Budget Brouhaha - Economist Raffelhüschen: "The Debt Brake is a Blessing"
Capital: Mr. Raffelhüschen, Chancellor Scholz recently reaffirmed in the Bundestag that the federal government would not leave anyone in the lurch. 'You'll never walk alone' - even in the face of the budget crisis. Is this a serious promise, considering the Federal Constitutional Court's judgment and impending savings?
Bernd Raffelhüschen: A touching sentiment, indeed. But it's far from reality. Scholz is shifting focus from the constitutionality of his budgets. The latest supplementary budget for 2023 submitted, in essence, is a debt brake violation. And it's non-constitutional – unless there's an emergency in 2023. I don' t see one.
The crisis in Ukraine and energy crisis have undeniably affected this year. Isn't that reason enough for an emergency?
According to the Constitutional Court, emergencies must be exceptional and situational. We can't willfully stretch an issue from 2022. However, the government has no other choice. The budget for 2023 is only four weeks away.
Economists like Rüdiger Bachmann contend that crises typically outlast a single financial year – making the Federal Constitutional Court's ruling "macroeconomic illiteracy." Is he correct?
No, I take a different view in this particular situation. We've had emergencies in the past, yes. The coronavirus crisis, for example, necessitated suspending the debt brake. But those emergencies are now over. The economy has had enough time to adjust.
So, what's the problem now?
We've vastly inflated our budget during the coronavirus crisis and got used to it. In 2019, our budget was 350 billion euros. Then it shot up to 550 billion euros in 2022 and 480 billion euros in 2023. And we're still discussing a 480-billion-euro budget for 2024. This plainly isn't sensible, rational budget management.
In your view, should we implement savings in the new budget to patch up these rifts?
Yes, there's no other way. But I don't see a political solution. The SPD doesn't want to trim social spending, the Greens reject the energy transition, and the FDP wants to adhere to the debt brake. It's like a square circle.
In your opinion, which side should make the first cut?
The debt brake is legally binding. We can no longer ignore it - not even in the face of emergency programs or overtures. No, we must address social spending, if only for demographic reasons. But we also need to review subsidies. We can't allow hasty energy transition to lead us into de-industrialization.
Excessively rushed?
Yes, needlessly rapid. Germany can't single-handedly combat global warming. And if other countries allow themselves an additional ten years for the energy transition, perhaps we should as well.
So what's your take on social benefits?
We need to tackle every corner, precisely – not with scissors, but with a lawnmower. We should ask everyone, without exception, to make some sacrifices. Starting with the citizen's income, which should be more closely tied to an individual's work ethic, through to pensioners, whose pension increase should be below the general wage growth of the working population. The same holds true for pensioners and active civil servants. I'll likely be cutting my own throat to say this.
BUT these measures would be profoundly unpopular…
These are measures that I wouldn't bring up as a politician, oweing to the risk of job loss.
Lower income groups would bear the brunt of these cuts, right?
Germany is home to the wealthiest rich and poorest poor. We can and should expect everyone to chip in somewhat. It's not about eliminating basic income support complementarily. It's about getting away from the notion that basic security entails no obligation.
Capital.de.
Additional Insights:
- The German debt brake has come under scrutiny for its rigidity in addressing emergencies. Critics argue that it needs further reforms to allow for flexibility during unforeseen circumstances
- The growth of public debt has been a cause for concern among some economists, who argue that the debt brake is preventing Germany from investing in necessary infrastructure projects
