Quote of the Day
"Germany can only redistribute what it produces."With an economy in shambles and unemployment tracking a 11.4%, it's a wonder that so many American progressives want to regress to a failed economic model such as Germany's.
--Angela Merkel, Leader of Germany's CDU party
3 Comments:
Germany's economy has lately been doing much better. Also, a big reason unemployment is high is that the government gives little incentive to work with its incredibly generous unemployment handout (whose duration is measured in years instead of weeks). You can redistribute other ways without creating such a strong disincentive to work.
By Tim McGuire, At 11:50 AM EDT
Of course, by that same logic there's not much incentive to work HARDER if you're getting wealth redistributed your way and if, once wealthy, will pay more in taxes.
Clearly Germany's biggest problem is its (last I checked) 36 month unemployment insurance, but this level of direct disincentive is instructive.
By Ben Polidore, At 4:49 PM EDT
That's correct, any time there's taxation there's a disincentive to work. The question becomes, at what point is the marginal income of another hour of work (at the same wage as the previous hour) lower than the marginal utility of not working that hour? And taxes (redistribution) will always lower that point. Nonetheless, an element of redistribution is often helpful, in the form of education subsidies, healthcare, (limited) unemployment benefits, social security, and so on, since the marginal value of a dollar (or a euro in this case) is higher to someone with fewer of them (assuming it's not just a handout, and it's actually going to productive use).
The problem starts when the number of hours worked at that equilibrium drops below full-time employment--which is why Germany has relatively high unemployment. I think the principal reason is not redistribution (I have no evidence to support this but I'd guess France redistributes more than Germany) but the 36 month unemployment insurance. I remember reading in the Economist that all 3 major German parties are planning to scale that back some, which will probably help their economy quite a bit.
By Tim McGuire, At 6:16 PM EDT
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