Debate about debt brake: Where will the new government get its money from?
These contortions are necessary because of the debt brake, which the Union faction does not want to touch: According to it, the federal government is only allowed to take on debt amounting to 0.35 percent of German economic output - a largely arbitrary figure. This hinders investments in defense, infrastructure and climate protection .
The think tank Department of the Future (DZ) has now put forward a reform proposal . The 0.35 percent should be abolished, but the state should not be allowed to take on unlimited debt.
A special fund, says DZ economist Florian Schuster-Johnson, is simply not enough. "There are other investment needs as well: infrastructure, climate, public services, for example." The new special fund is only intended to cover armaments investments.
The current debt regulation, the DZ authors write, "regulates financial policy blindly": It takes into account neither the interest that the state pays nor the growth through credit-financed investments. "Our proposal looks at the real economic conditions," says Schuster-Johnson.
When the economy performs better, tax revenues increase. This revenue can be used to pay the interest on government investments.
If the government takes on debt to increase the “production potential of the economy,” it can outgrow the loans: if it invests in railways, promotes better machinery or provides well-trained workers, the economy can achieve more.
Under the current debt brake, the state has to save the necessary money elsewhere, and the costs are borne immediately. This is visible in dilapidated schools and the collapsing railway. If the state takes on debt, it spreads the costs across future generations, who will benefit from the improved infrastructure.
Tobias Hentze, an economist at the employer-friendly German Economic Institute (IW), thinks this is "basically welcome". A more flexible debt rule that also takes growth and interest into account makes sense.
At the same time, the European debt rules limit Germany's borrowing to around 1.8 percent of GDP, even without the 0.35 percent rule. "According to our calculations, that would not open the floodgates for excessive debt," says Hentze.
The problem lies elsewhere: According to the DZ proposal, only "productive" government spending should be allowed, i.e. spending that makes the economy more productive. But determining which spending is productive "is anything but easy." Economists disagree on how productive subsidies are.
The DZ is aware of this. The study authors propose that each government should determine by law how it weighs up growth and interest costs - the Bundestag determines what constitutes productive expenditure. This would give parliament more freedom than under the 0.35 percent limit. To ensure that MPs do not define things arbitrarily, an independent council of economists should monitor the budget rule.
"It is understandable that in the current situation, people want to give parliament far-reaching options," says Achim Truger, a member of the so-called Economic Experts Group. "Using a specific number as a debt rule could be an economic own goal."
However, Truger is skeptical as to whether the independent controllers can actually be independent: "Those who are extremely critical of public debt may find everything unproductive and could bully parliament." The opposite is also possible: "Depending on the yardstick, you can describe everything or nothing as productive."
DZ study author Schuster-Johnson disagrees: The committee only has an advisory function. The public can form its own opinion from its analysis and the federal government's calculations. "At present, there is no evidence-based investigation at all into how economically viable individual expenditures are."
In the coming weeks, there will probably be arguments about how much additional money a possible coalition between the CDU/CSU and SPD can raise - and how. SPD leader Saskia Esken told the taz: "The question of how we secure more money for our defense must go hand in hand with the question of how we guarantee more investment in education, roads and infrastructure. Both are urgently needed, so there can be no either-or."
This needs to be discussed now, but not in a fast-track procedure. "What I do not accept is that such far-reaching decisions are still being decided with the majority of the old Bundestag, as Mr Merz and the Union are proposing. That shows no respect for the voters," Esken told taz.
taz
