Thursday, December 13, 2012

Is U.S. Adopting Europe’s Anti-Competitive Economic Policies? Import French Wine, Not Economic Policy

            Last week, Francoise Hollande, Socialist President of France, recommended that homework be eliminated in French schools.  He argued that assigning homework provides an unfair advantage to students with stable home environments.  This same type of anti-competitive thinking has produced a social safety net in France and most of Europe that has undermined economic incentives and encouraged workers to remain unemployed or underemployed.  For example, the World Bank estimates that the annual cost of the social safety net as a percent of GDP in France is more than twice the size of that in the U.S. 
Not surprisingly over the past decade, France’s unemployment rate averaged 2.6 percentage points higher than the U.S.’s, and the Gaullist nation’s annual GDP growth was approximately one-third that of the U.S.   Unfortunately, the Obama Administration’s proposed tax increases currently under deliberation by Congress on the higher income, higher productivity, and more highly educated workers pushes the U.S. in France’s direction.   The top five percent of wage earners, or those earning over $154,000 already pay an average income tax rate that is 11 times that of the bottom 50 percent of U.S. workers. 
Not only do Obama’s tax rate hikes on the most productive Americans shrink incentives, they reduce the yearly budget deficit by less than ten percent.  Instead of diminishing the income of higher wage workers via elevated taxes, U.S. economic policy should be directed at raising the income of lower income workers.  The U.S. should import French wines and movies, not French economic policy.  Ernie Goss



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