Mobile seven-year spans (one year fewer and one year more in the following vintage), without a single turn in the business cycle, may never become the most frequent. Should that happen, however, it would call for adjusting — replacing, for instance, the seven-year spans with decades — since the amounts of budgetary revenues (mainly tax receipts) and of a larger or smaller part of budgetary expenses vary in different directions and magnitudes with the cycle. Lengthening them — or shortening them to five-year spans — would change nothing in the fact that, for an economically meaningful accounting result, “chronically” does not mean “always.” Enterprises, families and private non-commercial associations must not be constantly in deficit. The rule in question here concerns the aggregations of a category of public bodies of the same nationality. This level introduces no exception. In the statement of the rule, “chronically in surplus” does not mean “never in deficit.”
As for asserting a radical difference between the economic best and worst for a nation, on account of its public finances on one hand, and for a private non-commercial association on the other, that assertion is in truth unjustifiable: it requires at least a begging of the question or an objectively inadmissible conflation. Seeing, on the contrary, what this best and this worst have that is radically alike guards against the temptations of misusing public goods: “do not do to this good what you would not want their stewards to do to the said associations (families being among them).” Public finances are far more than appendages of politics raised to the art of making society, in peace and prosperity.
The depreciation entries for fixed assets recorded in general accounting have their place only in enterprise management. They are at once acknowledgments of depreciation and provisions for renewing equipment. They entail a corresponding increase in expenses. They are imperative, because without them the result would be overstated by the amount of the depreciation, and the provision that depreciation makes necessary would not be set aside113. Outside enterprise management, adding fixed-asset depreciation to expenses degrades the relevance of the income statement; it is accepted that, without recording depreciation of this kind in general accounting, nothing prevents introducing it into estimates of cost price. The most relevant annual budgets of families and of charitable, sporting, and religious associations, among others, contain two subtotals and the difference between the first and the second: A) revenues, B) expenses, C) surplus or deficit, according to whether the difference between A and B is positive or negative. Among the expenses, there is indeed amortization, but only of loans. What is most decisive is captured, and far more clearly than pretending the entity to be managed were an enterprise. An enterprise is a sellable organ. No other social organ, as such, is. Ignoring this difference produces a denial of reality.
Everywhere, a slice of borrowing becomes over-borrowing when, for whatever reason, the debt already contracted can no longer be amortized without borrowing anew — and at a level that makes a total of expenses exceeding the total of revenues less and less avoidable. A chronically growing share of revenues absorbed by debt amortization is a symptom of over-indebtedness. This is why the budgetary result as just defined is the most important. When it is in deficit, it weighs down future expenses and moves closer to over-indebtedness (or worsens it). When it is in surplus, it can be applied to lightening the public debt and, with it, the future burden of amortizing that debt. A family, or any other non-commercial association, better avoids over-indebtedness, or escapes it more easily, if it entered it knowing the difference between its revenues and its expenses (including the amortization of its loans), and how that difference evolves as a proportion of revenues. The same holds for any nation, on account of its public finances, France being one of those whose leaders and senior officials spare their fellow citizens from facing the reality that the budgetary result and the major items of public expense, as a percentage of revenues, constitute year after year — the tax levy being by far their largest part — rather than the statistical construct that is GDP, whose base 100 is today the most used because it seems, wrongly, that there is none more appropriate115.
Whoever holds a concept true whose definition is the product of an effort to eliminate errors and gaps in observation aims at a collective victory over what keeps us from that truth and its use. The absence of a true definition of the budgetary result in public finances is inconceivable, as is the absence of a true definition of income, among other primordial economic realities. To truth and effectiveness, the unambiguous is consubstantially tied, where the equivocal leads away. In our textbooks and our laws, several definitions of the budgetary result in public finances, with no verdict on which is judged the most appropriate, make us more incompetent rather than more intelligent. Let us not be so faint-hearted as to shrink from telling the truth and from holding more important what we cling to, in our conscience, at the risk of having to repudiate a misplaced belief. Political courage needs the support of intellectual courage. The only budgetary results, surpluses, and deficits discussed below are those defined above (first paragraph of point 4).
Short of erasing over-indebtedness (start of the second paragraph of point 4) — whether by voluntary or forced waiver of claims, by monetary depreciation (generalized or pocketed inflation, devaluation), or by both — so that loans do not chronically exceed investments, budgetary results must become chronically in surplus. If they are merely chronically balanced, they reveal three eminent weaknesses: they do not allow escape from the over-indebtedness that results from the chronic excess of loans over investments, because of budgetary results too frequently and heavily in deficit; they make less secure than they would be if in surplus the direct placements in the public treasury account — placements chronically dedicated, thanks to budgetary results themselves chronically in surplus, to financing public investment without bank intermediation; they leave the political class too able to be prodigal and manipulative at the community's expense, too beholden to the financial industry, and too little disposed toward the asymptotic decline — like that of a train's speed during normal braking — in the weight of the tax levy (more on this in point 8).
Lightening the weight of sovereign debt relative to total income — by approximation, GDP — contributes less to growth than a reliable prospect of escaping over-indebtedness or of avoiding entry into it. This is a virtuous circle. Such a prospect makes the population more assured of the soundness of the national economy. The course of business is thereby better sustained, even during cyclical slowdowns. The consolidations of public finances and of growth come earlier and stronger. A cardinal law of political economy can be stated in one sentence: the contribution of the budgetary result to growth is highest when that result is chronically in surplus, smaller when it is chronically balanced, and increasingly negative when it is chronically more and more in deficit, all else being equal as regards public investment.
A political party and a government that take no position on the long-term trajectory of the weight of the tax levy evade one of their duties of state. That trajectory will necessarily turn out to have been upward, stable, or downward. Only chronically surplus budgetary results, without reckless speculation and after escaping over-indebtedness, provide the means of an asymptotic decline in the weight of the tax levy — like, as already noted, the fall in speed during a train's normal braking. Once that means has been obtained through more reduction in public expenses than increase in the tax levy, a mechanism of long-run political justice becomes more readily operable: pursuing the adjustment of the tax levy to the public expenses judged, through adversarial debate, the most indispensable and the least corrupting. Whoever favors this adjustment stays consistent with that choice only by also favoring chronically surplus budgetary results — not only because such results provide the means of the adjustment, but also because the effort to obtain them sets taxation and public expenses on a course oriented toward fewer invasive actions and less disabling assistance. Whoever, like most ecologists and environmentalists, refuses to admit this adjustment and the chronically surplus budgetary result into their normative views — does that person not become, all in all and usually in spite of themselves, an advocate of a politics of the worst?
Through heavier public expenses, the lightening of employer contributions — and, more broadly, the lightening of the “cost of labor” (of whole wages, in fact) — is a public subsidy. Judging it beneficial, entrepreneurs entrench themselves in asserting a “yes to lighter public expenses and to the freedom to undertake, provided that public subsidies to enterprises and other private employers are maintained,” and a “no to recognizing that these subsidies stoke statism.” And all of it placed in the bundle of “social” public spending! Reducing and abolishing public subsidies whose recipients are enterprises and other employers is sound economic policy — but only by likewise loosening the obstacles to the direct placement of savings into capital increases, or by refraining from restoring them. Another way to improve the budgetary result is to reduce and then abolish tax incentives, beginning with those that cause artificial rises or falls in prices. It is also fitting to trim tax credits for gifts that are partly charged to the community, instead of leaving them entirely private — these deductions having been introduced by overlooking what is especially corrupting about this kind of subsidy: the associations authorized to use this aid lie when they deny that the deductible portion of the tax on these gifts is a public subsidy. The profusion of fiscal and commercial fictions creates a society that flees economic truth and honor. The more this ill spreads, the more that frank commitments to reducing public expenses and the most corrupting tax incentives help push it back.
Prevailing conformisms divert from abolishing the fiction of employer contributions and from privatization. This is why we have judged it preferable to devote to this abolition the first of our major directives on wages, and then the last directive to privatizations.
One of these recommendations is the rule of the countercyclical oscillation of the weight of public investment around a tendency toward stability at a level high enough to eliminate the most damaging delays and to prevent, in decreasing order of public usefulness, the accumulation of new ones. The other recommendation is the permanent stimulus through direct placements in capital. How to bring this stimulus about must be recalled (recalled because the analyses that lay out its systemic logic are set out in the part Economic Science). Reducing the mass of public expenses becomes more tolerable to those it affects if underemployment is receding, because this “how” has been put into practice — just as reducing the tax levy likewise becomes more tolerable to those it worries, on the same condition. Leaders, and those seeking to become leaders, take a risk when, knowing this “how,” they judge it inadequate because it disturbs the unifying ideas of their supporters. Their competitors, having caught wind of that judgment, then do well to denounce it with carefully chosen arguments, so that their good sense and breadth of view strike home in public opinion. The likelihood of this is increased by the teachers who explain and endorse the method of activating growth prescribed in the next chapter and the two rules framing budgetary policy set out here. Editorialists who come out in favor of these endorsements, and return to them whenever the news gives them the chance, work in the same direction.
The surest path to this better state does not run through the marshes of fiscal proliferation, budgetary laxity, monetary overabundance, and incompletely assumed distinctions. Since 1950, the last two cycles of change of course in economic mentality do seem to have been thirty-year ones: the glorious a posteriori ones were followed by the deceptive ones, swelling public over-indebtedness and over-financialization and then depressing employment. If, after 2040, it turns out that since about 2010 these swellings and then this depression have progressively been halted, and the decline of overconsumption firmly begun, the following recognition will only have helped considerably. The rule of the chronically surplus budgetary result and the rule of varying the weight of public investment with the business cycle help establish an economic policy that produces more prosperity and quality of life than before, while reducing inequalities that undermine social cohesion — thanks to what orients it on two distributions whose ignorance or denial makes union leaders and senior officials, as well as governments and political parties, economically incompetent: the distribution of total income that maximizes total labor income; and the distribution of the latter through the key of equalities and inequalities in wages (see, in the part Economic Science, Distribution and Wages). Amending the forms of the tax levy and the capping of public expenses in the light of a political economy that misses the reality of these distributions condemns us to retentions and modifications ill-suited to the full exercise of the social body's industrious vitality, and disappointing to those who sense that it is high time to “change the software.”