Who should the decline in prosperity hit and how hard?
(Photo: Imago Images)
The calculation is simple: A stagnating economy plus ever higher import prices result in declining prosperity. This is something like the new Germany formula.
The upheavals of the Ukraine war and the energy crisis continue to slow down Europe’s largest economy. Gross domestic product fell minimally in the second quarter. At the same time, import prices rose to an all-time high in June.
The derivation of the new formula is simple. The many savings that citizens have accumulated during the corona pandemic are being eaten up by high energy costs.
The hoped-for consumption boom does not materialise. A large part of the growth that should have occurred after the corona crisis can no longer exist.
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Now we have to ask ourselves the question: who should be hit by the decline in prosperity and how badly? There are three options:
- The state stays out of this question. Rich people with decent savings don’t mind a few dollars less. Poor citizens, on the other hand, often cannot bear the new burdens. Mass private bankruptcies would be the result. In the end, this costs even more prosperity. So this option is the worst.
- The state redistributes. He uses tax money to support low-income households in particular and gets the money back from the richer ones – with higher taxes or at least by refraining from any relief.
- The state finances the relief with debt. But he has to pay it back at some point. For this he needs more money in the future. He can catch up with higher taxes in better times.
As far as the German state is concerned, it has currently opted for all options. The federal government wants relief, absolutely even, but not only for the low-income.
But it shouldn’t be higher taxes either. And new loans would be very unfavorable right now, after all, the debt brake should be in place next year.
If you put one and one together, you realize that it doesn’t add up. Anyone who wants to relieve the burden should do so in a targeted manner. When it comes to financing, there are reasons for both redistribution and borrowing. It is impossible to do without both.
You have to die a death.
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