The federal government’s stimulus package must be credible

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It is the federal government, otherwise so fixated on the black zero, that launched the largest aid program to date in the corona crisis. Chancellor Angela Merkel (CDU) and Finance Minister Olaf Scholz (SPD) now want to have the huge acute aids followed by an economic stimulus program. This is sorely needed despite the aid billions because the economy will not escape the deepest post-war recession as quickly as initially hoped.

The government is facing a major problem here: unlike abroad, Germans are not happy to look at new aid worth billions that can fuel production and consumption and help to push the recovery. It is the fear of the side effects of higher public debt that is increasingly dominating the debate in this country.

This fear could lead to the absurd result that the many billions ultimately destroy more trust than create it. But no company invests with skepticism, and nobody buys long-lasting products, be it a car or a refrigerator. Economic growth will not return without trust.

It takes its revenge that Scholz called the first aid package “Bazooka”, a cannon that has a resounding effect but does not hit precisely. In order to stay in the picture, the economic stimulus package must now contain precision weapons: instruments that work precisely and can be a little boring.

For example, the better tax loss offsetting: It allows companies to better offset the often drastic losses of global shutdowns with the profits of previous and subsequent years and thus to pay less taxes this year. The instrument can be implemented quickly by the tax offices, and it rewards companies that have already proven successful business.

Public investment could indirectly enable private investment

It would have a similarly precise effect if companies were allowed to write off investments more quickly in the years 2020 to 2022: in order to secure the better conditions, many companies would no longer sit out the crisis, but plan the post-corona future. You are more likely to make profits again. This would accelerate the upswing – and make it easier for the state to reduce its debt again because of the higher earnings from corporate profits.

Highly effective means in times of crisis also include public investments: the construction industry would get a replacement for the orders from the private sector that would be canceled in the coming months. The country as a whole would finally have modern infrastructure, which in turn would also enable private investments.

The good thing about these three points is that all industries would benefit – not just individual lobby groups. A general car purchase premium even for petrol engines does not meet this criterion. Anyone who helps individual sectors as politicians will hear the question from everyone else: why they and not us? Aid can only be justified for those economic sectors whose business has actually been temporarily banned by the state. This does not apply to the industry in Germany.

For the same reason, the grand coalition should think three times before lowering income and corporate tax rates. The advantages would be companies and high earners, not the supermarket cashier who hardly paid taxes anyway due to her low earnings.

The goal of any stimulus package is to fuel growth. In a crisis like this, the economists’ consensus is more unanimous than ever to finance everything about debts and think later about how to reduce them. The more growth there is, the faster the debt levels will then decrease in relation to the gross domestic product, as the consolidation in the upswing after the financial crisis has shown.

Shopping fun despite the ideal savings?

The stronger the growth, the fewer austerity programs or tax increases will be needed after an economic stimulus program. For reasons of purely economic rationality, there is now something to be said for a general consumption voucher up to a medium income limit, so that people can rediscover the fun of shopping and fuel growth despite the obligation to wear a mask.

However, does this work as well in Germany as it does in the United States? Does the people believe a chancellor who preached thrift for 15 years that the opposite was now necessary? Are you pumping? In any case, the current government debt debate raises doubts.

Any funding for innovation, digitalization, better schools and climate protection in this country is likely to be more capable of winning a majority than pure pleasure in consumption. Economy is, to a large extent, psychology. Stimulus measures that a majority do not find credible will fizzle out.

More: The greatest revolution in human history is now beginning in the phase of the corona pandemic.



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