Making Germany Happy

June 28, 2009

Comments

Yesterday Glenn Reynolds linked to an article in Der Spiegel complaining about “Obama’s mistakes”:

Just as the US public initially rallied behind the war President Bush — even to the point of re-electing him — Americans have now thrown their support behind the debt president Obama. The mistakes of the Bush administration are now widely accepted. The mistakes of the Obama administration are still not recognized as such. They are seen as the truth.

Glenn follows the link with a quote from a reader:

“The piece drips with der Spiegel’s typical anti-Americanism, but when your spending alarms even the Europeans, it’s time to reconsider.”

The article is worth reading if only because it illustrates nicely a point I made before the election: Germans will be suspicious of the American president because he’s the American president, not merely because of the policies he’s supported. Any foreseeable American president is bound to make decisions that won’t make Germany happy.

Frankly, I doubt that the Germans are particularly concerned about our spending. Rather, I suspect they’re complaining that we don’t tax ourselves enough.

According to the OECD the tax to GDP ratio in the United States is about 28.3% as of 2007, the most recent year for which they have statistics, while for Germans it’s about 36%. By German standards we’re undertaxed and getting more so rapidly. Our public debt to GDP ratio is rising rapidly, too, from where it is now (which has been roughly the same as Germany or France) into the same territory as Belgium’s or even Japan’s.

Would Germany be happier if we behaved more like Germany? Frankly, I doubt it. If we did we’d be spending less than 2% of our GDP on our military which means that there would be little counterbalance to a resurgent Russia. Further, until very recently Germany has been one of the few countries running a trade surplus with China. Simply stated the Chinese factories producing consumer goods for sale in the United States are built and stocked with German machines. If we behaved like Germany we’d have been running a trade surplus with China which means that the Germans wouldn’t have been able to sell all that heavy machinery to the Chinese.

In my view the bottom line is that very little that we could do would make Germany happy and, consequently, what they think isn’t that interesting to us.

19 responses to “Making Germany Happy”

Eric Florack

June 28, 2009 at 2:03 pm

In my view the bottom line is that very little that we could do would make Germany happy and, consequently, what they think isn’t that interesting to us.

Correct. And let’s assume by some miracle we manager to make Germany… or for that matter, Europe as a whole, happy. What have we gained?
LaurenceB

June 28, 2009 at 2:52 pm

f we did we’d be spending less than 2% of our GDP on our military which means that there would be little counterbalance to a resurgent Russia.

I’m too lazy to do the math, but I’m pretty sure that if we spent 2% of our GDP on our military we would still be dwarfing the military expenditures of Russia. And that’s assuming, of course, that you’re correct that Germans are pleased to see us “counterbalancing” Russia’s military – which I suspect may not be true.
Joerg

June 28, 2009 at 3:02 pm

Dave,

Nobody says the US should make Germany happy.

Spiegel Online’s Anti-Americanism is well known. What is disappointing rather is that you make it sound as if Spiegel’s opinion reflects the opinion of “the Germans.”

Most Germans don’t give a damn about US deficit spending. The majority of Germans (like most Americans) does not give much serious thought to most economic issues. Most German commentators are concerned about deficit spending and huge debts in general. Therefore we created the Maastricht criteria, which we sometimes break, but they are still a benchmark, because we know that creating huge debts for our children and grandchildren is not good, and will cause economic troubles even in our life times. Thus Germans are concerned about US deficit spending as well.

Moreover, what do you make of Instapundit’s qoute? “When your spending alarms even the Europeans, it’s time to reconsider.â€

Isn’t it funny, that even the conservative WSJ agrees with the oh so “liberal” German fiscal policies? See for instance this post of mine on Merkel’s warning
Dave Schuler

June 28, 2009 at 3:08 pm

Nice to “see” you again, Joerg.

As I suggested in the body of my post, I don’t think the complaint is so much that we’re spending too much but that we’re borrowing too much. Hence my comments about taxation.

As I see it the problem with this is that we have little choice. We’ve got to engage in some sort of fiscal stimulus because monetary policy can go now farther. That stimulus could take the form of more spending or less taxing but either way we’ll be borrowing more for the near term.
Joerg

June 28, 2009 at 3:27 pm

Thanks for responding, Dave!

I have been “seeing” you all the time, i.e. reading your post 😉 , but unfortunately lack the time to comment.

Why do you need such a big stimulus? Isn’t that socialism? Didn’t Americans criticize Europeans for doing this for decades? Now we learned our lesson, but you reinvent it. Why not let the market fix itself?

Anyway, I understand that due to the smaller safety nets in the US, you guys need a bigger stimulus than we do. Okay. But it would be nice, if we would not any longer get criticized for our “huge” welfare system and huge tax.

High taxes are not worse than huge deficits.

Another thing that bothers me is that many Americans demand from us Europeans that we contribute more to US led missions. All these missions are very expensive. Europeans (like Americans) care more about their jobs, health care and the education of their kids than about promoting democracy in Iraq and Afghanistan.

“I don’t think the complaint is so much that we’re spending too much but that we’re borrowing too much.”

Without the wars and ambitious state building missions in Iraq and Afghanistan, you would not need to borrow so much. The economic stimulus would be easier to finance.

“As I see it the problem with this is that we have little choice.”

I guess so, but Iraq was a war of choice. Maybe in a few years, more Americans might even think that Afghanistan was a war of choice, i.e. that it would have been sufficient to bomb the Taliban extensively rather than trying state and nation building for billions of dollars.

Money that is missing now.

Anyway, it’s not up to me to criticize US decisions. Rather the point that I am trying to make is: Americans should not criticize Europeans that much for their small international contributions, because all these wars are terribly expensive and the money is needed for domestic economic issues, because higher taxes and higher deficits are harmful to the economy in the long run. (Still you can criticize for the gap between rhetoric and policy.)

Do you know what I mean?
Eric Florack

June 28, 2009 at 4:26 pm

Why do you need such a big stimulus? Isn’t that socialism? Didn’t Americans criticize Europeans for doing this for decades? Now we learned our lesson, but you reinvent it. Why not let the market fix itself?

Two things;
First, you ask questions most of US have been asking. THe answer, I fear is the American people have elected a socialist.

The other thing.. I note with some irony that goin more socialist is what left in this country mean when they say we should be more like the Europeans.

Without the wars and ambitious state building missions in Iraq and Afghanistan, you would not need to borrow so much. The economic stimulus would be easier to finance.

And without them, IRan would have had nukes by now. This is desirable?
Joerg

June 28, 2009 at 4:31 pm

“And without them, IRan would have had nukes by now.”

How did the Iraq and Afghanistan wars slow Iran down?

I thought the wars on the Western and Eastern border of Iran just made them more determined, since they feel surrounded by nuclear powers, US and Pakistan.

Anyway, so you spend a few hundred billion dollars on the wars (trillion?) just to save a couple of years before Iran gets the bomb?
anjin-san

June 28, 2009 at 5:16 pm

How did the Iraq and Afghanistan wars slow Iran down?

Short answer is that, of course, they did not. If anything, our demonstrated willingness and ability to depose middle eastern governments we don’t like made the acquisition of nukes by Iran much more urgent.
Eric Florack

June 28, 2009 at 6:01 pm

The sort answer of course is that they limited the ability of Radical islam in all three areas.

Determined they may have been, but able to respond in force? Not so much, anymore.

Anyway, so you spend a few hundred billion dollars on the wars (trillion?) just to save a couple of years before Iran gets the bomb?

You do understand this is survival we’re talking about, right?
Mike

June 28, 2009 at 6:15 pm

Joerg – don’t try to debate Florack – anyone with commonsense knows that invading Iraq has nothing to do with Iran other than increase their urgency to develop nukes to prevent any future invasion of Iran by the US – some think (naively) that if there is a flourishing democracy in Iraq ( 🙂 ) then this will inspire the Iranians to overthrown their gov’t and move toward democracy. Of course look at the shining example in Iraq.

Joerg – more Americans agree with your posts than you probably get from the “news”
Dave Schuler

June 28, 2009 at 7:11 pm

Why do you need such a big stimulus? Isn’t that socialism? Didn’t Americans criticize Europeans for doing this for decades? Now we learned our lesson, but you reinvent it. Why not let the market fix itself?

I’ll answer the last question first since it’s the easiest. It’s politically impossible for any president to “let the market fix itself”. Something must be done. For President Bush back in 2001, it was tax cuts, for President Obama it’s spending. But something will be done.

Complaining about socialism presents a false dichotomy. Neither the German system nor the American one is either fully socialistic nor completely free market. In some ways we’re more free market, in others the Germans are.

I don’t feel qualified to tell Germans how they should run their domestic economy. I would wish that Germans would give me the same courtesy but, alas, that’s not to be.

I would have preferred a somewhat different spending package than was passed by the Congress just as I would have preferred a different tax cut than President Bush. That wasn’t in my control. However, to be effective in an economy of our size fiscal stimulus must be large. A $400 billion stimulus package in the U. S. is roughly is the equivalent of an $80 billion one in Germany.

You may not have noticed: I rarely critique the domestic arrangements of other countries. I feel that people are entitled to their own mistakes. What suits Germans may not suit Americans and vice versa. Differences in circumstances and tastes don’t seem to deter German news media from engaging in the passive aggressive claptrap they’ve been dealing out for the last thirty years, at least.

Without the wars and ambitious state building missions in Iraq and Afghanistan, you would not need to borrow so much. The economic stimulus would be easier to finance.

You clearly don’t understand fiscal stimulus. To have a stimulus effect it must be borrowed.

That having been said, don’t blame me for Iraq or Afghanistan. I opposed both invasions. We did what we did and now we are required by international law, political necessity, and common decency to make the best of the situation.

Americans should not criticize Europeans that much for their small international contributions, because all these wars are terribly expensive and the money is needed for domestic economic issues, because higher taxes and higher deficits are harmful to the economy in the long run.

I wouldn’t have invaded Afghanistan and if I had I wouldn’t have made it a NATO mission. However, that’s water under the bridge and if a military alliance has any validity its members need to contribute their share. This might be a good opportunity for James to step in with some observations on NATO’s future role.
PD Shaw

June 28, 2009 at 8:16 pm

The last time the Americans announced plans to reduce their military spending by removing troops from Germany, the Germans cried foul. In 2004, Germans were spending $35.1 billion on defense, and the Americans were spending $11.2 billion annually to finance its military presence in European NATO countries, primarily in Germany.

I know where I would start military cuts, but I didn’t campaign there.
An Interested Party

June 28, 2009 at 8:33 pm

Why do you need such a big stimulus? Isn’t that socialism?

I assume you are being facetious? How exactly is government spending in and of itself considered to be “socialism”?

And without them, IRan would have had nukes by now.

What a crock of shit…there is absolutely no proof that the wars in Iraq and Afghanistan have slowed down the Iranian’s nuclear program or caused them not to have nuclear weapons by now…
anjin-san

June 28, 2009 at 9:16 pm

The sort answer of course is that they limited the ability of Radical islam in all three areas.

Iran is a nation state with considerable wealth, resources and a populace that is pretty well educated. The wars in Iraq and Afghaninastan decreased their military potential not a whit. If anything, it has increased because we thoughtfully deposed their greatest enemy.
mpw280

June 28, 2009 at 10:01 pm

The germans are only happy when they are trying to conquer the rest of europe, and we have stopped them two times in the last 100 years. Of course we can’t make the germans happy we stopped their ideas of world conquest not once but twice. mpw
mpw280

June 28, 2009 at 10:03 pm

anjin-san
the war between Iraq and Iran left Iran with a population gap, this is what will haunt them. There is a population of old farts who want to control things and under employed well educated young people who are getting pissed off at being left behind the rest of the world. mpw
B. Minich

June 29, 2009 at 9:58 am

Germany and the US are going to have big differences of opinion no matter what happens, due to their seperate histories. During the Great Depression, the US had major issues with deflation. Meanwhile, the Germans dealt with hyperinflation. These differences in experience lead the US to trend toward policies that will inflate the currency, while the Germans will want to deflate it – thus, Chancellor Merkle’s noises about how the US is printing too much money. (To be sure, the US worries about inflation too, but when crisis hits, it isn’t what they worry about first.)
charles austin

June 29, 2009 at 1:23 pm

This analysis is predicated on their being one “Germany” to try and appease when it comes to policy and public opinion. I would think this is just as fallacious as assuming there is one “America” to try and appease.