Unrest ripped through the French capital after protesters initially highlighted failings in the public school system. The action snowballed into widespread expressions of dissatisfaction with the cost of living and job prospects.

The macroeconomic health of the European nation is not in great shape: unemployment was 8.3% in Q2, real GDP growth was 0.4%, and wage growth was 1.7% at the national level. And underpinning it all is public debt, currently at 116% of GDP, with 30-year bonds topping 5.4% at the time of writing.

And the U.S. bond market, flirting with a wrap on the wrist for its own policymakers presiding over mounting debt, stalled. In fact, 10- and 30-year Treasury yields even declined.

“There’s a reason that the U.S. has pulled back a little bit in the last few weeks [and] why France has not,” Heather Long, chief economist at Navy Federal Credit Union, told a Bipartisan Policy Center (BPC) event last week. “It’s a couple of key indicators that differentiate us from France and suggest … that we still have a little bit of room to have these debates now, in the context of a K-shaped economy.

“We’re at about 100% debt-to-GDP; they’re at 120% debt-to-GDP. They are further along that crisis curve, and they are growing at about 0.5%. We’re growing at just over 2%. That’s a pretty big difference. ”

While economists largely agree that policymakers are perhaps naive in their hopes to simply grow the U.S. out of a debt crisis, starting from a point of strength rather than stagnation gives the economy a better chance of rebalancing its debt-to-GDP ratio.

But Long added that France also differs from the U.S. in that the former has exhausted much of its revenue-generating capacity through taxes. Per the OECD, the “tax wedge” (the difference between labor costs to the employer and the corresponding net take-home pay of the employee) for French workers is 47.2%, according to its most recent data. The U.S., on the other hand, is down at 30%.

“It’s certainly not easy to raise taxation in the U.S., but from a financial world perspective and the bond market perspective, there’s a lot more room to experiment and to grow in the United States than there is in France,” Long added. “To me, the biggest warning sign from France is really not just the K-shaped economy effect, but the generational effect that’s going on and to see young people really driving this latest protest … from the disparities that they’re seeing generationally, and that seems like a pretty big foreshadowing [of] what we could see here as we creep towards 120% debt to GDP.”

The generation question

As with any debt, the question of repayment isn’t if but when—and that’s the question budget experts are asking the public and politicians to think about.

Phil Swagel, the director of the nonpartisan Congressional Budget Office, said policymakers have a series of choices to make: How they might prepare for growth to slow if spending is cut, which forms of tax to explore, and so on.

“The other set of choices that you can think about with the deficit is about which generation is paying, so the longer we wait to make changes, that means some generations are … missing out on their share of the burden of the adjustment,” Swagel told the BPC event, “and then who within each generation will pay a tax.”  

He explained: “The longer we wait means some generations, in some sense, don’t share in the burden of the adjustment. Then, who within each generation is affected? I think there’s a societal consensus it will be progressive, not in the political sense, but in the sense that households with relatively high lifetime incomes will have more of a share of the adjustment. But that’s a societal preference, and there’s lots of room for disagreement in there.”