e 79%. The Social Security’s debt share amount to 210 billions euros – 11% - and the local administrations’ debt reaches 173 billions - 9.4%. The debt’s interests amount to 47 billion euros , thus being the second most important budgetary spending.

This explains why compulsory levies reached 44,9% corresponding to 50 billion euros of taxes for households and companies. These compulsory levies are scheduled to be increased to 46.3% in 2014. The public sector is an ever-hungry ogre and the tax system is feeding it!

As a result, this context is not « growth-friendly. » Legal plunder, as would say French economist Frédéric Bastiat, has created an unprecedented economic decay. Simply put, benefits of companies are over-taxed thus reducing the re-investment part resulting in a growth decrease that ends into unemployment. This is how Big Government and its public spending destroy economic growth.

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