Public Debt: The End of the Welfare State?

In the face of a continuously rising public debt ratio and the persistent difficulty of reducing the budget deficit— especially in a context of massive spending needs, such as the climate transition and rearmament— numerous debates have emerged. Between purely accounting approaches and intergenerational conflict-driven perspectives, another line of inquiry is to question the long-term sustainability of France’s generous social protection model. Can the State continue to fund all the necessary expenditures to improve healthcare, education, housing, while also pursuing redistributive policies aimed at significantly reducing inequalities? Only two levers appear to be truly effective: increasing the employment rate, or even the total number of hours worked (but how can this be made acceptable to voters amid rising populism?); and boosting productivity (but how can governments be convinced that investments in human capital, innovation, and research must not be sacrificed on the altar of short-term deficit reduction?). What should the priorities of budgetary policy be? What kind of tax system is needed? Attempting to answer such questions requires keeping in mind a fundamental principle of public finance: the non-earmarking of revenues to specific expenditures. Creating a new tax or levy for each new spending item only serves to expand the role of the State in the economy without questioning its actual effectiveness.