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Merkel is too much of a lefty, say "experts"

by Jerome a Paris Wed Jun 28th, 2006 at 08:38:56 AM EST

What have our newspapers come to? In what is supposed to be a big news article about Germany's reform of its healthcare system, there is no information whatsoever about the actual content of the reform, but multiple comments by economists and financial analysts about how the reform increases taxes and bureaucracy and thus is a disappointment.

I'll comment on the article below the fold, but let me insert here with full visibility Migeru's definition of economists:

Economists are like the Physicians of the 18th century: they had one cure for everything (bloodletting). Regardless of the question they always give you the same answer. And if the patient doesn't get well they say the dose was not high enough.

What a bunch of charlatans!

I am quoting the article in full, and inserting my comments after each paragraph, to show the full extent of their biases and incompetence.

Merkel changing her tune on taxes

BERLIN. Eight months into her term as chancellor, Angela Merkel is on the verge of raising taxes for the second time, in this case for a vast and bureaucratic health care system.

The proposal by her coalition of conservatives and Social Democrats envisions an expansion of the system to cover children that could cost taxpayers from €16 billion to €25 billion, or $20 billion to $31 billion.

Let's note first of all that neither the lead nor the title focus on the actual content of the reform, or even on the topic of healthcare, but only on the fact that the reform will increase taxes.

Even that fact that the apparent intent of the reform is to provide healthcare to children (something actually false, as children are already covered under the existing system in Germany) is not enough to make a tax hike palatable.

The message is clear: taxes are bad. And public healthcare = bureaucracy = bad. Even providing for children is not a goal worthy of tax increases.

Merkel hopes to spur the birth rate, an aim already given a boost when the government agreed this month on incentives to give working women generous financial help to have a family and then return to work. The final health care proposal should be ready by the end of this week and presented to Parliament before it goes on its summer break next week.

Merkel is already under fire from the business community for doing little on the reform front, and the costly new program will force her to decide how to pay for it. One choice is some kind of indirect tax, such as the value-added or sales tax; another is to raise the income tax.

No input on the content of the reform, but we know that it follows another costly incentive (to help women have children and then get back to work, again, what an outrageous public policy goal), and that the business community is unhappy about it.

It's costly, it's a tax, and it's not a "reform". (And how dare she want to actually pay for public spending she is committing the government to...)

Either measure is sure to be unpopular, particularly since Merkel has barely weathered the storm over raising the sales tax from 16 percent to 19 percent, an increase that takes effect next January. Economists have attacked this tax, saying it would do nothing to encourage consumer spending and thus to cut the unemployment rate of 11 percent.

(Note - a factual mistake: it's not a sales tax, it's the VAT which has been increased. The nitpicking is all the more relevant that there is a terrifying dearth of facts in that article). The only justification for the unpopularity of the measure is to mention (unnamed) "economists".

But let's flag one sentence here: "it would do nothing to encourage consumer spending and thus cut the unemployment rate."

As I wrote in an earlier story (Claiming Germany), Germany is the poster child of "reform": it has cut wages, boosted labor flexibility and massively improved the competitivity of its companies which, as a result, are taking full advantage of globalisation, boosting their exports, and enjoying record profits. Sadly, this has not been reflected in the real economy, whose growth is lagging because consumption is weak - because wages are stagnant.

So all seem to agree that increasing consumption (and thus wages) is the solution. But that goes directly against the whole logic of "reform". So what's the solution? (Cut taxes, of course)

Merkel came to office promising to cut taxes, reduce bureaucracy, and encourage competition and transparency.

Well, she came to office after negotiating with the social democrats, so her pre-election promises (even if the above over-simplification was correct) had to be adjusted to the reality of coaliton government. The conservatives did not win the elections, so their promises are moot.

But after spending several Sunday nights closeted in the chancellery with health experts from her conservative union and the Social Democrats, a plan is in the works that seems likely to create more bureaucracy at a higher cost to the government.

The decision has the makings of "bureaucratic monster," and an expensive one at that, said Winfried Fuest, economics professor at the Institute for the German Economy in Cologne.

Still no mention of the content of the plan, but sure enough, two more paragraphs to describe it as "bureaucratic" and a "monster" and costly. And, again, that's in a news piece...

Germany is beset by spiraling costs for medication, a declining birth rate and an aging population. All that is adding pressure on the health care system that insures 90 percent of German adults through 250 health care insurance companies, a system that eats up money with little accountability.

"There is absolutely no transparency in the way doctors charge patients in the public health system," said Fuest, whose institute is one of five economic research centers that advise the government. Nor is there transparency in the ties between drug companies and the doctors, he added.

"Spiralling costs" "a system that eats up money with little accountability". Sounds bad, right?

In fact, Germany seems to be spending pretty much the same kind of money on health care as most of its neighbors, not to mention less public money than the USA...

But still no mention of what the current plan is about, but yet another "economist" quote".

(click for larger version)

Patients in the public system do not receive bills. Instead, the doctor is reimbursed through the patient's public insurance company. Conversely, in the private health insurance system, patients receive a bill that meticulously records the cost of each treatment.

private = meticulous
public = ?? Unaccountable? Inefficient?

We "report", you decide.

But under the plan being fashioned, analysts say it is unlikely that the public health system will become more transparent and subject to competition.

"For years, politicians have spoken about the need to introduce transparency, but nothing has happened," said Fuest, a process that seems to be continuing under Merkel, despite her election promises to cut taxes and reduce bureaucracy.

Okay, we get the point. Merkel is bad, evil, horrible because she is raising taxes and not fighting bureaucracy. But WHAT'S IN THE FUCKING PLAN? Will we ever get the information, instead of endless editorial comment on the plan?

Elga Bartsch, a German economics analyst at Morgan Stanley, said: "When it comes to health reform, it seems this government is doing what the former coalition of Social Democrats and Greens did to finance the pension reform: They raise taxes.

"Merkel is already warning the public that the health reforms will be more expensive. The pity is that it will not lead to a structural reform."

[My comment: see comment above]

Before Merkel became chancellor in November, she said she wanted to introduce a flat health care fee of €109 for almost all adults; low-income earners and children would have been subsidized and contributions by employers into the health system would have been capped at 6.5 percent of wages. Skeptics of the scheme warned that it would result in a financial shortfall of €20 billion.

The Social Democrats wanted a people's insurance, or Bürgerversicherung. The idea was to bring into one public health system all the privately insured people - mostly high-income earners - but also civil servants and self-employed.

Ok; progress of sorts: actual information on earlier campaign proposals.

Depending on the details of the compromise now in the works, the health and finance ministries estimate that the costs of the reforms, particularly for insuring children, will range between the €16 billion and €25 billion.

Christian Dreger, macroeconomist at the German Institute for Economic Research in Berlin, said there was still no decision over whether the taxes would be direct or indirect. "Whichever way, it will not boost consumer spending," Dreger said.

This would be the second big tax rise since Merkel come to power. This month, plans to increase the value added tax from 16 percent to 19 percent effective next Jan. 1, became law, a step Merkel said was necessary to reduce labor costs and to trim Germany's budget deficit and adhere to the fiscal rules of the European Union's Growth and Stability Pact.

The hope to get facts on the plan was swiftly dashed, wasn't it? Back to "economists" and tax rises.

Luckily for her, the economy is growing, but consumers, fearful for their jobs, are saving instead of spending. Household savings have risen from 9 percent of disposable income to 11 percent, according to the Finance Ministry.

Speaking after last Sunday's seven- hour session in the chancellery, Merkel said that "in no way" would the people have to pay more for the health reforms.

But she has not fully explained how she will manage the costs. She said the aim was to use tax revenues to lower contributions from both the employers and employees. But even in her own party, leaders are skeptical and even fearful of a backlash from the public.

That's the only inkling of the actual content of the plan, which, according to dvx basically aims at transferring some of the funding for healthcare from payroll taxes to income taxes. But you basicalyl have to know the information already to be able to find the nugget in that paragraph...

But there's still more ink on "costs" and "backlash".

Wolfgang Böhmer, the conservative state premier of Saxony-Anhalt and himself a doctor, said he had no idea "where the money would be coming from," adding that the income tax should not be raised any further.

Others criticize the size of the bureaucracy the government is creating. According to some proposals, the employers, the employees and the state will all pay their contributions into a giant fund out of which the health insurers will receive a flat fee for every patient.

Any insurer that cannot manage with the allotted sum will have to collect additional revenue from patients. Bartsch of Morgan Stanley said she was not optimistic that the reforms would lead to much more efficiency. "In terms of transparency, the reforms do not get to the heart of the matter," she said. "In any event, the reforms will be costly."

So, that was the finale, with more "bureaucracy", "cost" and anonymous criticism, and still no description of the plan. How fucked up is that?

What a sad, sad piece of journalism. And the media wonders why people are turning to blogs and away from them?

Hint to newspapers: there are other constituencies in our countries than businessmen and financial analysts. Some of these "citizens", "workers" or "consumers" are even interested in news at times, in accessible healthcare (and not just in tax cuts), and certainly not in mindless editorial pro-business diarrhea.


In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Jun 28th, 2006 at 09:05:11 AM EST
Dang, Jerome. My "definition" was in response to their insistence on improving consumer spending, not to the whole article.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Wed Jun 28th, 2006 at 09:08:12 AM EST
it still applies, doesn't it?

We just have to replace "bloodletting" by "labor reform". I think it would be quite a catchy slogan ...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Jun 28th, 2006 at 09:24:35 AM EST
[ Parent ]
What a sad, sad piece of journalism. And the media wonders why people are turning to blogs and away from them?
Summarize this news story as saying "there exists a plan". Ignore everything else. Dig up the plan. Make up your own mind. Use the newspaper to wipe your butt. That's one expensive piece of toilet paper.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Wed Jun 28th, 2006 at 09:14:23 AM EST
Strange how somebody could label Merkel a lefty. Until now she looked to me more like Lady Thatcher dressed up as Miss Piggy. Her awful proto-fascist politics combined with that porcine gait, I mean, as the americans would say, if it looks like a __ if it walks like a __ and grunts like a _, then it must be a ___ !

Economists, indeed ...

by name (name@spammez_moi_sivouplait.org) on Wed Jun 28th, 2006 at 10:24:20 AM EST
Which only goes to show that you should never trust a right-wing newspaper representing the world-view of a rabidly right-wing nation to present news and information in a "Fair and Balanced" way.

Anyway, it should demonstrate to Merkel that no amount of kowtowing to the bush administration over the environment will get her a pass unless she becomes a total believer.

And didn't we have a discussion recently where we determined that economists are paid to come up with conslusions flattering to their paymasters ?

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Wed Jun 28th, 2006 at 10:33:52 AM EST
I agree the article is woefully inadequate at presenting real or useful information and biased economically.  I work with a broad spectrum of German industries, all of them see their economy as inadequate and are admiring of U.S. GDP.  Simulataneously there is a high degree of awareness and social conscious on the effects of this.

While reading Claiming Germany I thought to myself that, in my experience (not an economist), all of these contradictions may indeed be contradictions, but they are not mutually exclusive.  While there has been reform there are still myriad details that always crop up because of excessive bureacracy.  I've paid well for financial, legal and tax advice, not a bit of it matters because something changes, is found and then applied.

I work on a freelance basis, no doubt an area not well explored in Germany.  My "company" is small, the regulatory environment really doesn't make it easy.

I'm privately insured, so sorry to say I can't contribute much to the policy discussion on that angle yet.  The World Cup is a bit distracting for me, so I am getting caught up on a lot of news today.

I can say I am often charged a consultation fee of between 10-50 euros for simply picking up a prescription, after complaining I am not.  That transparency with billing is a good thing I think, and cost control in the public arena is a good thing--it seems some of the economists quoted above suggest it is not?

Last thought (sorry for rambling, but there is a wealth of topics between the two excellent diaries) is that I absoultely agree a big problem in Germany is simple business confidence.  Between manufacturing, finance, Mittelstand firms and huge international concerns, there is a pervasive unease.  The pursuit of ever increasing shareholder value, competing against numbers in the U.S., coupled with layoffs and cutbacks makes the employed feel at risk.  People are working very long hours as well, and feel understaffed for the workload.

Just my overall impressions...

by lizah (lizah at gmx.org) on Wed Jun 28th, 2006 at 12:52:28 PM EST

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