What Germany Knows About Debt

[CatholicGerman]

From the New York Times:

IN many countries, including the United States, there are calls for the government to spend more to jump-start the economy, and to avoid the temptation to cut back as debts mount.

Germany, however, has decided to cast its lot with fiscal prudence. It has managed rising growth and falling unemployment, while putting together a plan for a nearly balanced budget within six years. On fiscal policy and economic recovery, Americans could learn something from the German example.

Twentieth-century history may help explain German behavior today. After all, the Germans lost two World Wars, experienced the Weimar hyperinflation and saw their country divided and partly ruined by Communism. What an American considers as bad economic times, a German might see as relative prosperity. That perspective helps support a greater concern with long-run fiscal caution, because it is not assumed that a brighter future will pay all the bills.

Even if this pessimism proves wrong more often than not, it is like buying earthquake or fire insurance: sometimes it comes in handy. You can’t judge the policy by asking whether your house catches on fire every single year.

 

[Dale_M]

the article:

Germany is likely to continue having a higher relative level of government spending than the United States. But the German civil service has a stronger hand in writing legislation — a role that limits the sort of waste and short-term thinking that Congress injects into American law. It is also well understood in German political discourse that tax cuts need to be paid for.

I think there is something to be learned from Germany. They have a high-cost social welfare net, yet they manage to maintain a sound economy. I’m not saying that the US needs to have such an extensive social welfare as in Germany, but the US Congress is notorious for its pork barrel spending. And during the past 30 years, it has been irresponsible with tax cuts without corresponding cuts in federal spending.

 

[Sabda]

IN many countries, including the United States, there are calls for the government to spend more to jump-start the economy, and to avoid the temptation to cut back as debts mount.

:ehh: Last I heard many people in this country are very concerned about the mounting debt and want the government to cut back on spending.

 

[josephdavid]

Thanks to a rosier economic outlook, the German finance minister Wolfgang Schaueble can expect a lower deficit for 2010 and will need to borrow perhaps as much as 20 billion euros less to finance the budget.

…Quoting government budget officials, the two papers said that several reasons have contributed to the improvement: Higher corporate tax revenues due to a sharp rise in exports, lower labor market costs, plus added income earned from the recent auction of fourth generation mobile phone network licenses to telecommunications companies.

Despite the rosier outlook, Otto Fricke, a budget expert for the business-friendly Free Democrats, urged the government to stick to its plans to cut spending.

dw-world.de/dw/article/0,5718588,00.html

Another contributing factor of maintaining sustainable debt compared to U.S.:

German business confidence surged unexpectedly in July to record its highest monthly gain since the country’s reunification 20 years ago, a key business climate survey published Friday showed.

The Ifo institute index, based on a survey of 7,000 executives, jumped from 101.8 points to 106.2 points, the largest gain since 1990. Experts had been expecting a fall in business confidence.

At the heart of the recovery was a strong rise in German exports over recent months, accompanied by falling unemployment since the summer of 2009.

dw-world.de/dw/article/0,5828357,00.html

I was just visiting a factory in Germany and their orders are surging from foreign orders from Russia and parts of Asia and Brazil

 

[CatholicGerman]

dw-world.de/dw/article/0,5718588,00.htmlI was just visiting a factory in Germany and their orders are surging from foreign orders from Russia and parts of Asia and Brazil

Yeah, at my old workplace they’re working around-the-clock to keep up with orders.

 

[Kaninchen]

It does have to be said that forced withdrawal from Ruling The World Biz all those decades ago seems to have worked out well (US arms expenditure 4.3% GDP, German arms expenditure 1.3% GDP).