The incentives are stacked up really weird here. There are a lot of situations in which earning more money just means paying more tax and getting less social benefits, so your income stays about the same.
I'm personally leaving next year. But there are many other reasons.
Why was this downvoted? The current system of providing benefits to “poor” in Germany absolutely kills any incentive to earn more than 3k gross income per month.
Anyone earning more than that actually starts to earn less, as the benefits immediately go away (e.g. rent support) and leaving you with less money on the table.
A family of 4 (2 unemployed adults and 2 kids) qualify for 2k to 3k Eur (net) benefits per month, meanwhile any “working” adult get slapped with 51% effective tax rate without any benefits at all. Basically you share your income with another family just because they do not feel like working.
> meanwhile any “working” adult get slapped with 51% effective tax rate without any benefits at all
This number is demonstrably false. I just checked my payslip from last month. Gross salary is around 7000 euros, and net salary is around 4300 euros, giving an effective tax rate of 39%. And that's only if you consider health insurance, care insurance, unemployment insurance, and the statutory pension plan "taxes". I don't mean to enter into a debate into what constitutes a tax, but in many other countries, these types of insurances are handled privately, so the tax rate will "look different" without meaningfully describing the difference in actual expendable income. Effective tax rate on my payslip just for taxes that are called "tax" is around 20%.
If you are counting statutory insurances into your understanding of tax rate, then the part of "without any benefits at all" is just ludicrous hyperbole, or we have a very different understanding of the word "benefit".
I never thought about it this way. This explains quite a lot. I guess the only people who stay are those who don't have the creativity or desire to enjoy their wealth beyond just making it, whether they like their jobs or not, which, for some reason, does strike me as quite 'German'.
Government spending is still exploding [1] because of high social spending. You can spend every Euro only once. Government decided to prioritize like it did. Tax income is very high.
And still all other G7 countries have a much higher debt level. So there is really no excuse to neglect critical infrastructure for an ideology of austerity.
Of course it is not trivial at all, if you consider voting power (-> cannot cut tax money going into pensions) and legal limitations (-> cannot cut Bürgergeld/Grundsicherung by much, as it is not allowed to go below the Existenzminimum (minimal amount of money required to sustain a citizen)). Especially if you are looking at the real requirements (military, infrastructure, etc.) going by the tune of trillions.
And again, German debt levels are way lower than any other G7 country's. So there is no excuse.
>Of course it is not trivial at all, if you consider voting power
Indeed. I think you figured out the issue. Politicians aren't elected to fix infrastructure, but to distribute taxes through the social security system.
Hard to blame politicians for wanting to get elected again, though. This is a systemic issue with democracy. And even an approach with more direct democracy (in contrast to the indirect, parliamentarian democracy) shows that there are issues with denial of reality on the voters side (see for example the recent Swiss vote for the 13th month pension).
"A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury."
And yet the social democrats have infamously implemented reforms that drastically cut back on worker's rights and social welfare.
The reason the government can't go below the Existenzminimum is that this would be a violation of the constitution's guarantee of human dignity according to the federal constitutional court of Germany, not because it would annoy the poors.
Also there is documented corruption in almost all political parties in federal politics. Most of that corruption is legal though but the beneficiaries are decidedly not the recipients of the "social security system" but rather of public-private partnerships and subsidies.
If you think the poor are leeching off society then the same goes for the fossil fuel industry, the agricultural industry, car manufacturing and other industries that are heavily subsidised and benefiting for extremely specific tax exemptions and funding programmes. One of the biggest beneficiaries of the COVID relief programs in Germany unlike the US was not ordinary taxpayers but airlines and large manufacturing companies.
>car manufacturing and other industries that are heavily subsidised
Any evidence that BMW, Mercedes and VW aren't massive net tax payers?
I had this conversation before, where someone claimed that e.g. the automotive industry was heavily subsidized. But when I looked into it I found absolutely no evidence.
The German government is directly supported by the massively successful German industry. It is the sole reason Germany can even afford it's welfare state. On it's face it is absurd to claim that that industry is tax payer supported, completely ridiculous.
>If you think the poor are leeching off society then the same goes for the fossil fuel industry, the agricultural industry, car manufacturing and other industries
Social security is the top expenditure point in the budget.
Social security is infrastructure. What do you think infrastructure exists for? Cars and electric signals don't get to vote. And Germany still has an appalling amount of childhood poverty nevertheless.
It would indeed be trivial to "find the money" but the neo-liberal FDP is acting as an internal opposition demanding both strict adherence to the self-imposed debt brake (which was put in place to allow for investment during economic downturns by avoiding unnecessary debt when things are going well -- except everyone promptly forgot about that justification) as well as neither enacting new taxes (e.g. additional tax brackets), raising existing taxes nor resuming the very moderate wealth tax we suspended (not abolished!) years ago for no good reason.
> Broadly speaking the only solutions are tax rises, spending cuts or more debt. But these are three very different parties, with conflicting views over borrowing and spending.
So they basically just couldn’t come up with a solution when trying to balance the budget. Definition of death by committee, which is a representation of the will of the people.
How can we do this better? This feels so important, yet it feels impossible if this is the outcome of telling our politicians they need to respect a budget.
Feels like the problem isn't the committee per se, more the committee's incompetence and inability to effectively compromise.
Coalition politics only works if the members recognise the need for compromise and are competent enough to achieve it. I'd honestly expected German politicians to be better at this tbh.
In some topics the coalition parties are diametrically opposed to each other. In addition, the smallest party (FDP) is fighting for pure survival (5% barrier). This means, the chances for good compromises are just especially low in this constellation. Also, the coalition treaty was agreed upon before the Ukraine war happened. That makes it useless in some ways, removing any common ground.
Here is a bet: Once a new coalition gets elected in 2025 (most likely led by the Union (CDU/CSU)) exceptions to the strict rules of the debt brake will be found. Currently, the Union as part of the opposition has no motivation to agree to any exceptions (2/3 majority required). But that will change very quickly once they are part of a coalition.
Yes, the FDP is part of the problem. But since you need a 2/3 majority to establish more special budgets even getting all coalition parties on board, you also need parts of the opposition.
Beware of the Constitutional Court (Karlsruhe). Unless the Constitution is amended explicitly, any attempts to bypass the Debt Brake by creative accounting etc. will likely be slapped down by the judges.
The "creative accounting" part regarding the recent court decision was the attempt to re-use a Corona special budget for something else, after the Corona pandemic was over. This is pretty easy to avoid for new special budgets. You "just" need the 2/3 majority.
That would require the new coalition to have a 2/3 majority which is unlikely I think. Most probably it will be a Große Koalition again with the CDU/CSU around 35% and the SPD around 15%.
My point was, that in my opinion the large opposition parties will agree to special budgets, securing the 2/3 majority, mostly to be consistent and maybe also out of a feeling of responsibility.
You only need 50% majority to declare an extraordinary emergency situation ("außergewöhnliche Notsituation", Art. 109 Abs. 3 Satz 2 GG) and then any expenses related to the emergency do not fall under the debt brake.
The government can just direct government-owned corporations (e.g. Deutsche Bahn) to make new shares and purchase them with fresh money, thus giving the corporation a free cash infusion. Financial transactions are also not covered by the debt brake.
Reducing debt works only if the government is willing to make significant budget cuts. It is pretty clear the focus of the German government is the maintenance of it's social security system.
It is also worth pointing out that the debt break means the government is incentivised to increase taxes as funding for their expenses.
Just to add some context: The largest budget positions of social security (by far) are supplements to the public retirement system.
As of now about 25% of the federal budget go towards retired people [1] (in addition to all mandatory "taxes" paid by working people).
The vast majority of the money is not spent on charity but is part of the societal deal that younger people support the elders. So the payments retirees get are the result of them paying into the system for 30 - 40 years.
The shrinking numbers of younger working people and the beginning retirement of baby boomers make this system unsustainable and politically very hard to change.
Something will give sooner or later but god knows what that will be.
> So the payments retirees get are the result of them paying into the system for 30 - 40 years.
On a societal level, it is more accurate to frame this as “the purchasing power the retirees get are the result of the dynamics of political power in the society”.
This is clearer because regardless of what any entity pays into whatever, a change in political power in the future can always change “the deal”.
Also, there are a few ways for deals to change. One is that payments promised in the future can nominally satisfy the original deal, but the purchasing power of those payments (which is really what people want) can be eroded, namely by government policy. So you can pay into the system all you want, but you might not be able to but what you expected you were going to be able to buy.
Another way is that if you are promised benefits, such as healthcare, then the quantity/quality of healthcare can be reduced. Longer wait times, less qualified personnel, less quality control in medicines coming from factories that are not being inspected as often, etc.
In addition the individual worker has been promised "you pay now and get security later" which makes it very hard to argue against. Your stereotypical grandma isn't suited to be framed as a "drain on society" and she isn't typically getting rich of it. It's the sheer amount of grandmas that is bringing the system to it's knees.
Much lying happened back in the day when it became apparent that birth rates would result in a lower standard of living for old people who worked all of their adult live.
Rather than let the system fail gradually or seek to reform it in general, politicians took the easy way out and started supplemanting it from the general budget and have been ever since.
>Rather than let the system fail gradually or seek to reform it in general, politicians took the easy way out and started supplemanting it from the general budget and have been ever since.
I don’t blame the politicians, as it is impossible to get elected on a platform of reducing the biggest voting bloc’s (perceived) quality of life.
It’s just a structural weakness in democracy due to the way humans are, papered over by growth due to high fertility rates in previous generations and the resulting momentum that I think started petering out somewhere in the 1990s.
Well, Germany had money for Covid shenanigans (a lot of which went to friends and family, see various mask procurement scandals). It has money for a WW1-style trench warfare in the East which has been a stalemate for 2 years. It has money to refuse cheap energy via the remaining Nordstream-2.
So, let the bridges fall apart!
(The above does not mean that I am in favor of the aggressor. As far as I'm concerned, the aggressor can get the hell out of the occupied territories. At some point though one needs to consider whether it is possible to make progress militarily.)
If you remove those who are too young to be in employment (i.e. children and minors) and those who are beyond retirement age and those who are too ill or disabled to work, the lion's share of the social security system exists to subsidize companies unwilling to pay their workers a living wage.
Are you saying the government should drastically raise the minimum wage in order to cut back on social security expenses?
That's literally true. There's even a word for it: Aufstocken.
Are you saying Bürgergeld is too high? That the standard of a living wage should be lower than Bürgergeld currently is? How do you define a "living wage" then?
You say minimum wage is (too?) high, taxes are "drastically" too high and social spending is "drastically" too high. What does that mean? What tax rates per bracket would you find acceptable? How much lower should Bürgeld be or which group of current recipients should be excluded from it? Or what other social welfare programmes are you thinking of that should be cut?
It's easy to say that "social spending" is too high if you look at a context-free aggregate value. But what do you actually envision when you say that you think it should be "drastically" cut?
Maintenance of infrastructure is also harder to finance, because it's not a large single lump sum but an inconsistent stream of multiple grants and tenders, and it becomes the local government's responsibility, who in turn have a smaller pot of funds.
Am I correct in that driving at very high speed reduces the risk of dying in a bridge collapse? (Even though speed contributes to the bridge failing faster, so a tragedy of the commons.) At high speed you spend less time on the bridge, and may have enough forward momentum to carry you over a developing crack. OTOH if you fall through a collapsing bridge, you could die no matter what your speed.
Germany decided to place the vast majority of freight transport on the autobahn instead of on rails as most countries do. I guess this is going to have a self-reinforcing effect with autobahns being increasingly congested and badly maintained.
There is plenty of money for bridges in this country if would stop taking it away from productive citizens that create value and giving it to unproductive citizens that just further reduces willingness to pick up a job. Working full-time vs living on benefits roughly evens out here in Germany, so I fully understand fellow citizens who stop working. Not only that, it justifies giant government departments that deal with determining each citizens needs and generally administering this redistribution that adds absolutely zero value. We need to fix these incentives.
Minimum wage around 1300 EUR per month. If you are on benefits you get maybe like 500 EUR and the gov pays your rent. Plus you get bonuses for kids, so if you are a single mom with several kids (increases your benefits) and no qualifications, working is not economical.
Not sure if that's a good or a bad thing, i imagine if you do not work, you can spend more time with the kids.
What costs? Healthcare, schooling (including kindergarten) and transportation are free for kids. Only thing you need to do is feed them and buy them some clothes, and government already pays you money for that.
Exactly. The ones benefitting most in German society from people in the economy are „full-time“ politicians and „Beamte“ enjoying the worlds best healthcare, above average pay with little to no perf review, and a whole separate extremely nice pension system.
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