A Cautionary Tale for America — From France

For those who see no downside in America’s failure to control its runaway federal borrowing, a harbinger of debt danger is emerging at, of all places, Paris. That’s where the French government is finding that it is unable to boost its defense spending because it has already borrowed too much money. So while America’s other allies in the North Atlantic Treaty are spending more to improve their militaries, France is lagging. It’s a cautionary tale for America.President Macron aspires to raise French defense spending to as much as 3.5 percent of national economic output from its current level of roughly 2 percent, the Financial Times reports, “implying a doubling of yearly spending” to some 100 billion euros by 2030. Yet the French fiscal well is dry. Paris has already racked up so much debt — more than 3.3 trillion euros — that its borrowing now exceeds the size of its economy of a little more than 3 trillion euros. The French budget deficit is already one of the largest in Europe, running at almost 6 percent of economic output. Taxes are among the highest on the Continent. Spending cuts on welfare entitlements, one imagines, are insupportable. So “lawmakers and analysts are questioning whether France can deliver” on its spending goals, the FT reports, as the “high national debt threatens to curb its defence ambitions.”So much for Monsieur Macron’s “priority to rebuild the military after decades of cuts after the Cold War,” the FT says. By contrast, at Berlin, lawmakers wary of Russian aggression have unveiled a vast military rearmament scheme to the tune of some $1 trillion in new spending — largely funded by new borrowing. Germany, though, can apparently afford the splurge. It recently surpassed Japan as the world’s largest creditor nation.One option for France is to beg the European Union for an exemption from the superstate’s deficit caps, allowing it to borrow to cover more military spending. Yet national amour-propre — and excessive indebtedness — apparently bars this course. “France has no intention” of asking for a temporary suspension of the EU deficit limit, the FT reports, “since it fears spooking bond investors and adding to already high interest costs.” Already, France is spending 59 billion euros a year to service its national debt, an amount that exceeds its annual defense budget. Yet Uncle Sam can hardly castigate the spendthrift French. America’s own debt held by the public already stands at some 97 percent of the gross domestic product. Interest on the debt here, too, exceeds the annual defense budget. The budget bill brewing in Congress is slated to add trillions of dollars to the national debt. Fiscal hawks have already been sounding the alarm over how the surging national debt could constrain America’s freedom of action. The head of the Congressional Budget Office, Phillip Swagel, has warned that the “unprecedented” level of federal debt could induce a “Liz Truss-style market shock.” That means a debt market meltdown like the one that prevented Prime Minister Truss from advancing a pro-growth supply-side tax cut in Britain.Mr. Swagel’s caution was “a reminder of the perils of profligacy,” these columns cautioned last year. Since then, the fiscal picture has hardly brightened. The solons on Capitol Hill, rather than tackling the scourge of federal overspending, appear content to let budget deficits persist indefinitely. Yet as France’s thwarted defense buildup shows, there are risks to this recklessness. Debt, in the end, can destroy national independence just as badly as defeat in a war.

A Cautionary Tale for America — From France

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