The United States is on the cusp of entering our fourth year of this self-inflicted, not to mention self-perpetuated, economic malaise that began in the late summer of 2008. Industrialized democracies across the globe have fared differently, with some countries doing much, much better than others. One such case in point: Germany. Unemployment has not risen in that country, but rather, dropped since the advent of the economic crisis.
Before he left office, Socialist chancellor Gerhard Schroeder raised taxes, balanced the German budget, cut entitlement programs, and invested in public-private initiatives that actually sustained employment levels through the economic crisis. The programs were designed to make it cheaper for companies to keep workers on the payrolls, and as a result, because these workers, who would otherwise have been laid off, did not receive the welfare benefits for which they would otherwise have been eligible. The result was that employment in Germany remained stable, and continued, in some periods, to rise, while the government actually ran surpluses.
If this sounds like the exact opposite of what’s going on in the United States, that’s because it is. Yes, Germany has some of the highest tax rates of any country in the world, but through a smart policy of coordinating labor, industrial and fiscal policy, in conjunction with putting their financial house in order, Germany has not only weathered this economic storm, but emerged from it a stronger country without having suffered the social costs (not to mention financial) that the United States has struggled so deeply with.
In short: the German model works. That’s not to say that we can replicate exactly the German experience. There’s no likelihood of ever getting US rates of taxation at the stratospheric levels needed to sustain these programs. But copy-catting them in some respects would require our politicians to put aside a certain degree of the ideology and rhetoric upon which they seem to have based their careers in recent years. This stands in stark contrast to their German counterparts. And the contrast between the two countries’ experience is night and day as well. We would be wise to emulate our German friends, to the extent that we can, and put aside our childish wrangling over political minutiae in order to restart this moribund economy of ours.