Wednesday, August 03, 2005

As France Does - Not

Professor Krugman explained last week that France is superior to the US because it has higher unemployment rate, slower growth and lower income per capita. Oringinal Source. Now you might ask why is it better to be poorer? Because the French are working less they have more time to be with their families. Krugman slants his data and argument against the United States in every column. So we have our designated Krugman fisker - Don Luskin. Luskin examines in National Review the differences and finds - the average Frenchman has lower disposable income than an American at the poverty line!! - Its average real GDP growth since 1991 has been 1.8% per year, compared to 3.1% for the United States. - Its GDP per capita is lower than all but the poorest four U.S. states — lower even than Alabama, a state Krugman nastily described the week before last as being populated by people too poorly educated to work in automobile factories.
In the meantime, Krugman rationalizes it away as a matter of "family values" — deliberately mocking the slogan of some American conservatives. He says members of the typical "French family are compensated for their lower income with much more time together," and that France is "extremely supportive of the family as an institution." Let's talk about that "lower income." Krugman Truth Squad member Bruce Bartlett points to a report by the European consulting firm Timbro that found that total private consumption per capita in France is about half that of the U.S. The average French family has a lower standard of living than Americans living below the poverty level. Impoverished Americans have 16% more dwelling space per capita than the average French; the American poor are more likely to have a car, a dishwasher, a microwave oven, a personal computer, and a clothes drier. So now we know what French families are doing with all that extra time together — they're crouching in cramped living quarters doing household labor.
At Discovery Institute Brett Swanson finds 2004 economics Nobel laureate Ed Prescott is bullish on Europe. Not because Europe is doing well, but because things are so bad that they have to get better! And the reason: the problem is high taxes and it can be fixed, if they have desire to:
Spain offers a good case for European optimism. Like many of its continental neighbors, Spain was afflicted with declining labor force participation through the mid-1990s. Let's pause here to look at some facts. From 1993-96, the average hours worked (per working age person, per week) in Spain was 16.5. This compares with 17.5 hours in France and 19.3 in Germany. Clearly, Spain wasn't working. Then, in 1998, Spain flattened its tax rate in a manner similar to the U.S. tax reforms of 1986. Coupled with labor market reforms of the previous year, Spain's labor force participation increased about 21% in the period 2000-2003, to 20 hours per week, exceeding that of Germany (18.3) and France (17.8). Correspondingly, this increase in labor participation led to increased tax revenues. (Incidentally, Spain, France and Germany all had slightly higher labor force participation rates than the U.S. in the early 1970s, when European tax rates were more in line with those in the U.S.)
But France will follow Krugman and be proud of their proverty. I hope not.

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