Mon Dieu! Smaller Government in France

In a step that could have a damaging effect on the jokes I tell when giving speeches, the Prime Minster of France has announced a plan to freeze government spending for five years. Some of the details are a bit unclear. As the Financial Times notes, Minister Fillon did not state whether spending would be frozen at current levels, or frozen after adjusting for inflation. A hard freeze would be the best option, but either choice would shrink the aggregate burden of government in France. To their credit, policy makers in Paris seem to understand the problem:

France is planning to freeze public spending for five years under its biggest programme of social and economic reform since the late 1960s, according to François Fillon, the prime minister. …The government has said it wants to eliminate its deficit and reduce spending as a share of national output – the highest in the EU at 53.5 per cent – during Mr Sarkozy’s first five-year term… Mr Fillon did not say whether he was planning a real-terms or nominal freeze, nor whether it would encompass France’s indebted social insurance system. He admitted that France would only eliminate its deficit “if we do the underlying structural reforms, which would allow us to reduce in a much more significant way public-sector employment and public spending”. …Mr Fillon has been credited with keeping Mr Sarkozy’s government focused on repairing France’s precarious public finances and cutting welfare and pension costs.

Assuming Sarkozy’s government fulfills this pledge, France will take a big step in the right direction. With any luck, maybe American politicians then would do something similar. The same policy, if adopted in America, would reduce the burden of federal government spending from more than 20 percent of GDP today to 15.9 percent of GDP (with a hard freeze) or 17.8 percent of GDP (with an inflation-adjusted freeze) after five years.