The French were just handed an affront to their out-sized pride. Moody’s has just downgraded their national debt. France has now lost its sterling AAA rating, dropping a notch to Aa1.
Moody’s cited a number of reasons, including France’s rigid (i.e., over-regulated) labor market, its lack of innovation, and its high level of national debt. The first two factors seem likely to lead to the undermining of its industrial base, and the last leaves it open to the bad debt problems of Greece and Spain, the agency noted.
Of course, it is unlikely that the new, avowedly socialist regime of Francois Hollande will alleviate any of these problems — in fact, it will likely exacerbate them by further poisoning the economic system with statist nostrums.
But lest we laugh too loudly at the French, we need to remember that we have the same disease. The neosocialist regime of Obama has also massively proliferated restrictions on the labor market. Start most notoriously with Obamacare, whose onerous provisions become fully operational in 2014, and which will slap huge new expenses on companies for employees working 30 or more hours a week (at least for companies with 50 or more employees). Add the aggressive use of the NLRB to force unions on hapless employees and businesses, insane new regulations on fossil fuel energy (especially coal production), the Lilly Ledbetter Act, dramatically expanding the ease of filing sex discrimination lawsuits, and so on, and you have the same fate in store for our productivity and innovation.
Regarding our national debt, we are already worse than France, not just in absolute amounts (we are a bigger country), but as a percentage of GDP. The French are at about 90% debt to GDP ratio, while we exceeded 100% early in Obama’s profligate tenure.
No doubt this is what has moved Treasury Secretary Tim Geithner to call for a radical new change in our legal system. He recently proposed that America should just eliminate the limit to debt altogether, knowing that the existing limit will be hit in the very near future, and not relishing a congressional fight over the matter. Let’s just borrow money with no limitations, until we spend ourselves into prosperity.
Jason’s Law of Karma in political ethics is that people get the government they deserve. This is just as true for us as it is for the French. We are all Greeks now.