Tax cuts are one way to say things, but look closely at what they are rejecting - a VAT tax cut, which is by definition a progressive tax cut, and income vouchers, which are also progressive. In both cases, you are getting ready to help those who will be needing the help, and in turn helping get the economy working.
What's more, while I recognize Münchau downplays public investment as a proper vehicle for stimulus, even Germany could use some, which would pay off in future. Alternative energy; improved transportation grid; public housing.
But where Steinbrück really shows he is out of his depth is when he says the following:
He also rejected the idea of issuing spending vouchers. He said these could boost consumption in lower income categories, but added: 'That has nothing at all to do with lasting support for economic growth.'
If the German economy follows the trajectory that is currently forecast (and remember, the risk is on the downside, not the upside, that's pretty much an established fact) then he is absolutely wrong. The lasting damage a couple of years of severe recession and negative growth in the -2 to -4% territory (if not worse) is real. The impact this will have on the health of Germany and the Eurozone makes a couple of year's deficit spending pale in comaprison.
Deficit spending, it should be added, wich is much easier to pay for when the size of the economy is larger thanks to the stimulus.
Too bad the Germans (and the Dutch for that matter) can't be asked to have the severe recession for themselves, since they seem so hell-bent to make it as bad as possible. Alas, we all will be treated to it, just like in the early 1990's... Fai de bèn a Bertrand, te lou rendra en cagant
As for spending vouchers, that's a better idea, as long as they have some investment aspect. The Süddeutsche had a nice idea in that context which I wholly favour:
The World From Berlin: Merkel Puts on the Bailout Brakes - SPIEGEL ONLINE - News - International
The center-left Süddeutsche Zeitung writes: "The level of the discussion in this country about the wisdom or folly of a stimulus program has been meagre. Instead of first considering what the criteria for such a program ought to be, all parties are contenting themselves with taking old ideas and presenting them as new. What we're getting is a hodgepodge of proposals which in the best case won't damage growth, but which will also certainly do no good to reverse the current trend." "If we really want to put people in a buying mood, than we simply have to give them some money. If every citizen were given a climate-voucher worth €250, which could be used until Jun. 30, 2009 to buy energy-saving household and garden appliances, it would not only boost consumption, it would also promote climate protection... In order to stimulate corporate investment, they should be allowed as an exception to deduct the cost of new machine purchases in 2009 from their taxes."
The center-left Süddeutsche Zeitung writes:
"The level of the discussion in this country about the wisdom or folly of a stimulus program has been meagre. Instead of first considering what the criteria for such a program ought to be, all parties are contenting themselves with taking old ideas and presenting them as new. What we're getting is a hodgepodge of proposals which in the best case won't damage growth, but which will also certainly do no good to reverse the current trend."
"If we really want to put people in a buying mood, than we simply have to give them some money. If every citizen were given a climate-voucher worth €250, which could be used until Jun. 30, 2009 to buy energy-saving household and garden appliances, it would not only boost consumption, it would also promote climate protection... In order to stimulate corporate investment, they should be allowed as an exception to deduct the cost of new machine purchases in 2009 from their taxes."
Note the nuance: lasting support. While I have serious doubts that Steinbrück would favour a lasting support in the form of a permanent spendable income increase like a payrise or a minimum wage definition (where non-existent)/raise (where existent), the vouchers will be an extra income and consumption that'll end. (Anso see my comment downthread.) Then again, Steinbrück may be out of his depth discussing lasting supports in the context of temporary anti-cyclical measures. *Lunatic*, n. One whose delusions are out of fashion.
