President Macron Is Correct: France's Welfare Spending Is Out of Control

As a break from U.S. politics, I would like to look at the other side of the Atlantic and see what is going on in France. A couple of weeks ago, French President Emmanuel Macron made a controversial statement by referring to France's welfare spending as "pognon dingue" (literally translated as "crazy money," but can be translated "an insane amount [of money]"). His statement that France's welfare spending is out of control has caused much rancor in French politics. Let's examine some statistics.

Looking at government expenditures more generally, statistics from the Organization for Economic Co-Operation and Development (OECD) show that France ranks the second highest in terms of percent of GDP. The only country that outranks France is Finland. Nevertheless, we have to remember that Macron's comments were specific to welfare spending.

Looking at social expenditure statistics from the OECD, France has 31.5 percent of its GDP going to welfare spending as of 2016. This is the highest percent of GDP out of all of the OECD countries. When looking back to 1980, which is when OECD started tracking these figures, France was only at 20.1 percent. This means between that France's welfare spending increased by more than 50 percent since 1980! The French government just released a report last Thursday on social spending in France. Included in the report was the tidbit that in 1959, social spending was less than 15 percent of GDP. Now it is at 31.5 percent, which is more than double what it was about a half-century ago.

Source: Direction de la recherche, des études, de l'évaluation, et des statistiques (DREES)

From a historical perspective, we see that France has had increasing problems with its social spending. What about looking forward? In May 2018, Moody's changed its outlook on France's credit rating from stable to positive because the Macron administration vowed to cut government expenditures. Moody's also stated in May 2018 that its high levels of government spending was weighing on its overall competitiveness. Moody's is not the only one to view France's spending habits disparagingly. The International Monetary Fund (IMF) identifies France's social spending as a major driver of its high budget deficits and its forced tax increases (IMF, Article IV, 2017, p. 6). The IMF goes as far to say that government spending is at the heart of France's fiscal problems (ibid., p. 9)!

Source: IMF, p. 13

I would hardly classify the IMF as capitalist or Right-leaning, and even the IMF concludes that "it will be critical to design and lock in deep spending reforms at all levels of government (ibid., p. 14)." This is the IMF, a well-respected institution within the policy world, making us aware of just how bad France's welfare spending is, and how it needs to be curtailed.  The narrative about Macron's comments did not incite a conversation from much of French media on how to decrease increasingly unsustainable debt; the coverage was largely about how offensive Macron's comments were. What should scare us about this response even more is that Macron did not propose what he would like to reform or cut. All he did was accurately state that the spending is out of control. Addressing a simple fact has the French world, particularly the French Left, in a frenzy. If much of the French world is oblivious to this basic of realities, I would hate to see what is in store for France's fiscal future.