How The Widespread Protests In France Could Lead To An Economic And Political Crisis

0:00The ugly crisis in France has dangerous implications not only for Europe but also for the U.S. and the free world.

0:12Steve Forbes: Hello, I'm Steve Forbes and this is What's Ahead where you get the insights you need to better navigate these turbulent times. The riots ripping apart France are the result of a series of disastrous decisions. Ignoring the lessons of what was done and the necessary responses to them will lead to an economic and political crisis on a scale of the 1970s and even the 1930s. The popular quip that France is too big to fail and too big to bail out sums up why the country's situation is so serious in its scope. France has been living in make-believe land for decades. Its government debt is as bad as ours proportionately, but the country's economic growth for years has been absolutely pitiful.

1:01Steve Forbes: The size of its economy and that of the EU are falling further and further behind ours. France is grossly overtaxed. For instance, in the U.S., Social Security and Medicare payroll taxes total 15.3%, half from the employee, half from the employer. In France, the rates can top 60%. Corporate taxes are higher than ours. So are its top income tax rates. So is its capital gains levy. Its value added tax, the VAT, which is super national sales tax, stands at 20 % for most products and services. Despite some reforms, its labor laws are too restrictive. Government spending is obscenely high, about 50 % of GDP versus 36 % in the U.S., and ours is nothing to boast about.

1:55Steve Forbes: France has a presidential election next year, and none of the probable candidates are talking about serious reforms. In fact, the chief far-left possible candidate wants France to default on the French bonds owned by the European Central Bank. So in addition to dealing with violent rioters, France may face a strike from bond buyers. In fact, many bondholders are scaling back their holdings because the national legislature is controlled by President Macron's opponents. They see no prospect that France can make the changes to restore confidence that the country can get its financial act together.

2:36A French bond crisis will damage the ability of other countries whose spending, tax, and regulatory policies are anti-economic growth to finance their existing debts and new debts, since governments routinely run deficits these days.

2:52Steve Forbes: France can't long avoid a reckoning on its past mistakes of gross overspending and stifling policies, nor can the EU, such as dealing with massively high energy costs, resulting from grossly expensive, ill-conceived policies to crush the use of fossil fuels with windmills and solar panels. If France and the EU refuse to make pro-growth economic reforms, extremist parties will gain power and make no mistake, they're anti-American and anti-free markets and they're sympathetic to Vladimir Putin. The terrible virus of anti-Semitism will spread. NATO will be shattered. The world will become a much more dangerous place.

3:38The U.S. had better do some hard thinking on how to encourage pro-economic growth changes in Europe and that includes tossing out most tariffs and, of course, getting our own economic act together. I'm Steve Forbes. Thanks for listening. Do send in your comments and suggestions and look forward to being with you soon again.