BDA AGENDA 26/20 | TOPIC OF THE WEEK

Expenditure of around 500 billion euros. 180 billion euros in new debt. How is this to be financed? The debt brake and the "black zero" proved their worth after the financial crisis and must be used again.

The crisis-ridden budget could only be financed by taking on new debt. But government debt is a burden for future budgets that future generations will have to bear as taxpayers. The state must return to a sound budgetary policy as quickly as possible. In order to return to the path of growth, the economy needs business-friendly framework conditions, but no additional burdens.

Avoiding the misguided path of higher charges for debt financing

For 2021, "only" 96 billion euros in new debt were originally planned. In the end, at around 180 billion euros, it is almost twice as high. In the two years of the Corona crisis, the federal government is thus taking on debt of almost 400 billion euros. By comparison, the 2019 federal budget had a volume of around 356 billion euros.

To finance these "corona debts", the (re-)introduction of a wealth tax or a so-called "corona soli" is already being discussed. Proponents forget, however, that many personal companies continue to be affected by the "Soli" and that a wealth tax often hits the business assets of family businesses - i.e. companies that are now struggling with liquidity and equity shortages. Because of the continuing high burden on businesses, they would again pay taxes on their profits as the economy recovers. Instead of discussing new burdens, the state must use available funds wisely.

Return to sound budgetary policies

Even if it wants to, a state cannot finance every project. For a project to be carried out, it must prevail against other projects in a competition of ideas. This is in keeping with the spirit of our economic order and with spending discipline. For the latter, the state already has two tried and tested instruments: the debt brake and the "black zero". Constant borrowing undermines the competition for ideas. That is why the two fiscal policy instruments must be used again.

Entrepreneurial capacity to act as a driver of innovation

However, Germany must also grow out of the crisis. The brakes on growth must be removed and the economy's innovative strength must be relied upon. Public investment can support this. That is why investment spending of EUR 61.8 billion in the 2021 federal budget is gratifying. But these funds must actually flow into growth-enhancing uses.

In addition, there is a need for better framework conditions for entrepreneurial investment - for example, through improvements in the offsetting of losses. Furthermore, a moratorium on burdens and a binding upper limit for social security contributions of a maximum of 40 percent are absolutely necessary.