French royal debt and deficit

By 1786, however, the deficit had become so huge—one–sixth of the total royal budget—that Calonne knew that reforms—meaning more taxes, or at least more loans—could no longer be put off.

To obtain the support of regional nobles for such changes, the King called an Assembly of Notables.

the American affair was also the source of more debt for a regime already plagued by grave financial problems.

The United States became independent, but France gained nothing from the war except deeper national debt.

When the Notables demanded an accurate account of the royal finances, the king refused and instead dismissed the Assembly. This caused great anxiety and protest among the educated public, and marked the start of the financial and political crisis that eventually led to the revolution itself.

Although largely neglected in most histories of the French Revolution, the central government’s persistent budget deficit was a factor of paramount importance.

The struggle produced radical changes in macroeconomic policy to shift the burden of adjustment, altering the course of and prolonging the Revolution.

While the collapse of the monarchy has been attributed to persistent peacetime deficits, these did not appear until the mid-1780s when earlier reforms and successful budget policies were abandoned by reactionary finance ministers.

Had the earlier policies been continued, it is unlikely that a severe crisis would have occurred in 1788/89.