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March 05, 2009

Comments

hattie

They do carry frugality to ridiculous extremes sometimes. I don't know. We've made such a mess of things here that it's a little much to point the finger. In fact, pointing the finger does no one any good at this point but delays coming up with solutions.

Detlef

"Germany was slow to respond to the global economic crisis and the belated stimulus package it has put forward is massively disappointing. Germany is the largest economy in Europe, and its failure to respond aggressively will damage the ability of the continent and, indeed, the US to recover."

I just don´t know.
If I look at Western Europe and the USA it doesn´t seem that the German stimulus package was that late.

And even more to the point.
Look at the US package. For example extended unemployment benefits ($60 billion), more money for food stamp programs ($19.9 billion), expanded access to health insurance for the unemployed ($111 billion).

All of these are actually part of the social and legal structure in Germany. If unemployment rises government spending for these programs rises too. It´s automatic deficit spending.

Or the $44.5 in aid to local school districts to avoid layoffs and cutbacks. These are state spendings in Germany and not dependent on local property taxes like in the USA. And German states don´t have to produce a balanced budget like many US states. So we´ll see deficit spending in the German states too.
Not to mention that firing state employees isn´t as easy in Germany as in the USA.

Just giving the US stimulus package a quick look-over I´d say that around $200-250 billion of that package deals with things that are part of already existing (regular not temporary) German laws.

If we just relabeled government spending related to it (following the US rules) I´d say we could boost the number size of the German stimulus package quite a bit.

In short, a significant part of the US stimulus package seems designed to just temporary boost some US government programs to (not quite) German levels.

This topic "blame Germany" seems a hot topic in the last 2 days.
Matthew Yglesias, Kevin Drum, Felx Salmon, Brad Setser to name some. And in comments to their posts you find lots of Americans indignant about Germany and Western Europe in general. And then you´ll start to find a few comments pointing out that you´re comparing apples with oranges.
By not counting at all the existing social safety nets in Germany (and other European countries). Which already do some of the things the USA needs a new stimulus bill for.

Mind you I´m not saying that the German stimulus package is great.
My "rant" :) was simply about not taking into account the differences between the US and German (Western European) social safety nets.

And I certainly do agree that concentrating only on exports is the wrong way in the long term. But that was what economists advised for years. Bring costs down (stagnant wages) to enhance competitiveness. And afterwards the exact same economists were baffled that the German domestic market stagnated. Of course wages pretty much stagnated in the USA too. You just had the housing bubble to help consumers.

David

Good point, Detlef. US domestic consumption was debt-fueled and the bubble inevitably burst.

But what about the smaller EU states that border Germany? Can one simply let them fail? Won't that torpedo any chances for recovery for the continent?

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