OMG, FRANCE IS TOAST (NOT)

France, Malkin, and the know it all economists. Malkin runs a "France is sure to go in the toilet" piece today. I'd point out that "everyone" has known that France is heading toward the sewer for thirty years and everyone has been pontificating about it. But it doesn't happen. Why?

A couple of confusing stats: their productivity is higher than ours and grows every year; their unemployment doesn't bother anyone because when you are unemployed your wages continue even when laying around on your fat ass all day long. Their GDP is slow but not disastrously so.

How do they stay in business? I submit to you that the French people do not feel the tax bite at all. That is because the main source of government welfare spending is the Value Added Tax, known as VAT. A VAT is tacked onto every product and service from the second it is created through every step of business (transport, unloading and loading, distribution, and sales) til the time it is sold. You may buy an orange that has been VATTED ten or twenty times but all you see is the final selling price. Same for a dress, a computer, or a service. In theory this tax should drive up the costs of French products BUT....through knowing use of the various VATS the tax can be used to subsidize any product or business the government chooses. Note the current farm product and Airbus bail outs. The French don't feel it. I submit that that the VAT seems to have no bottom or top, it just stays there and it seems to be working, as of now.

Somehow or other I doubt that France will go down the drain, and we are really stupid to think that it will.