The announcement of a degraded public deficit in 2023 by INSEE has sparked a lively debate. While a slight increase in the deficit may not greatly weaken France’s position, especially in comparison to the UK and the US, concerns have been raised about the potential impact on future generations. However, when compared to other countries in the G7, France’s public debt per young person under 15 is relatively normal. The deficit in France is still seen as concerning, as it is being used to justify cuts to public services, the transition, and soon to social benefits.
The worries about revenue are legitimate as the current deficit is mainly due to a relative degradation in revenue. The revenue is estimated to be 51.9% of GDP in 2023, down from 54.2% in 2017. The Prime Minister has mentioned taxing rents, but could this decline be a result of rents that are being generated? Issues like rent-seeking and market rents are contributing to the erosion of public revenue, with corporate taxes being lowered and production taxes being cut, while various public spending and tax optimization schemes remain in place.
Addressing citizens’ concerns about expenditure is also important, particularly in understanding how increased spending can result in weakened public services. The complex socio-fiscal system offers some insight into this matter, with increases in spending not always leading to improved services. There is a need to untangle the complexities of the system to provide clearer explanations to citizens. Both the Banque de France and Cour des Comptes have expressed ideological views on the deficit, emphasizing the need to address expenditures and have a collective preference for spending.
It is important to consider the impact of the deficit on the economy and future generations. While the deficit may seem manageable currently, the long-term effects need to be taken into account. The decline in revenue and the increase in expenditures are contributing to the growing deficit, prompting discussions on how to address these issues. By examining the root causes of the deficit and implementing effective solutions, France can work towards stabilizing its economy and ensuring a sustainable future for its citizens.
