|Your pal, JohnM, is pontificating over at the Centrist place about global warming. Quite amusing.|
His discourse on German economic soundness, which he utterly cannot comprehend, is also amusing.
Why are the Germans doing OK?
Here's why, from Acting Man, one of the premier macroeconomic blogs on the planet:
Then-Chancellor Gerhard Schröder, a Social Democrat, surprised the world, to say nothing of his own voters, by pushing through the labor-market reforms that paved the way for the current relative prosperity. The changes cut welfare benefits and gave employers more flexibility in reaching agreement with their employees on working time and pay.
The Schröder government, and later the coalition under Angela Merkel, also cut federal corporate income taxes to 15% from 45% in 1998. Include state taxes, and the effective corporate rate today is close to 30%, down from 50% or more in the 1990s. These reforms made Germany more competitive, attracted investment and jobs, and paved the way for the country's economic resurgence and an unemployment rate currently at 5.7%.
Mrs. Merkel's government did the world an additional favor in 2009, amid the financial crisis, by rejecting calls from the International Monetary Fund, then British Prime Minister Gordon Brown, President Obama, Treasury Secretary Tim Geithner and the same dominant Keynesian consensus to join the global spending party.
"They've already pumped endless amounts of money into the economy," said German Finance Minister Wolfgang Schäuble in 2010 about U.S. policy. "The results are dismal."
Germany's resurgence might have been even stronger if Mrs. Merkel and her coalition partners hadn't reneged on their tax-cutting campaign promises and raised VAT and other taxes in a bid to stay close to budget balance. Still, Europe is lucky that its largest economy remains strong and creditworthy.
Yet now Mrs. Merkel is widely berated for avoiding the policy errors that led to the debt crisis and for having the nerve to encourage other countries to emulate the reforms that worked in Germany. The Keynesians will never forgive the Germans for being right.