9 public deficit you climb on the podium

The establishment of the euro in January 2002 assumed that one set of economic rules of the game in the States that would now share the same currency. Should especially ensure that the economic policies of the States are all strict. Countries concerned. Four years later, these indicators, designed to increase upstream coordination of economic policies in different countries, became in fact the only evaluation criteria of the "good" or "bad" public management. A 2.9 public deficit, you climb on the podium. At 3.1, it is put in the pillory!

The eye and bolted on the offside of the 3 line, one would forget that, as the case may be, 3 public deficit is an economic result that may be honourable if economic growth is very low or particularly poor if growth is good. One would also forget what this deficit is used, or rather what it should be used. Because, before being a simple accounting result, the public deficit is a strategic tool of economic policy in the broadest sense. It is indeed imperative control the negative aspect of the public debt, i.e. the future financial burden resulting while recognizing the positive effects of this same debt: on the one hand, the securing of the fraction of national savings which it mobilizes, on the other hand, the potential economic impact of the expenditures funded. From steep or dogmatic speeches, a good dosage and a certain skill are therefore necessary.

The recent Pébereau report has the merit in this context to recall with force and clarity the fundamentals of good public management: a public deficit, in other words an increase of public debt, should be structurally reserved for financing investments that will come increase the collective heritage of the nation. With this definition of orthodoxy, the public debt is perfectly legitimate: it is a "good" debt. Without it, or it abandons to invest (not roads, stadiums, drinking water, schools, hospitals...) since you can pay the project cash; either it funded only by the tax. But it still cannot request the only current taxpayer to pay for a property that will be used for twenty years, or even more!

Today, the "good debt" in France is mainly carried by local communities, precisely because it is forbidden to borrow for anything other than to finance their investments. And they make a reasonable use: who knows today that during these ten years the community invested more than 350 billion euros without that debt increased to euro, it is establishing in 2006 as in 1996 to EUR 106 billion

"Bad debt" on the other hand when it is used to finance so-called spending continuous "current" or "functioning", including expenditures for redistribution or transfer... where it redistributes, via the deficit, that is not! It is to be paid to future generations of the consumptions of today. The taxpayers of tomorrow did take no benefit. However, "Bad" debt is an abusive term, because it is true that one cannot impose a strict annual balance between spending and the current Government revenues, particularly in the social field. Indeed, in phases of weak growth, government revenues are poorly oriented and expenditures tend to progress more quickly. Reduce then they could further increase the economic and social crisis. The deficit moved therefore fairly mechanically in these periods of lower growth. But should compel absorb it an economic cycle and therefore identify the "surplus" as growth is good, then allowing to face the bad years. In this sense, the "cyclical" debt is more than acceptable as it is transient, but it becomes "bad" when it is perpetuated in time, regardless of the economic situation.

What rule therefore propose Suggest a simple illustrative reasoning. First, one might consider that public debt will be increased each year with reference to the level of investment. For example, "structural" deficit could rise to 60 of the level of investment. It is a fairly rigorous vision in that it assumes a rate of already significant cash flow, of 40. This formula for sharing could of course be adapted to the level of interest rates. For public spending to investment of 3 of GDP, the current order of magnitude in France, it would thus allow a public deficit of 1.8 of GDP.

Possible second rule: the deficit "of operation" could register up to height of the gap between the real economic growth and the growth potential. Therefore, for a growth of 2, identical to the rate of potential growth, the "current" balance should be null. For growth of 1, it would allow a deficit of 1 of GDP, while for a growth of 3 should be a current surplus of 1 of GDP... Deficits and surpluses "common" would thus be well function of growth and to compensate, entirely or largely, an economic cycle.

Technocratic, will it tell No, educational! Household, familiar with the difference between a real estate purchase loan and a credit to the consumer, could well understand the "strategic" debt use if it was presented. The "physical" structural debt consideration is indeed clear: facing the stock of debt is the mass of public infrastructure.

In addition, this approach would probably be a good way to sanctuarize public investment policies, unfortunately too often victims of the policy of budgetary rigour. Perhaps only such would avoid that some money will be used for significant lasting economic gains, but in a simple goal of accounting cutting improving public financial balances in a timely manner. It is this fear of drift, which makes it especially vigilant European instances definition of facilities and the calculation of deficits, thus generating a complexity sometimes frightening, otherwise the flexibility and efficiency in public management.

Separate economic structural debt debt in public debt would be a better strategy to claim the "zero debt" objective risk in economic terms and also probably inaccessible.