A False Narrative

That’s a narrative that Marine Le Pen and her Rassemblement National (RN) have bought into deeply, and sold to voters, on their march to power. In recent years, Le Pen has pointed to deficits to warn that “saving” France’s pension system poses a choice between unlimited immigration or an explosion in birthrates. She’s stood shoulder to shoulder with France’s business elites to claim that the country is facing “a wall of debt.”

Absent spending cuts or new taxes, France’s deficit next year will hit 6 percent. That’s twice the level that the European Union nominally allows its member states to maintain.  Barnier’s budget was trying to reduce the deficit to 5.1 percent by the end of 2025. Bayrou has long warned that the deficit needs to be held under 2 percent to reduce debt.

Inflation, low growth, and low wages have all hit France’s working class hard in recent years, despite the protections of the social model established after World War II.

In mid-November, Le Pen and the government showed their hand when they rejected a raft of budget amendments proposed by the left-wing New Popular Front parties in parliamentary committees, which aimed to address those problems and save France’s social model by raising taxes and spending. During committee votes the centrist bloc often didn’t bother showing up to oppose the measures, knowing that Barnier would later use constitutional powers to push the original, unamended budget through. For their part, the Rassemblement National voted for certain measures like a tax on the rich at the committee stage, then turned around and voted with the government against the budget when it had a chance to pass. They said the budget had been “deformed” by left-wing amendments.

According to Éric Coquerel, a veteran La France Insoumise MP who is also the president of the National Assembly’s powerful finance commission, that budget contained €75 billion in new taxes on “very big business and the richest of our fellow citizens.”

That amount would be more than enough to plug France’s steep deficits.

But the current political battle isn’t just about balancing the budget. If that were the case, La France Insoumise’s tax-the-rich agenda would be a quick, easy, consensus way out. The battle over the budget is also a battle over whether the social democratic bargain established in France at the end of World War II will continue to be kept.

A crisis in funding for local authorities is a window into the theory that the government is manufacturing this budgetary crisis, though not everybody agrees what the solution should be.

At the end of October, Jean-Léonce Dupont, a former senator, vice president of the Committee on Local Finances, and president of the département of Calvados, warned senators that France’s local authorities could face a collapse in département-level investment by the end of 2025. The degraded state of their finances is so bad, he said, that if nothing changes France’s 101 départements will no longer be able to make payments by the end of 2025, and might have to be placed under the fiscal control of the central state administration.

Dupont told senators, who were looking into the financing of local authorities, that the government had lied in its growth projections to try to cover a massive and growing hole of its own making. He also said that the state inflated its forecasts to give a false impression of how much revenue the VAT would bring in at the same time as they abolished local taxes that previously funded these département-level authorities.

Attacking the Postwar Model

Dupont is a fiscal moderate who sees cutting government ministries and shrinking the state as the way out of France’s financial cul-de-sac. But his explanation for the dire financial situation of France’s local authorities is similar to one made by David Guiraud, who is the France Insoumise MP for the Northern city of Roubaix.

Guiraud told Jacobin that the funding shortfall for the state budget can be explained by tracking where VAT has been going under Macron. Five years ago, he explained, 90 percent of the revenue from that tax went to the state budget. Now just about half of it does.

That’s despite revenue from VAT soaring in recent years. In 2017, it raised €163 billion. In 2024, the haul was €217 billion. With France facing interest on debt payments of €50 billion this year alone, the intake from VAT could cover the gap on its own if it wasn’t going to cover obligations the government has manufactured.

“The state is sitting on a mountain of gold,” Guiraud told the National Assembly in October. “And like all dragons, it’s hiding a part of the treasure in the mountains.”

The missing VAT money instead goes to funding social security, which has been starved of funds previously raised by abolished business taxes. VAT is also going to cover gaps in funding local authorities, who’ve lost most of their powers of taxation. “Effectively all that money which used to go to the state to fund our public services goes to the social security budget today, to make up for tax exemptions for the ruling class,” Guiraud told Jacobin.

Big VAT windfalls could reflect increased consumer spending. Under Macron’s neoliberal economic theory, that means that tax cuts are working, and the result is a more dynamic market economy where the government is taxing less of the pie but it’s getting bigger. But that isn’t the case, Guiraud says. Instead, rising VAT revenue is actually the result of inflation. Workers are caught on the other side of the inflation vice because low growth means their wages aren’t matching the rising prices.

“It’s French consumers who pay,” Guiraud said. “We knew that the government’s forecasts for inflation and growth were systematically false. It didn’t start last year.”

The full extent of the deficit wasn’t known though, because Macron hid the true figures. They could have come out in a legislative process, which Macron’s then finance minister Bruno Le Maire wanted to go through to address the deficit, Guiraud said. But ahead of last June’s European elections, Macron refused to expose the real conditions to public scrutiny.

If département-level authorities do go into default, then local investment will evaporate. That threatens all domains of public spending and could worsen an already twenty-year low in investment in new social housing.

“In reality, it’s a question about the redistribution of wealth; it’s class war,” Guiraud said. According to the France Insoumise MP, Macron’s term has been distinguished by this feature — shifting France’s tax burden from the rich to the poor, who don’t have a choice in paying VAT.

The VAT scam then, is a big part of Macron’s legacy. Under his administration, France’s tax burden didn’t actually disappear, Guiraud said. It was just transferred onto the shoulders of the country’s working class and middle class.

The endgame to all of this, says Guiraud, is the destruction of France’s postwar social system. The capitalists and liberals, he says, never accepted the 1944 National Council of the Resistance program for postwar reconstruction, which was heavily influenced by Communist elements of the Resistance to Nazi invasion and the Vichyite regime. That program created social security and nationalized energy, insurance, and banks.

“French capitalists have never tolerated social security,” Guiraud said. “When it was created . . . it was hundreds of billions of euros which escaped the logic of the private sector, hundreds of billions of euros which they couldn’t make a profit off of. They know that they’re breaking social security. They know it. I think they do it deliberately for the most part.”

“Without making any political choice, we have a social VAT today,” Guiraud says. “We pay for gifts to big business by taxing consumers. We’re not obligated to do that. Money from consumers can come back into the pocket of the state and finance public services instead of big business.”