4 ms·

The debt brake, forcing balanced budgets, sounds like a good idea but actually turns out to be a terrible idea in practice. https://www.dw.com/en/what-is-germa

by rwmj 2y ago

The debt brake, forcing balanced budgets, sounds like a good idea but actually turns out to be a terrible idea in practice. https://www.dw.com/en/what-is-germanys-debt-brake/a-67587332 https://www.dw.com/en/what-is-germanys-debt-brake/a-67587332 https://www.bbc.co.uk/news/world-europe-67624009 https://www.bbc.co.uk/news/world-europe-67624009

JanSt 2y ago
Government spending is still exploding [1] because of high social spending. You can spend every Euro only once. Government decided to prioritize like it did. Tax income is very high. [1]https://de.statista.com/statistik/daten/studie/75248/umfrage/deutschland-ausgaben-des-staates-2008-bis-2013/ https://de.statista.com/statistik/daten/studie/75248/umfrage...
- generic92034 2y ago
  And still all other G7 countries have a much higher debt level. So there is really no excuse to neglect critical infrastructure for an ideology of austerity.
  - constantcrying 2y ago
    >So there is really no excuse to neglect critical infrastructure for an ideology of austerity. They neglect infrastructure to focus on social security. If they wanted to find the money, they trivially could.
    - generic92034 2y ago
      Of course it is not trivial at all, if you consider voting power (-> cannot cut tax money going into pensions) and legal limitations (-> cannot cut Bürgergeld/Grundsicherung by much, as it is not allowed to go below the Existenzminimum (minimal amount of money required to sustain a citizen)). Especially if you are looking at the real requirements (military, infrastructure, etc.) going by the tune of trillions. And again, German debt levels are way lower than any other G7 country's. So there is no excuse.
      - constantcrying 2y ago
        >Of course it is not trivial at all, if you consider voting power Indeed. I think you figured out the issue. Politicians aren't elected to fix infrastructure, but to distribute taxes through the social security system.
        workingdog 2y ago
        Indeed! "A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury." -Elmer T. Peterson misquoting Alexander Tytler.
        generic92034 2y ago
        Hard to blame politicians for wanting to get elected again, though. This is a systemic issue with democracy. And even an approach with more direct democracy (in contrast to the indirect, parliamentarian democracy) shows that there are issues with denial of reality on the voters side (see for example the recent Swiss vote for the 13th month pension).
        hnbad 2y ago
        And yet the social democrats have infamously implemented reforms that drastically cut back on worker's rights and social welfare. The reason the government can't go below the Existenzminimum is that this would be a violation of the constitution's guarantee of human dignity according to the federal constitutional court of Germany, not because it would annoy the poors. Also there is documented corruption in almost all political parties in federal politics. Most of that corruption is legal though but the beneficiaries are decidedly not the recipients of the "social security system" but rather of public-private partnerships and subsidies. If you think the poor are leeching off society then the same goes for the fossil fuel industry, the agricultural industry, car manufacturing and other industries that are heavily subsidised and benefiting for extremely specific tax exemptions and funding programmes. One of the biggest beneficiaries of the COVID relief programs in Germany unlike the US was not ordinary taxpayers but airlines and large manufacturing companies.
    - hnbad 2y ago
      Social security is infrastructure. What do you think infrastructure exists for? Cars and electric signals don't get to vote. And Germany still has an appalling amount of childhood poverty nevertheless. It would indeed be trivial to "find the money" but the neo-liberal FDP is acting as an internal opposition demanding both strict adherence to the self-imposed debt brake (which was put in place to allow for investment during economic downturns by avoiding unnecessary debt when things are going well -- except everyone promptly forgot about that justification) as well as neither enacting new taxes (e.g. additional tax brackets), raising existing taxes nor resuming the very moderate wealth tax we suspended (not abolished!) years ago for no good reason.
      - constantcrying 2y ago
        >Social security is infrastructure. No? Even on the budget they are distinct items. >And Germany still has an appalling amount of childhood poverty nevertheless. Don't forget the homelessness, which is far worse than in the US. Not only is the social security expensive, it also quite ineffective. >It would indeed be trivial to "find the money" but the neo-liberal FDP is acting as an internal opposition Exactly. Even they are refusing to cut social spending.
        hnbad 2y ago
        > >Social security is infrastructure. > No? Even on the budget they are distinct items. That's not a refutation, that's a technicality. What is the function of social security? What would happen without it?
        constantcrying 2y ago
        >What is the function of social security? To reduce social conflict by subsiding people who, for one reason or another, are unwilling or unable to successfully participate in the labor market. >What would happen without it? I don't want to speculate, but at some point we are going to find out.
vhiremath4 2y ago
> Broadly speaking the only solutions are tax rises, spending cuts or more debt. But these are three very different parties, with conflicting views over borrowing and spending. So they basically just couldn’t come up with a solution when trying to balance the budget. Definition of death by committee, which is a representation of the will of the people. How can we do this better? This feels so important, yet it feels impossible if this is the outcome of telling our politicians they need to respect a budget.
- growse 2y ago
  Feels like the problem isn't the committee per se, more the committee's incompetence and inability to effectively compromise. Coalition politics only works if the members recognise the need for compromise and are competent enough to achieve it. I'd honestly expected German politicians to be better at this tbh.
  - generic92034 2y ago
    In some topics the coalition parties are diametrically opposed to each other. In addition, the smallest party (FDP) is fighting for pure survival (5% barrier). This means, the chances for good compromises are just especially low in this constellation. Also, the coalition treaty was agreed upon before the Ukraine war happened. That makes it useless in some ways, removing any common ground.
generic92034 2y ago
Here is a bet: Once a new coalition gets elected in 2025 (most likely led by the Union (CDU/CSU)) exceptions to the strict rules of the debt brake will be found. Currently, the Union as part of the opposition has no motivation to agree to any exceptions (2/3 majority required). But that will change very quickly once they are part of a coalition.
- qznc 2y ago
  We already know some: For example, a special budget (Sondervermögen) for the Ukraine war. Our finance minister and our chancellor just don’t want it.
  - generic92034 2y ago
    Yes, the FDP is part of the problem. But since you need a 2/3 majority to establish more special budgets even getting all coalition parties on board, you also need parts of the opposition.
- inglor_cz 2y ago
  Beware of the Constitutional Court (Karlsruhe). Unless the Constitution is amended explicitly, any attempts to bypass the Debt Brake by creative accounting etc. will likely be slapped down by the judges.
  - generic92034 2y ago
    The "creative accounting" part regarding the recent court decision was the attempt to re-use a Corona special budget for something else, after the Corona pandemic was over. This is pretty easy to avoid for new special budgets. You "just" need the 2/3 majority.
- ofrzeta 2y ago
  That would require the new coalition to have a 2/3 majority which is unlikely I think. Most probably it will be a Große Koalition again with the CDU/CSU around 35% and the SPD around 15%.
constantcrying 2y ago
Reducing debt works only if the government is willing to make significant budget cuts. It is pretty clear the focus of the German government is the maintenance of it's social security system. It is also worth pointing out that the debt break means the government is incentivised to increase taxes as funding for their expenses.
- arlcode 2y ago
  Just to add some context: The largest budget positions of social security (by far) are supplements to the public retirement system. As of now about 25% of the federal budget go towards retired people [1] (in addition to all mandatory "taxes" paid by working people). The vast majority of the money is not spent on charity but is part of the societal deal that younger people support the elders. So the payments retirees get are the result of them paying into the system for 30 - 40 years. The shrinking numbers of younger working people and the beginning retirement of baby boomers make this system unsustainable and politically very hard to change. Something will give sooner or later but god knows what that will be. [1] https://www.bundeshaushalt.de/DE/Bundeshaushalt-digital/bundeshaushalt-digital.html https://www.bundeshaushalt.de/DE/Bundeshaushalt-digital/bund...
  - lotsofpulp 2y ago
    > So the payments retirees get are the result of them paying into the system for 30 - 40 years. On a societal level, it is more accurate to frame this as “the purchasing power the retirees get are the result of the dynamics of political power in the society”. This is clearer because regardless of what any entity pays into whatever, a change in political power in the future can always change “the deal”. Also, there are a few ways for deals to change. One is that payments promised in the future can nominally satisfy the original deal, but the purchasing power of those payments (which is really what people want) can be eroded, namely by government policy. So you can pay into the system all you want, but you might not be able to but what you expected you were going to be able to buy. Another way is that if you are promised benefits, such as healthcare, then the quantity/quality of healthcare can be reduced. Longer wait times, less qualified personnel, less quality control in medicines coming from factories that are not being inspected as often, etc.

by rwmj 2y ago

JanSt 2y ago

Government spending is still exploding [1] because of high social spending. You can spend every Euro only once. Government decided to prioritize like it did. Tax income is very high. [1]https://de.statista.com/statistik/daten/studie/75248/umfrage/deutschland-ausgaben-des-staates-2008-bis-2013/ https://de.statista.com/statistik/daten/studie/75248/umfrage...

generic92034 2y ago
And still all other G7 countries have a much higher debt level. So there is really no excuse to neglect critical infrastructure for an ideology of austerity.
- constantcrying 2y ago
  >So there is really no excuse to neglect critical infrastructure for an ideology of austerity. They neglect infrastructure to focus on social security. If they wanted to find the money, they trivially could.
  - generic92034 2y ago
    Of course it is not trivial at all, if you consider voting power (-> cannot cut tax money going into pensions) and legal limitations (-> cannot cut Bürgergeld/Grundsicherung by much, as it is not allowed to go below the Existenzminimum (minimal amount of money required to sustain a citizen)). Especially if you are looking at the real requirements (military, infrastructure, etc.) going by the tune of trillions. And again, German debt levels are way lower than any other G7 country's. So there is no excuse.
    - constantcrying 2y ago
      >Of course it is not trivial at all, if you consider voting power Indeed. I think you figured out the issue. Politicians aren't elected to fix infrastructure, but to distribute taxes through the social security system.
      - workingdog 2y ago
        Indeed! "A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury." -Elmer T. Peterson misquoting Alexander Tytler.
      - generic92034 2y ago
        Hard to blame politicians for wanting to get elected again, though. This is a systemic issue with democracy. And even an approach with more direct democracy (in contrast to the indirect, parliamentarian democracy) shows that there are issues with denial of reality on the voters side (see for example the recent Swiss vote for the 13th month pension).
      - hnbad 2y ago
        And yet the social democrats have infamously implemented reforms that drastically cut back on worker's rights and social welfare. The reason the government can't go below the Existenzminimum is that this would be a violation of the constitution's guarantee of human dignity according to the federal constitutional court of Germany, not because it would annoy the poors. Also there is documented corruption in almost all political parties in federal politics. Most of that corruption is legal though but the beneficiaries are decidedly not the recipients of the "social security system" but rather of public-private partnerships and subsidies. If you think the poor are leeching off society then the same goes for the fossil fuel industry, the agricultural industry, car manufacturing and other industries that are heavily subsidised and benefiting for extremely specific tax exemptions and funding programmes. One of the biggest beneficiaries of the COVID relief programs in Germany unlike the US was not ordinary taxpayers but airlines and large manufacturing companies.
  - hnbad 2y ago
    Social security is infrastructure. What do you think infrastructure exists for? Cars and electric signals don't get to vote. And Germany still has an appalling amount of childhood poverty nevertheless. It would indeed be trivial to "find the money" but the neo-liberal FDP is acting as an internal opposition demanding both strict adherence to the self-imposed debt brake (which was put in place to allow for investment during economic downturns by avoiding unnecessary debt when things are going well -- except everyone promptly forgot about that justification) as well as neither enacting new taxes (e.g. additional tax brackets), raising existing taxes nor resuming the very moderate wealth tax we suspended (not abolished!) years ago for no good reason.
    - constantcrying 2y ago
      >Social security is infrastructure. No? Even on the budget they are distinct items. >And Germany still has an appalling amount of childhood poverty nevertheless. Don't forget the homelessness, which is far worse than in the US. Not only is the social security expensive, it also quite ineffective. >It would indeed be trivial to "find the money" but the neo-liberal FDP is acting as an internal opposition Exactly. Even they are refusing to cut social spending.
      - hnbad 2y ago
        > >Social security is infrastructure. > No? Even on the budget they are distinct items. That's not a refutation, that's a technicality. What is the function of social security? What would happen without it?
        constantcrying 2y ago
        >What is the function of social security? To reduce social conflict by subsiding people who, for one reason or another, are unwilling or unable to successfully participate in the labor market. >What would happen without it? I don't want to speculate, but at some point we are going to find out.

vhiremath4 2y ago

> Broadly speaking the only solutions are tax rises, spending cuts or more debt. But these are three very different parties, with conflicting views over borrowing and spending. So they basically just couldn’t come up with a solution when trying to balance the budget. Definition of death by committee, which is a representation of the will of the people. How can we do this better? This feels so important, yet it feels impossible if this is the outcome of telling our politicians they need to respect a budget.

growse 2y ago
Feels like the problem isn't the committee per se, more the committee's incompetence and inability to effectively compromise. Coalition politics only works if the members recognise the need for compromise and are competent enough to achieve it. I'd honestly expected German politicians to be better at this tbh.
- generic92034 2y ago
  In some topics the coalition parties are diametrically opposed to each other. In addition, the smallest party (FDP) is fighting for pure survival (5% barrier). This means, the chances for good compromises are just especially low in this constellation. Also, the coalition treaty was agreed upon before the Ukraine war happened. That makes it useless in some ways, removing any common ground.

generic92034 2y ago

Here is a bet: Once a new coalition gets elected in 2025 (most likely led by the Union (CDU/CSU)) exceptions to the strict rules of the debt brake will be found. Currently, the Union as part of the opposition has no motivation to agree to any exceptions (2/3 majority required). But that will change very quickly once they are part of a coalition.

qznc 2y ago
We already know some: For example, a special budget (Sondervermögen) for the Ukraine war. Our finance minister and our chancellor just don’t want it.
- generic92034 2y ago
  Yes, the FDP is part of the problem. But since you need a 2/3 majority to establish more special budgets even getting all coalition parties on board, you also need parts of the opposition.
inglor_cz 2y ago
Beware of the Constitutional Court (Karlsruhe). Unless the Constitution is amended explicitly, any attempts to bypass the Debt Brake by creative accounting etc. will likely be slapped down by the judges.
- generic92034 2y ago
  The "creative accounting" part regarding the recent court decision was the attempt to re-use a Corona special budget for something else, after the Corona pandemic was over. This is pretty easy to avoid for new special budgets. You "just" need the 2/3 majority.
ofrzeta 2y ago
That would require the new coalition to have a 2/3 majority which is unlikely I think. Most probably it will be a Große Koalition again with the CDU/CSU around 35% and the SPD around 15%.

constantcrying 2y ago

Reducing debt works only if the government is willing to make significant budget cuts. It is pretty clear the focus of the German government is the maintenance of it's social security system. It is also worth pointing out that the debt break means the government is incentivised to increase taxes as funding for their expenses.

arlcode 2y ago
Just to add some context: The largest budget positions of social security (by far) are supplements to the public retirement system. As of now about 25% of the federal budget go towards retired people [1] (in addition to all mandatory "taxes" paid by working people). The vast majority of the money is not spent on charity but is part of the societal deal that younger people support the elders. So the payments retirees get are the result of them paying into the system for 30 - 40 years. The shrinking numbers of younger working people and the beginning retirement of baby boomers make this system unsustainable and politically very hard to change. Something will give sooner or later but god knows what that will be. [1] https://www.bundeshaushalt.de/DE/Bundeshaushalt-digital/bundeshaushalt-digital.html https://www.bundeshaushalt.de/DE/Bundeshaushalt-digital/bund...
- lotsofpulp 2y ago
  > So the payments retirees get are the result of them paying into the system for 30 - 40 years. On a societal level, it is more accurate to frame this as “the purchasing power the retirees get are the result of the dynamics of political power in the society”. This is clearer because regardless of what any entity pays into whatever, a change in political power in the future can always change “the deal”. Also, there are a few ways for deals to change. One is that payments promised in the future can nominally satisfy the original deal, but the purchasing power of those payments (which is really what people want) can be eroded, namely by government policy. So you can pay into the system all you want, but you might not be able to but what you expected you were going to be able to buy. Another way is that if you are promised benefits, such as healthcare, then the quantity/quality of healthcare can be reduced. Longer wait times, less qualified personnel, less quality control in medicines coming from factories that are not being inspected as often, etc.