Thread by @ojblanchard1

1/6. Tweet thread. Why do I think the economic program of the Nouveau Front Populaire is worse than that of the Rassemblement National?

The nature of the two programs is very different. I have argued that the RN economic program is a Christmas tree, without logic or coherence (previous tweet thread). The NFP economic program is instead mostly internally coherent, based on an epochal redistribution from rich to poor, and from firms to workers.

2/6. Why is it so dangerous? It is essential to distinguish between two types of programs on the left. A social democratic one, that tries to equalize chances and redistribute without destroying the incentives to create and to produce---roughly the program of the socialist party of old. A revolutionary one---to use the words of Jean Luc Melenchon---which goes much further, is nearly confiscatory in nature, hoping that, somehow, the economy will continue to function.

3/6. For all practical purposes, the NFP program is of the second kind. It intends to tax income through much higher tax rates. The program does not give a number, but in 2022, LFI suggested a marginal tax rate of 90% for the highest tranche. It intends to tax successions through much higher tax rates as well, indeed with a 100% tax rate above some level. It intends to reintroduce the ISF and tax wealth at 3% a year, according to Manon Aubry. It is hard to see how this will not lead entrepreneurs to move en masse their operations elsewhere.

4/6. It intends to increase the SMIC right away to 1,600 euros. Given how many wages move with the SMIC, this means a major increase in labor costs for firms. It argues that, on Keynesian grounds, this shift in income will lead workers to spend more, increase output, and benefit all. It ignores the fact that, on the supply side, the increase in costs will lead many firms to go bankrupt, many more firms to become uncompetitive and layoff workers, all firms to decrease investment, and growth to decrease.

5/6. As a social democrat, I believe in equalizing chances, in improving education, in redistributing income from rich to poor. As an economist and someone sometimes involved in policy design, I also know there is a delicate balance between reducing inequality and maintaining strong growth. The NFP program simply ignores this balance, and can only, like many of its predecessors, lead to an economic catastrophe.

6/7. Just as for the RN program, we are told, sotto voce, not to worry, that the program will not be applied. I am skeptical. The program commits to taking dramatic measures in the first 15 days and it is hard to see how it can renege on those. In any case, a less bad program would still be very bad.