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Germany's Economic Recovery Despite Lack of Stimulus

  1. Dec 7, 2010 #1
  2. jcsd
  3. Dec 8, 2010 #2
    While Germany has a comprehensive social safety net - it differs from the US model.

    "The system's benefits are so extensive that by the 1990s annual total spending by the state, employers, and private households on health care, pensions, and other aspects of what Germans call the social safety net amounted to roughly DM1 trillion (for value of the deutsche mark--see Glossary) and accounted for about one-third of the country's gross national product (GNP--see Glossary). Unlike many of the world's advanced countries, however, Germany does not provide its citizens with health care, pensions, and other social welfare benefits through a centralized state-run system."

    " Over time, these programs came to provide a wide net of entitlements to those individuals having a steady work history."

    So far, Obama's Stimulus Plan has reduced tax collections (left a few dollars each week in everyones paycheck - the 95% of taxpayers) approximating $243 Billion, paid another $171 Billion (approx) in Entitlements, and "shovel ready" focused spending on "Contracts, Grants, and Loans" of $161.9 Billion - and the result(?) - the unemployment rate went up to 9.8% recently.

    Now, US Democrats want to engage in class warfare - raising taxes only on the people who pay the majority of the taxes - and couple this with additional social spending (Medicaid expansion).

    IMO - the US has an entitlement mentality - based upon need and/or qualification - with politicians constantly expanding the group to win favor - coupled with a class warfare - a shrinking taxpayer base.

    It's my opinion the US system has evolved into - let the rich pay for everyone and in Germany - everyone is expected to contribute.
  4. Dec 8, 2010 #3


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    Germany's most important difference IMO- all exported products by companies in Germany are tax-free. This has made Germany an export powerhouse.

    The US should follow suit!
    Last edited: Dec 8, 2010
  5. Dec 8, 2010 #4


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    To clarify, you're blaming Obama for enacting hundreds of billions of dollars worth of tax cuts?
  6. Dec 8, 2010 #5
    Did you visit the link? Obama spent $243 BBillion on his tax break for 95% of Americans.

    "A report from the White House Council of Economic Advisers, meanwhile, asserts that the president's economic stimulus package has sent more than $200 billion in tax relief and other benefits to mainly middle- and lower-income families since its passage."

    Do you think Obama didn't give away $243 Billion in the name of a tax cut?
  7. Dec 8, 2010 #6


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    Don't you understand my question? I do not deny the fact that Obama has enacted close to $300 billion in tax cuts over the past 2 years.

    My question is if you think he deserves blame for this?
  8. Dec 8, 2010 #7
    Pelosi and Reid are only capable of putting legislation on his desk - he has to sign the paper.

    "Obama focused on the $787 billion stimulus plan, an ambitious package of federal spending and tax cuts designed to revive the economy and save millions of jobs. Most wage-earners will soon see the first paycheck evidence of tax breaks that will total $400 for individuals and $800 for couples. "

    Is Obama NOT responsible for the Stimulus now?
  9. Dec 8, 2010 #8


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    I can no longer figure out if you really do not understand my question!

    Again (and hopefully for the last time), I'm NOT saying that Obama isn't responsible for the Stimulus Bill. I'm specifically asking you if you think it was a bad thing that he enacted the $240-odd billion worth of tax cuts, since that's what your earlier post suggests.
  10. Dec 8, 2010 #9
    I'm not sure what you mean by "bad"? Do I think it was a waste of $240,000,000,000 - yes...$400 spread out over 52 weeks/365 days (you get the idea) - it's hard to say if any jobs resulted? If they were going to spend that kind of money, I would've preferred a micro-business program - perhaps a $24,000 cap per business (easier for the example) - this would've funded 10,000,000 small business ventures with $24,000 each - is that correct(???) - I guess the cap could've been $50,000 per business - talk about job creation!
  11. Dec 8, 2010 #10


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    What does one normally mean? Do you think it was a good move or not? Are you glad it happened or not? Did you support it or oppose it?

    I would think that answers my question. Or do you not consider wasting $240B a bad thing?

    Where does the $400 number come from? And do you think that's too little or too much?

    Most estimates I've seen say that the Stimulus Bill saved/created on the order of a million or so jobs as of several months. I don't know how many of those were specifically attributed to the tax cuts.

    You are saying now that you want a giant, broad tax credit to small business worth hundreds of billions of dollars, when you've repeatedly opposed just that, in favor of very specifically and carefully targeted measures. (Of course, that's roughly what Obama has already done - http://www.whitehouse.gov/the-press...has-signed-eight-small-business-tax-cuts-law- )
    Last edited: Dec 8, 2010
  12. Dec 8, 2010 #11
    Please see post 8 above - the $400 figure is for a single person and $800 for a couple.

    As for the job estimates - as I said - it's hard to say if any jobs resulted from keeping an extra ($400/52) $7.69 per week in pocket?

    To answer your question as I now understand it - No, the Stimulus was a giant mistake undertaken by a young and inexperienced President, eager to keep his base happy.
  13. Dec 8, 2010 #12


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    Obviously that can not account for the entire $240B. There are roughly 100 million households in the US. $240B spread out over them gives an average of about $2400 per household.
  14. Dec 8, 2010 #13
    Perhaps the personal habits of everyday Germans played a role in Germany's economic recovery; this article suggest Germans generally dislike debt.

    The same article claims Germany offers better job security to German citizens than the US does to US citizens. Also, Germany implemented some kind of "shorter workweek" system to aid soften the blow of the recession on the German workforce.
    And apparently Germans like to save their money, at least according to this Forbes.com article:

    Here is the CIA's World Factbook with lots of information on Germany; US link provided for comparison:



    Just comparing budgets; Germany lives within its means:
  15. Dec 8, 2010 #14


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    As Monique suggested in an earlier thread, going through a period of crushing hyperinflation can have that kind of effect on the national psyche.
  16. Dec 8, 2010 #15
    I'm still trying to figure it out - maybe "cash for clunkers" was included - I really don't know?
  17. Dec 8, 2010 #16
    Actually Germany had two stimulous packages.



    Their biggest come back was in industry, and not the service industry.

    For instance, the Sears Kennmore top of the line washing machine is now made in Germany
    Last edited: Dec 8, 2010
  18. Dec 8, 2010 #17
    According to an exhaustive report by the SF Fed, the effect of the stimulus bill on the job market was negligible.


    The Fed study is unique because it is comprehensive, independent, and does not rely on self-reported numbers by recipients of stimulus contracts to the White House (numbers which have been broadly shown to be unreliable). The results are also in line with predictions from academic models that examine output (employment market prediction is notoriously difficult, while output modeling is well understood), suggesting a generally accurate methodology.

    Note also that the Fed paper specifically excludes tax cuts. It attempts to measure the stimulative effects of increasing government outlays only. It also finds, most damningly, that the multiplier effect peaked in March '10, before turning sharply negative, a fact the Fed attributes to the transitory nature of contract jobs. In the long run, the removal of government-funded jobs from the economy coupled with the crowding out effect of the maturation of new government debt issued to finance the stimulus will have a two-fold negative impact on both employment and output.


    The CBO already predicted a long-run decline in GDP of 0.3% due to the crowding-out effect. This model assumed consistent and permanent job gains over the life of the stimulus, and no net job losses, meaning it, like most every CBO estimate, was too conservative. I would like to see the agency ordered by Congress to re-asses the long-run GDP effects using the data in this paper, but there's no chance of that happening in this congress, and little chance during the next congress.

    In light of this report, in my opinion, the stimulus bill should not have been passed. And I am generally warm to the principle of deficit public spending during periods of lower private consumption and higher saving. Clearly, the government is wholly incapable of allocating funds efficiently, even in the most favorable of macroeconomic times.
  19. Dec 8, 2010 #18


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    Thanks for the link and the analysis, talk2glenn; those are very surprising (IMO) numbers. I expected significant crowding out, but not this near-total amount.
  20. Dec 9, 2010 #19
    Amazing how that works, simply given some time for a free market to work itself out.

    The only thing is, if a government does nothing, it can't later claim any success for the natural swing of the tide.
  21. Dec 9, 2010 #20
    I think one of the articles mentions this. Basically the Germans fear inflation, whereas America, due to the Great Depression, fears deflation.
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