Sarko's Gift to the Wealthy
These are depressing days in France, as the true meaning of Nicolas Sarkozy's accession to the presidency becomes clear. The new government's very first law was a massive and unnecessary tax cut, passed by the National Assembly in the early morning hours of Bastille Day, that will go mostly to the wealthy, further degrade France's public finances and probably lead to cuts in programs the majority of people rely on.
The centerpiece of the new law sets a cap on each household's overall tax bill at 50 percent of income. This includes income taxes, property taxes, local taxes, the wealth tax and two taxes that were levied to shore up the social security systems. (This cap already existed, but it had been set at 60 percent.)
This might sound reasonable, but according to the French government's own estimates, very few people will benefit. In a total population of 62 million, there are only 234,397 households whose tax bill exceeds 50 percent of income. And 201,864 of these households will receive an average tax break of only 649 euros (or less than $900 at the current exchange rate of $1.37 to one euro).
As with the Bush Administration's tax cuts, the big winners in France will be at the very top. According to the Finance Ministry's estimates, the 1,081 households whose net worth is over 15.5 million euros will each get the equivalent of more than $344,000. So Sarkozy's "modernization" looks pretty good from the top, especially since the new government sweetened the deal with the completely superfluous near-abolition of the estate tax.
To be fair, the tax package did include something for those who soldier on with less than 15 million euros in net worth: Overtime pay will no longer be taxed. But besides the fact that people will have to work more in order to benefit from this part of the tax cut, this accounted for less than half the package's total annual price tag of 13.6 billion euros.
Given France's image in the United States as an overtaxed country, even Americans who opposed the Bush tax cuts might not be shocked by all this. But the previous French government also slashed taxes. The top marginal income tax rate in France is currently only 40 percent, similar to the 39.6 percent rate in the United States at the end of the Clinton Administration. Besides, the other income tax rates, which affect the vast majority of taxpayers, are actually lower in France than in the United States.
The new tax giveaway comes at a time when inequality in France is already rising dramatically. A new report by researchers at the Paris School of Economics shows that the income of the top 0.01 percent of households grew by 42.6 percent between 1998 and 2005, while that of the bottom 90 percent (colloquially known as "everybody") only increased by 4.6 percent. These findings are astonishing, because they mark the first time in decades that American-style inequality has been observed in France. Sarkozy's "modern" policies are intensifying this destructive phenomenon.
So why did the French government do this? The answer has little to do with sound public policy and a lot to do with the ideology of "Sarkozysme," which calls for glorifying wealth. This was repeatedly made obvious in the run-up to the tax-cut vote by the new finance minister, Christine Lagarde, who exclaimed, pep-rally style, during a speech to investors, "Get rich!" This probably confused her audience, which already was rich, but the basic point was clear enough.
In her speech introducing the tax bill in the National Assembly, Lagarde laid out the official case: French people don't respect work. This is because the pre-Revolutionary aristocracy wasn't allowed to work, which has led to an association between being privileged and not working. Therefore, the goal of the tax cuts is to reverse this by rewarding people who work.
How that squares with a law rewarding people whose parents leave them massive sums of money was, of course, never explained. And how brazen to equate working people today who value their well-deserved leisure time with the parasitical aristocracy of the ancien régime! This remark, near the beginning of an incoherent tirade against lazy people that was arguably the nadir of recent Western political discourse, was so ridiculous as not even to merit the term Orwellian.
Now, as an American, I've heard my fair share of anti-tax rhetoric, but this was the worst case for tax cuts I've ever seen. That honor used to belong to George W. Bush for his 2001 giveaway of our budget surplus. But Bush could at least argue, however disingenuously, that we were facing a recession and needed stimulus and that the surplus was "not the government's money, it's your money." France, however, isn't in a recession--growth was 2 percent last year and expected to be higher this year--and it doesn't have a surplus to give away.
Behind these economic issues lurks an important political question: When the inevitable budget cuts are implemented to pay for the tax giveaway, will the French stand for it? Can any Western country these days actually muster real opposition to these kinds of policies? Unfortunately, the French left seems to be stumbling, as Sarkozy goes about rearranging the country's ideological furniture. French Socialists used to play in a league with no equivalent to America's Republican Party. Life was good when even the Gaullist center-right accepted the basic tenets of the welfare state, which everybody agreed was the glue that had helped put postwar Western European societies back together. But Sarkozy, claiming that globalization leaves no room for alternatives, is launching a frontal assault on those principles, and the Socialists have struggled to fight back against GOP-style free-market rhetoric that used to be marginal in French politics.
It remains to be seen whether the clarity of Sarkozy's attack will provoke the Socialists to sharpen arguments that were perhaps dulled by the very fact of broad acceptance. It's hard to be optimistic, given that another key element of Sarkozysme is slick communications and control of the media. The French media landscape consists of outlets that are either too far left to have widespread credibility (Libération, L'Humanité), too esoteric to be read by the masses (Le Monde), owned by one of Sarkozy's best friends (Le Figaro) or run by Sarkozy's former deputy campaign manager (the major TV network TF1).
Other media outlets have seen their editor fired after pressure from Sarkozy (Paris Match, for publishing pictures of Sarkozy's wife with another man) or had stories suppressed because they might annoy the president (Le Journal du Dimanche, which pulled a piece claiming Sarkozy's wife didn't vote in the second round of the election).
If you think this sounds like the situation that prevailed in Italy during the reign of media tycoon Silvio Berlusconi, you're right. That's essentially what Sarkozy is: Berlusconi with nukes.
Given this depressing situation, the French might as well get their information from Le Canard Enchaîné (The Chained Up Duck), a satirical newspaper that is basically a print version of The Daily Show except that it also has some real news. Or people could just meditate, which seemed to be the solution preferred by Le Nouvel Observateur, a major newsweekly that inexplicably chose to run, in the immediate wake of the vote to institute Reaganomics, a cover story about Buddhism.
The backlash, if there is to be one, might come not only from the French Socialist Party but also from those in Sarkozy's own party--and there's a chance they're still out there somewhere--who are steeped in the sensible, center-right traditions of the great postwar generation.
To judge, as one must these days, by the reporting in Le Canard, some of these people were, in fact, disturbed by the finance minister's justifying a cut in the estate tax by ranting against the lazy. And at least a few conservative deputies want an alternative minimum tax to make up for some of the damage the new cuts will do. Then again, there were Republicans who weren't happy about Pat Buchanan's "war for the soul of America" speech at the 1992 convention, but they didn't do anything to take their party back.
So although one element of the response to Sarkozysme will have to be the rebuilding of the French left (which managed to maintain a unified front against the tax cuts), the bigger question is whether the center-right is really dead. It's too early to say for sure, but if I were Nicolas Sarkozy I'd be worried that it might not be.