Yesterday, the US President Obama announced a new debt plan built on taxes on rich. He called for $1.5 trillion in new taxes on upper income taxpayers. His plan would end Bush-era tax cuts for top earners and would limit their deductions. This proposal is following the public debate on the issue of high-income taxes, launched by the investor Warren Buffet few weeks ago. In the following paper, Toni Mascaró reminds us why this approach to taxes and deficits is wrong.
Publications
The French Minister of Finance, François Baroin, concluded the G7 meeting in Marseille with a statement that an equilibrium had been found between the necessity for fiscal consolidation and the necessity to avoid a recession. What kind of equilibrium is he talking about and is this equilibrium stable?
The discussions in Marseille started on a fairly correct assessment of the situation: one needs to tackle the sovereign debts crisis and the global economy (and in particular western economies) is slowing down.
The French bank BNP Paribas published a disclaimer to this article signed by our Director of development Nicolas Lecaussin and published in the Wall Street Journal. The paper is mentioning the difficulties of some of the French banks, including BNP.
The game of representative democracy is such that we constantly have to choose, not between policies, but between programs that are best seen as baskets of policies to be implemented if the candidate supporting that program is elected. The basket that the French President, Nicolas Sarkozy, “sold” to his electors in 2007 was, as always, made of all kinds of policies. But there was one on which he particularly insisted on during the elections and that, in my opinion, brought him the support from many voters: the promise that, if he was elected, individuals who will work more will earn more. “Travailler plus pour gagner plus”– with those words, he was promoting a move away from a society in which the extra money you make is redistributed away from you. At least that’s the way many people understood it.
In 2009, 31.3% of the French GDP has been spent on welfare payments. Those include spending by the State-managed health care system, unemployment benefits and social benefits. The government agency in charge of those payments has tripled its deficits during the past 3 years reaching a record 28 billion € in 2010. The annual amount of welfare payments reached 597,5 billion € in 2009, which is largely superior to the whole amount of the Greek debt (€328 billion).
This article first appeared in the Wall Street Journal
Markets always make good scapegoats. When they do well, they are populated by profiteers. When they do badly, they are accused of causing trouble for everyone else.The denizens of the Dow, Nasdaq, CAC and DAX floors may be speculators and myopics. Yet it’s hard to find even the most reckless private participant who behaves as though his credit is limitless.
The world is probably going to change after the recent downgrading by Standard&Poor’s of the US debt rating from triple A to AA+. Beyond the disturbing loss of the landmark Treasuries represented for global finance, what is important here is the awareness that even the biggest world economy is not allowed anymore to do just anything with public spending. The message is clear. The current crisis is actually giving the opportunity to put the political genie back in the bottle. It is now time to grasp this chance, but will political decision makers have the will to do it?
After a huge transfer-loan of €110 billion last year, Greece is once again pending on EU-IMF charity in order to avoid default, or at least, to benefit from a smooth default (assuming such a thing exists). Meanwhile, the Greek economy is paralyzed and tensions grow inside Greece as well as in other EU member states.
Portugal has undergone a huge change. There is a completely new political leadership: younger, better prepared, and much more open to the civil society. But even this “right wing” government lack the theory to understand the causes of the crisis Portugal currently faces, and thus seem unable to deliver real change.
After being seriously blamed by Italian Minister of finances Giulio Tremont last month, Switzerland finally finds itself largely approved on its private savings policy in the recently revealed by the EU Commission report on enforcement of taxation on savings regulation. As a matter of fact, France is the only EU country to accuse Swiss banks to implement mechanisms allowing some of the savings on Swiss bank accounts to avoid taxation in accordance with the agreement signed with the EU in 2004. The conflict opposing Switzerland and the EU on savings taxation lasts from several years now. Here is a brief history of the issue by Pierre Bessard, IREF fellow.
