FROM THE DESK OF ERNIE GOSS

I have heard Professor Goss speak many times.  He is a conservative economist and his commentary always seems to hit home.  I thought you might find his December commentary interesting. 

Is U.S. Adopting Europe's Anti-Competitive Economic Policies? Import French Wine, Not Economic Policy

Last week, Francoise Hollande, Socialist President of France, recommended homework be eliminated in French schools. He argued that assigning homework provides an unfair advantage to students with stable home environments. This same type of anti-competitive thinking has produced a social safety net in France and most of Europe that has undermined economic incentives and encouraged workers to remain unemployed or underemployed.   

For example, the World Bank estimates the annual cost of the social safety net as a percent of GDP in France is more than twice the size of that in the U.S. (graph). Not surprisingly over the past decade, France's unemployment rate averaged 2.6 percentage points higher than the U.S. rate, and the Gaullist nation's annual GDP growth was about one-third that of the U.S.    

Unfortunately, the Obama administration's proposed tax increases currently under deliberation by Congress on higher income, higher productivity and more highly educated workers pushes the U.S. in France's direction.  

The top five percent of wage earners, or those earning over $154,000, already pay an average income tax rate 11 times that of the bottom 50 percent of U.S. workers. Not only do Obama's tax rate hikes on the most productive Americans shrink incentives, they reduce the yearly budget deficit by less than 10 percent. Instead of diminishing the income of higher wage workers via elevated taxes, U.S. economic policy should be directed at raising the income of lower income workers. The U.S. should import French wines and movies, not French economic policy.