Insights · July 9th, 2011
For a long time I have said that many of our policies in the U.S. seem, to me, to be the opposite of what is actually needed to revive the economy and build a better future. Recent evidence from Germany, which is in fact doing pretty much the opposite of the U.S., suggests this view might be valid. From a blogger named brooklynbadboy:
1. Germany faced a budget crisis to which they responded by substantially raising taxes on the wealthy and holding the line, not cutting, spending.
2. Germany then faced the financial crash by increasing debt, increasing taxes, and investing those funds in infrastructure, increased social spending, and tax cuts for things like an extensive (far bigger than ours) national cash for clunkers program.
3. Germany then dealt with the employment crisis by not laying off people, but instead cutting hours. Then they made up the lost income through direct government payments to their people.
But here we are doing the almost direct opposite of what we know is working:
1. We are extending tax cuts for the wealthy.
2. We are cutting infrastructure and social spending.
3. We are laying people off by the hundreds of thousands and then paying them a meager amount to do nothing, but only for 99 weeks at the most.
So, according to the dominant economic policy controlling both the White House and Congress, Germany should be Somalia by now, right?
Wrong:
BERLIN — Germany’s unemployment rate dipped to 6.9 percent in June as the booming economy bolstered the country’s labor market further, official figures showed Thursday.
The unadjusted jobless rate was down from 7 percent in May, and the number of people registered as unemployed was 2.893 million — the lowest figure for June since 1992. The total was 67,000 lower than the previous month and down 255,000 from a year earlier.
Strong exports and signs of a recovery in domestic demand have powered the German economy — Europe’s biggest — for more than a year now, making the country a standout in the 17-nation eurozone.
How to reverse direction here? I wish I knew. Arguments and evidence seem to make little difference. Right now ideology seems to trump pragmatism. But eventually we will have to figure things out, don’t you think?
