Wolfgang Clement: Debt is like smoking - WORLD 2

Wolfgang Clement: Debt is like smoking – WORLD

BHave you ever tried to get used to something long established? I have been a smoker for many years. I knew how hurtful it was. I could smell where the smoke of my cigarettes was spreading. I could see who was smoking cigarettes. I knew there was no reason to smoke.

I did it anyway. But at some point, I realized that without cigarettes, I would be able to lead a better, healthier, and truly freer life – and I stopped. Not a little, but the whole. I set the limit of my freedom. I never regretted this decision. What does this have to do with the debt brake and the black zero? I mean: a lot!

You do not have to be an economist or a Swiss housewife to realize that you cannot spend more every month than you deserve. Every politician knows how dangerous debt is. Especially if from day to day, year by year, the election period for the election term becomes longer. Any politician can see on the budget balance that the debt service continues to limit freely available funds. Every politician feels the growing pressure of debt. Yet generations of politicians have made debts. Me too.

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Fortunately, unlike cigarettes, loan-funded money has not completely melted in the smoke. A lot of meaningful stuff is funded with that. But a lot of money was spent on things that would have long been forgotten had it not been for the debt. However, at some point a clear two-thirds majority in the Bundestag and the Bundesrat acknowledged that things should not continue this way.

Because one person can quit smoking more easily than the state has to be excluded from debt and repetition, in 2009, a lengthy brake was decided, kicking off a historic turnaround: For years, the debt we leave to our children and grandchildren.

Now the federal and state can only spend as much money as they take. There are exceptions to times of crisis. Although the federal government will also be able to make a few billion new debts each year in a “normal situation”, thanks to a huge increase in tax revenue, we are unable to meaningfully invest all the money received. In the first half of 2019 alone, the federal finance minister had a plus of nearly € 18 billion in cash.

The meaning and purpose of black zero and duty brakes

Sometimes, when I sit in a garden bar in the evening and smoke a cloud of smoke from the next table, the memory of earlier times breaks in me: Now such a cigarette, completely relaxed, would be something … Fortunately, such thoughts quickly dissolve in the smoke, because our risk should not be underestimated. What does this have to do with black zero and the debt brake?

Currently, German economists are very passionate about the meaning and purpose of the Black Zero and the debt brake and whether we should spend more money than we earn. For a better climate, more digitization, fresher infrastructure, everything great, beautiful, important. Some regard the Black Zero as a political fetish hanging around Germany's neck like a millstone. Now is the opportunity to earn new debts.

A key factor that many economists forget about in their budgets: politics. More specifically, too much of the human side of politics. There is something lacking in economic considerations, namely the pressure of political everyday life, an almost irrational component of actors who can know the right thing and do the wrong thing again. And that changes – alas – a lot.

How green zero threatens black zero

Olaf Scholz comes up with some ideas when it comes to cutting the 2020 budget. It must also pay attention to green zero – i.e. climate protection. The Minister of Finance is therefore facing a problem.

From my own experience, I believe I know that politicians come to reasonable compromises, creative solutions and clear decisions, especially when development is very near and hardly any evasion is possible.

At the beginning of this century, as the red-green federal government politically blended in between the barely funded welfare state and the seemingly endless rise in unemployment, the pressure that emerged from this situation created the 2010 Agenda. getting out of even bigger debts – but forbidden by EU law – then promotion and demand should be left behind only through promotion. Unemployment would not halve, but it would certainly increase even more.

If long-term budget forecasts for 2007 provided an outlet for even more debt, Angela Merkel and Franz Müntefering would probably just push more money into the pension fund rather than decide on retirement at 67. In a few years, our children and grandchildren would feel the effects of demographic change even more painfully than before.

"There was a lack of financial pressure to reach a compromise"

Instead of engaging in long negotiation efforts and politically painful compromises, politicians like to choose an acronym: squeeze in supposedly always full public coffers. A or B turns plus B. You could see that a few years later. Instead of discussing retirement with 63 and maternity pension, SPD and Union 2013 just decided on both. Instead of Baukindergeld and Mutual disagreeing with retirement, in 2018 they just decided on both.

The list can unfortunately continue, the pattern is always the same: decisions are at the expense of the next generation, not sustainable! They only came about because there seemed to be a lot of money temporarily. A strong economy has brought increasing tax revenue to Germany for years. There was a lack of financial pressure to reach a compromise.

The New Social Market Economy Initiative requires a constitutional commitment to sustainability so that such errors are not repeated. Budget width is a damn big draw for politicians because it needs a strong brake!

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Some economists' budgets have good arguments for new debt. Who wants to be opposed to investing in infrastructure, climate technology, education, housing and digitization? But the decision for or against these projects must not be financed by realizing in the pocket of our descendants. And that assumption also applies explicitly to shadow households and more or less creative ideas used to circumvent the official definition of public debt. In the end, debt is always long.

There's a lot of money for the foreseeable future, you only have to use it for clearly defined, convincingly negotiated goals in reasonable dimensions, rather than dealing with obvious electoral gifts. Political discourse requires either, and sometimes neither.

Anyone who wants to earn political respect must be firm

The debt brake releases the policy of deciding on a new debt or releasing it. It forces policymakers to find a measure and a middle ground for their projects, with compromise arrangements. Politics needs freedom, but that freedom also needs restrictions. And someone who makes sure the restrictions are respected.

The basic law still ensures that the debt brake is respected. This must not be shaken. And the goal of a black zero in the federal budget can only be dropped when it really can't be otherwise. Anyone wishing to earn political respect must prove steadfastness and not surrender to the temptation to repay the debt for the first time. The risk of relapse is simply too great.

From 2002 to 2005, former Social Democrat Wolfgang Clement was Federal Minister for Economic Affairs and Labor in Gerhard Schröder's cabinet. After leaving politics, Clement switched to work.