This Sunday, the French will go to polls to elect their next leader. Though President Nicolas Sarkozy has gained ground, he's still trailing socialist candidate Francois Hollande by five points in the final polls before election day. If Hollande wins, it will be hard to shake the impression that the French are in total denial about the inevitability of their nation's collapse under the weight of their welfare state.
Though there are a number of reasons why Sarkozy is in danger of losing -- most notably, the state of the economy -- it's pretty difficult to look at Hollande's socialist platform and imagine that he could be elected by a country that has any grasp of reality. France's debt has reached 86 percent of its economy and unemployment has hit 10 percent. The French want to blame Sarkozy's austerity measures, but the only reason such measures were needed in the first place was that for decades France has made welfare state obligations that it cannot possibly meet.
Instead of fixing things, Hollande's entire platform is based on the idea that the way for the French economy to grow is for the government to spend even more money, financed by even higher taxes. The message clearly has an appeal to France's voters, who live in a fiscal fantasy land.
Among Hollande's proposals:
-- Create tax brackets of 45 percent and 75 percent on higher income earners. (Yes, you read that correctly.)
-- Impose a financial transactions tax.
-- Ban stock options and bonuses.
-- Hike capital gains taxes on banks.
-- Lower the retirement age to just 60.
-- Attempt to generate 150,000 jobs through subsidies.
Hollande's economic policies, in other words, are the opposite of those successfully pursued by Ronald Reagan in the 1980s. Though this is bad news for the French economy, the question more likely to have an impact on the U.S. is whether he follows through on his pledge to rework the pact negotiated with Germany that imposes fiscal discipline on European Union countries. In Greece, which is also holding elections on Sunday, the socialists are publicly salivating for a Hollande win. If there's a new momentum among Europeans to avoid grappling with their mounting debt, it could roil financial markets and have spillover effects.