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French economist Gabriel Zucman has come to California bearing a familiar French solution to a fiscal problem: another tax.
Once based at the University of California, Berkeley, Zucman is back and campaigning for Proposition 40, which would impose an allegedly one-time 5 percent tax on the net worth of Californians worth more than $1 billion. Zucman, who coauthored the proposition, estimates that the tax could raise about $100 billion and claims that 90 percent of the proceeds would go to health care.
The California Legislative Analyst's office is far more cautious, saying it would raise only "tens of billions" and could cause a long-term loss of income-tax revenue as wealthy people leave the state with the companies they created.
I've written plenty about why wealth taxes are economically destructive, administratively nightmarish, and unlikely to achieve anything close to what their advocates promise. But Zucman's prescription is wrong for a more fundamental reason, as his (and my) native country shows: Raising taxes to fuel ever-larger demands for government spending is a recipe for disaster.
Unless you've been living in a remote cave recently, you've likely seen all the protests and destruction in France. But do you know why it's happening?
As another economist, Paul Krugman, rightly noted back in 2017, "France offers a social safety net beyond the wildest dreams of U.S. progressives: guaranteed high-quality health care for all, generous paid leave for new parents, universal pre-K, and much more."
For decades, France has answered any perceived desire with government spending, then responded to the resulting fiscal problem by seeking new revenue sources. Today, French government spending consumes roughly 58 percent of gross domestic product (GDP).
Krugman gloated that France wasn't suffering social collapse and speculated that it was due to all the spending. He certainly can't say that anymore. In fact, he is now worried that France may be on the precipice of a debt crisis. The truth is that France hasn't done well for some time, even when Krugman cheered its spending.
One of the groups in the street today, young people, has faced widespread unemployment for a long time. The youth unemployment rate in France (ages 15-24) has hovered between 17 percent and 27 percent since 2000. In the second quarter of 2026, it was 21.6 percent, against 14.8 percent in the Eurozone and 9.9 percent in the U.S.
French people also pay some of the highest taxes in the developed world, and they're not happy with the return. The government already takes more than 52 percent of the country's output in revenue, runs deficits exceeding 5 percent of GDP, and has accumulated debt approaching 120 percent of GDP. Nonetheless, French students complain that the government is shortchanging schools, while everyone sees that it is shortchanging its army and police.
The students aren't wrong to feel left out. At The Two Cents Substack, Hoover Institution scholar Hanno Lustig calculates that, between 1995 and 2024, spending on social protection and health (most of which benefits older people) rose from 53.1 percent to 58.7 percent of all French government spending. The share devoted to education, defense, and public order fell from 15.2 percent to 13.7 percent. Transportation fell from 5.3 percent to 3.8 percent.
In other words, France has built an enormous welfare state, much of it devoted to older citizens, while letting other state capacities and basic services fall apart. As transfers of wealth swallow a larger share of the budget, everything else gets squeezed.
That is the fiscal ratchet Californians should worry about when Zucman tells them Proposition 40 is necessary to "save" health care. Proponents claim Washington "cut" Medicaid, but that language is misleading. California's deficit started long before any Washington spending reductions. Besides, federal Medicaid spending isn't falling—not even close. The Congressional Budget Office estimates it will reach $708 billion in 2026, 8 percent more than in 2025. What Washington did in the 2025 budget reconciliation law was reduce Medicaid's future growth relative to previous projections, partly by changing eligibility and enrollment rules and financing arrangements.
This is how the ratchet works. Once the government projects a spending increase, anything less becomes a cut. And once Washington fails to finance the entire projected increase, Californians are told that Sacramento must backfill the missing money. And how should it do that? Conveniently, by creating an entirely new tax.
France has run this experiment for decades. It has an incredibly generous welfare state paid for with very high taxes; it's even tried a wealth tax and has a value-added tax, yet somehow it's never enough. Its welfare state has not eliminated scarcity. It has merely transferred the job of rationing scarce resources to politicians.
Zucman looks at California and sees hundreds of billions of dollars of private wealth waiting to solve a public finance problem. Californians should look across the Atlantic and ask a different question: What happens after politicians decide that every spending adjustment can be delayed until tomorrow by finding another pot of private wealth?
France should not be sending California tax advice. It should be sending a warning.
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The post France Is a Warning to California's Tax-the-Rich Crowd appeared first on Reason Magazine.
The accumulated public sector liabilities stood at £3.005 trillion, equivalent to €3.57 trillion, according to the provisional estimate released by the National Statistics Office. The figure represented 94 percent of UK gross domestic product and marked a historic high, the agency reported.
The balance grew by £91.7 billion compared with the level recorded twelve months earlier, about €109.074 billion, according to the provisional estimate.
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Despite the nominal record, the weight of the liabilities on the economy as a whole fell by seven tenths compared with the 2025 level, the agency reported. The agency recalled that net debt exceeded £2 trillion in June 2020, during the COVID-19 pandemic, and had surpassed £1 trillion in February 2010, following the global financial crisis.
September public borrowing amounted to £24.5 billion, or €29.142 billion, and was the second highest recorded for that month, according to the National Statistics Office. Only the September 2020 figure, unadjusted for inflation, was higher. Compared with the previous year, the imbalance increased by £1.8 billion, or 7.7 percent, because spending growth outpaced income growth, the agency reported.
Britain’s national debt has climbed above £3tn for the first time, underlining the pressure on the public finances before John Healey’s maiden Budget next week
— The Telegraph (@Telegraph) October 21, 2026
🔗 https://t.co/xKIQKqOhib pic.twitter.com/ExKxQ7hI95
Central government debt interest reached £10.9 billion in September, the highest figure recorded in the ninth month of the year since monthly records began in 1997, according to the National Statistics Office.
Annual inflation stood at 3.5 percent in September, four tenths above the August figure and the largest increase since October 2025, according to the National Statistics Office. The price of goods rose 3.2 percent year on year, compared with 2.7 percent in August, while services became 3.7 percent more expensive. Core inflation, which excludes energy, food, alcohol and tobacco, advanced to 2.8 percent, two tenths more than in August.
Sanae Takaichi has done something few Japanese leaders manage. She’s reached her first anniversary in office more popular than her predecessors, and she looks well placed to keep the job. In a country that has burned through five prime ministers in a decade, this counts for a lot. Popularity, though, is only one of two […]
The post Takaichi’s next vote is in the bond market appeared first on Asia Times.
Kemi Badenoch has said a "red warning light" is flashing on the economy as Britain's debt tops £3 trillion for the first time and inflation surges to 3.5% ahead of the Budget next week.
The post Badenoch Warns of “Red Warning Light” on Economy as UK Debt Tops £3 Trillion and Inflation Surges to 3.5% Ahead of Budget appeared first on The Daily Sceptic.
The UK economy will grow 1.3% in 2026, according to the IMF. But will it really, asks David Craig. With unemployment rising, it's just an illusion of out-of-control borrowing. But try getting an economist to admit it.
The post How Many Economists Does it Take to Wreck an Economy? appeared first on The Daily Sceptic.
The International Monetary Fund warned Tuesday that the global economy faces serious risks from Big Tech firms taking on massive debt to fund the buildout of artificial intelligence data centers worldwide. The IMF’s latest Global Financial Stability Report outlines a number of risks to economic growth in the coming years, including a reliance on AI […]
The post IMF warns of debt-fueled AI spending as bubble fears grow appeared first on Asia Times.
France is coming under increasingly direct pressure from its eurozone partners to resolve the political dispute surrounding its 2027 budget, with European finance ministers warning that continued uncertainty threatens confidence in the country’s public finances.
The warning follows a sharp increase in French government borrowing costs. Yields on ten-year sovereign bonds have risen by nearly 80 basis points since September, reaching levels last recorded in 2002. Investors are demanding higher returns to finance a government whose debt continues to increase while its capacity to impose spending restraint remains constrained by parliamentary divisions.
At the Eurogroup’s October discussions, finance ministers and European Central Bank officials pressed Paris to demonstrate that it can adopt a credible budget and comply with its commitments under the EU’s fiscal framework.
France’s difficulties have implications beyond its domestic politics. As the eurozone’s second-largest economy, France occupies a position fundamentally different from smaller countries that experienced sovereign debt crises during the previous decade.
The French government expects to borrow approximately €340 billion in 2027, making continued access to financial markets at sustainable rates an essential element of its fiscal strategy.
That financing requirement reflects both the need to cover the annual deficit and to refinance existing debt as government securities mature.
France’s public debt is already approaching 120 per cent of gross domestic product. As EU Today previously reported, official projections indicated that the debt ratio could reach 121.7 per cent in 2027, up from 115.7 per cent at the end of 2025.
The latest increase in yields adds another complication. Higher interest costs do not affect the entire stock of debt immediately because much of it was issued at earlier rates. They do, however, increase the cost of new borrowing and refinancing, progressively reducing the money available for other government commitments.
France also faces a difficult political timetable. With the presidential election approaching in 2027, parties are reluctant to accept measures involving spending reductions, higher taxation or changes to public services.
Prime Minister Sébastien Lecornu’s government has been attempting to reduce the deficit from an estimated 5.4 per cent of GDP in 2026 towards five per cent. Even that objective remains substantially above the EU’s three per cent reference value.
Economic Commissioner Valdis Dombrovskis has emphasised the importance of predictable fiscal policy and credible deficit reduction.
France is already subject to the EU’s excessive deficit procedure, under which member states must demonstrate progress towards agreed fiscal objectives.
The reformed European fiscal framework permits certain deviations from expenditure commitments in exceptional circumstances, but it does not provide an unrestricted exemption from debt sustainability requirements.
Paris therefore faces a double constraint. It must convince domestic political forces to support a budget while demonstrating to Brussels that its spending plans are sufficiently credible.
The danger is not necessarily an immediate financing crisis. France retains a large, diversified economy, deep financial markets and substantial tax-raising capacity.
The more immediate risk is that prolonged political deadlock produces progressively higher borrowing costs, making future fiscal adjustments more expensive.
The European Central Bank has instruments designed to counter destabilising market conditions, but these are not intended to finance governments that are unwilling or unable to implement sustainable fiscal policies.
Bank of France Governor Emmanuel Moulin said on 7 October that France did not currently require ECB assistance. He argued that the solution lay in adopting a credible budget rather than expecting monetary intervention.
His position follows increasing speculation about whether the ECB could intervene if French bond yields continue rising.
Such intervention would raise difficult questions about the relationship between monetary policy and national fiscal responsibility. The ECB must consider financial stability across the entire eurozone, but it cannot remove the political obligations of individual governments.
France’s existing excessive deficit procedure also complicates its eligibility for certain forms of exceptional support.
France’s problems are developing at a particularly difficult moment for European public finances.
Governments are confronting higher defence commitments, expensive measures to protect households against energy inflation and demands for greater investment in industrial competitiveness.
Italy, another heavily indebted eurozone economy, is facing related pressures. The combination places additional importance on the credibility of the EU’s fiscal rules.
The political consequences within France are already visible. Marine Le Pen has presented a programme proposing €140 billion in spending reductions, while other parties have advanced sharply different approaches to taxation, debt and public expenditure.
Those competing programmes illustrate the difficulty of securing a parliamentary consensus capable of reassuring markets.
The approaching presidential election reduces the likelihood of a durable settlement before voters choose France’s next head of state.
Eurozone partners cannot resolve that impasse from Brussels or Frankfurt. They can insist on fiscal commitments and provide a framework for adjustment, but the political decisions remain with Paris.
France’s immediate challenge is to prevent its budget dispute from becoming a broader loss of confidence in the government’s capacity to manage its finances.
France is emerging as the principal source of concern in Europe’s government bond market as investors reassess the fiscal strength of eurozone states and increasingly move money towards Germany and other countries regarded as safer borrowers.
The yield on French ten-year government debt has reached its highest level since 2002 after rising by about 70 basis points during September. The difference between French and equivalent German borrowing costs approached 160 basis points last week, its widest since 2012, according to market reporting on the sell-off.
The shift represents a sharp reversal in how investors view French sovereign debt. France has traditionally traded close to Germany and benefited from its status as one of the eurozone’s largest and most liquid bond markets. It is now being treated increasingly as a country whose political and fiscal outlook warrants a substantial premium.
The immediate concern is the French budget.
Paris said in September that this year’s deficit would exceed the government’s five per cent target, while the country faces the additional challenge of issuing a record €340 billion of government bonds in 2027. The money will be needed both to finance current expenditure and refinance debt accumulated during the Covid period.
EU Today reported earlier this week that French debt concerns had already pushed the euro to a 17-month low against the dollar. Political uncertainty ahead of the 2027 presidential election has added to market concern over whether any government will be able to deliver the spending reductions required to stabilise the public finances.
Bond markets, however, are responding to France’s present position rather than promises extending into the next presidential term.
The movement is also beginning to alter longstanding assumptions about which European sovereign borrowers are considered risky.
Italy remains vulnerable. Its ten-year bond spread over Germany rose to about 130 basis points last week, compared with roughly 80 basis points a month earlier. Italian public debt stands at around 138.6 per cent of GDP, and Rome expects its deficit to move above the EU’s three per cent ceiling.
Yet French debt has recently come under greater pressure than Italian debt.
Spain provides an even more striking contrast. During the eurozone sovereign-debt crisis in 2012, Spanish ten-year bonds yielded around five percentage points more than French debt. Spain’s ten-year yield is now approximately 75 basis points below France’s.
The difference reflects stronger Spanish growth and improved confidence in Madrid’s finances, although investors are watching Spanish and Portuguese debt for evidence that the French sell-off is spreading elsewhere in the currency union.
So far, the movement is not comparable with the eurozone crisis of the early 2010s. At that time, Italian bond spreads above Germany exceeded 500 basis points and Greece’s reached thousands of basis points. Current differences remain far smaller.
The direction of capital flows is nevertheless notable. Germany has re-established itself as Europe’s principal bond-market safe haven despite questions earlier this year about Berlin’s increased spending on defence and infrastructure. German ten-year yields fell as investors bought Bunds during the recent turbulence.
Higher sovereign yields feed into the interest costs faced by governments when refinancing debt and can affect borrowing throughout an economy. For a country already running a large deficit, rising yields make efforts to restore the public finances more difficult because an increasing share of expenditure must eventually be devoted to debt servicing.
TOKYO – For decades, the US enjoyed a remarkable luxury: its two biggest creditors, Japan and China, kept showing up at Treasury auctions with checkbooks open. Now, Donald Trump’s trade wars, tariff threats and widening geopolitical confrontations raise an uncomfortable question: what happens if Washington’s most reliable bankers decide they’ve had enough? Granted, global investors […]
The post When Asia’s central banks turn bond vigilante on Trump appeared first on Asia Times.
The global bond markets are a sensitive lot. And they’ve been having a particularly tricky time lately. Spooked by high inflation, high interest rates and high levels of government debt across the world, those markets have become less stable over the summer. The prices of government bonds – what governments sell to investors – have gone down. […]
The post Blame AI for global bond market tremors appeared first on Asia Times.
The most recent winner of the National Magazine Award for feature writing describes his turn to payday lending apps when AI gobbled up his livelihood (aka penning promotional web content for business clients). Sharp and darkly funny, the essay chronicles yet another nail in the coffin of the American dream:
Albert founder Yinon Ravid has said that he chose his app’s name for its suggestion of the kind of “smart, unassuming friend” you might come to for financial advice, but today, when I hear the name Albert, I am far more likely to picture an overwhelming force bent on my total destruction, a figure you might spot while being burned alive in a dream—black-robed, pale, teeth bared. When I first joined the app, about eighteen months ago, Albert offered me $25.00. To acquire this loan, I was required to pay an additional fee: A $6.99 instant deposit charge plus the cost of a $19.99-per-month subscription to Albert’s Standard plan, due in one week’s time alongside the full loan repayment. (If I really wanted to make the most of my $25.00, I also had the option of Albert’s $39.99-per-month Genius plan, which, among a very small handful of other talents, can “find restaurants based on your location, or in a specific area.”) On its own, this might’ve been manageable, but, true to the CRL’s findings, Albert’s offerings alone couldn’t keep me afloat, and so I soon signed up for the rest of the payday apps, each one toting its share of instant deposit and subscription fees. (Gallingly, Dave—the only publicly traded company of the bunch, valued at $4.72 billion as of this writing—has the nerve to ask for a tip after each transaction, a move that I suspect even the flintiest strip mall grift artists would dismiss as gauche.)
KARACHI: Fitch Ratings has assigned a ‘B-‘ rating to Pakistan’s proposed U.S. dollar-denominated bond, with a Recovery Rating of ‘RR4,’ the ratings agency announced. Pakistan plans to use proceeds from the bond for general budgetary and sovereign financing purposes, according to Fitch. The bond rating is aligned with Pakistan’s Long-Term Foreign-Currency Issuer Default Rating, while ... Read more
The post Fitch assigns Pakistan’s proposed dollar bond ‘B-‘ rating appeared first on BOL News.
KARACHI: State-run Pakistan LNG Limited (PLL) has issued a fresh tender to procure one spot cargo of liquefied natural gas for delivery between September 4 and 8, as global supply disruptions stemming from the Middle East war continue to strain the country’s gas-fired power generation. PLL invited bids from international suppliers for a single cargo ... Read more
The post Pakistan returns to spot LNG market with fresh tender as power generation takes a hit appeared first on BOL News.
The Ministry of Finance in Paris (Bercy). Jean-François Gornet / Flickr, CC BY-SA
France has crossed a critical threshold as its public debt exceeded €3.5 trillion in the first quarter of 2026, reaching 117.5% of GDP. The French Court of Auditors has sounded the alarm over what it describes as an “alarming” fiscal situation, as public deficits hit record levels and debt-interest costs continue to soar.
During the first quarter of 2026, France’s public debt passed the symbolic milestone of €3.5 trillion, reaching €3.5361 trillion at the end of March. The figure underscores the scale of the country’s budgetary challenges.
To put this amount into perspective, France would theoretically have to sell its entire gold reserve, all publicly traded and privately held state assets—including companies such as EDF, Engie, and Airbus—as well as all government-owned buildings and land in an attempt to repay the debt in a single payment. Even such a drastic measure would likely fall short.
In just one quarter, France’s Maastricht-defined public debt increased by €75.6 billion, a sharp rise in a very short period. This growing debt burden reflects a longstanding reality: for more than fifty years, the French government, local authorities, and social security system have collectively spent more each year than they have collected in revenue, particularly through taxation. To cover this structural gap, France has continued borrowing from financial markets.
Beyond the headline figure, analysts and financial institutions are particularly concerned about debt relative to economic output. According to France’s National Institute of Statistics and Economic Studies (INSEE), public debt now equals 117.5% of gross domestic product.
The increase has been dramatic. In 1980, public debt represented only 20% of GDP. By 2000, it had risen to approximately 60%. Over four decades, the debt-to-GDP ratio has nearly increased sixfold.
The current level of 117.5% is approaching the all-time record of 117.8% recorded in the first quarter of 2021 during the COVID-19 pandemic. At that time, President Emmanuel Macron launched an unprecedented economic rescue effort, pledging to spend “whatever it takes” to prevent economic collapse.
Although the health crisis has long since passed, France’s debt trajectory has not slowed significantly. Within the European Union, only Greece and Italy have higher debt ratios, making France the third most indebted country in Europe.
In response to what it views as a critical situation, France’s independent Court of Auditors, responsible for overseeing public finances, issued a warning report describing the state of the nation’s finances as “alarming.”
The report, revealed by France Inter and released ten months before the 2027 elections, calls for “strong, credible, and swift measures” to restore fiscal stability.
The court highlights several aggravating factors. First, France remains the only country in the eurozone whose debt level is higher today than it was at the end of the COVID-19 crisis. Second, public deficits continue to break records. France posted a budget deficit equal to 5.1% of GDP in 2025, the second-highest in the eurozone after Italy.
The government’s goal of keeping the deficit at 5% is viewed as unrealistic by the Court of Auditors, which fears a further deterioration of public finances.
A particularly troubling development is the rapid increase in debt-servicing costs. As debt accumulates and interest rates rise in financial markets, the amount spent on interest payments has grown dramatically.
In the current state budget, debt-servicing expenses have become the government’s single largest expenditure category, surpassing spending on the national education system (excluding pension obligations).
Paradoxically, this situation coincides with a significant increase in taxation. Taxes rose by €38 billion across 2025 and 2026 as part of efforts to limit further deficit growth. Yet France already has the highest overall tax burden in Europe when taxes and social contributions are combined.
This creates both political and economic tensions: higher taxes have not been sufficient to slow the growth of public debt, raising questions about the effectiveness of current fiscal measures.
France’s current trajectory highlights a troubling economic reality: structural public spending is growing faster than tax revenues, creating a persistent deficit that is difficult to eliminate.
Programs such as social welfare, pensions, healthcare, and public investment involve long-term commitments, while tax revenues tend to fluctuate with economic conditions.
This divergence between economic growth and debt growth raises a fundamental question for France’s public finances. If GDP expands by only 1% to 2% annually while debt continues to grow by 3% to 4% per year, the debt-to-GDP ratio will inevitably continue rising unless major policy changes are implemented.
French voters heading to the polls in 2027 will likely face a difficult choice between maintaining current levels of public services and restoring fiscal sustainability.
To reverse the trend, experts and institutions such as the Court of Auditors recommend a combination of measures: controlling the growth of public spending, improving the efficiency of existing expenditures, broadening the tax base without increasing marginal tax rates, and accelerating economic growth to boost revenues.
As the eurozone’s second-largest economy after Germany, France possesses significant economic resources. However, meaningful structural reforms will require political consensus and a willingness to accept difficult compromises.
In the short term, the government must demonstrate that its deficit-reduction commitments are credible. In the medium term, comprehensive reforms of public spending—particularly in pensions and healthcare—appear unavoidable. Over the long term, only sustained economic growth combined with spending discipline will be capable of reversing the debt dynamics that have characterized France for decades.
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