The Global “Fiscal Cliff”

The American vote will change everything, even if it made less noise than Obama’s election: On Nov. 6 California voters approved “Proposition 30,” which heavily increases public taxes. If citizens of the Golden State renounced their culture, it is because their state is trapped in financial difficulties, has run into debt and is unable to honor its maturity other than recognizing the debt. California is a metaphor for – and a caricature of – the developed world: The United States, Europe, Japan, all three affected by the economic crisis, the financial intemperance and the addiction to indebtedness.

This referendum is like the double inverse of another famous consultation organized in the same spot thirty years ago, which set off the liberal revolution in the United States. In 1978, Californians adopted “Proposition 13,” which conversely limited fiscal deductions and stimulated inalienable individual property. Milton Friedman, recipient of the Nobel Prize for Economic Sciences and laissez-faire theorist, came to campaign, explaining the virtues of tax decreases. Two years later, Ronald Reagan was elected president of the United States and applied the Californian principles at the country level, strongly lowering deductions and widening the deficit. Little by little, the quasi-totality of the countries of the world are following its lead. Even the French socialists in the mid ‘80s deregulated financial markets without lowering taxes, getting the state into debt. That is to say, the power of the liberal wave eventually reached the most resistant regions of the planet.

Liberalism without limit has therefore died in the same place where it was born thirty years before – with a vote from California. From one “proposition” to another, the world experienced this system, benefited from its advantages and suffered from its ravages, all of them very real. As usual, liberalism ended up being diverted by its stockholders – those of finance, in particular – who marred and distorted it. Like always, it opened up an excess of indebtedness that must now be curbed. And as usual, the crash in financial and moral values will lead to a new ideological cycle.

This cycle will lead us to the opposite point of liberalism, probably much further than we imagine today: more taxes, more rules, less liberty, less debt. Here is the program for years ahead. Undoubtedly, Barack Obama will heavily increase levies, in particular on the most well-off taxpayers, in order to avoid the “fiscal cliff” that threatens federal public finances. Like Reagan thirty years ago, he will follow the spirit of the time, but with a diametrically opposed ideology. The movement is likely to be planetary, at least shared by Western countries, as the “fiscal cliff” threatens them all to varying degrees. Taxpayers in all countries, get ready! From this angle at least, the France of François Hollande is at the forefront of modernity. And may even be in style.

Budget cuts and tax increases in the United States in order to avoid the “cliff” and formal plans in Europe are absurd, indeed almost excessive. It is the same process of “relearning limits” that the West is trying to do, after three decades of membership and financial innovations whose object was to push back credit limits. The crisis, for the United States as well as Europe, was never anything but common sense knocking on the window, long ignored, signaling the hour of accounts. After a period of denial, here we extend before the first equation that which we had frightened away in the debt thirty years ago: the development in our country is weaker than before the rupture of the environment of the ’70s. The deficit did not resolve this problem – it only masked it temporarily. And it is from the top that we have to work from now on. This is the price of the revival of the West.