Micromanagement Won't Solve Major Problems Ahead of Coalition Committee Meeting
The current week of parliamentary sessions in Berlin is unlikely to reduce public dissatisfaction with politics. Many citizens will likely look with even more bewilderment at the issues occupying ministries and lawmakers.
Following the controversial draft law for the sugar tax, the proposal for a plastic tax is now also available. These two taxes alone will involve approximately 1000 public administration employees. The CDU and SPD also plan to increase taxes on alcohol and tobacco consumption. It is doubtful whether Germans will become less ill as a result, as stated in the justification for the taxes. The primary goal is to close budget deficits.
The 1.3 Percent Isn't an Economic Boom
When the Bundestag debates income tax in its first reading on Thursday, disappointment will continue. What is being called a "reform" does not deserve that title. For most taxpayers, even inflation-related losses will not be compensated. Top earners will pay more anyway. Little remains of the "effective relief" once promised in the coalition agreement. Due to rising social security contributions, less net income remains from gross income.
Even if Chancellor Friedrich Merz (CDU) spreads optimism in public appearances, the now-predicted 1.3 percent economic growth for this year should not be mistaken for an upswing. This growth is bought with debt-financed spending programs. A relapse into stagnation threatens as early as 2028. High interest burdens on the federal budget limit long-term growth opportunities.
The fragility of the situation is evident in the decline in industrial orders in August. This is due to fewer large-scale orders, particularly in the defense sector. The economy is dependent on state contracts. This is not a sustainable economic policy strategy.
Reforms, by their very definition, are meant to change structures for the better. The CDU and SPD are still not daring enough to tackle these structures. The coalition spends too much time on trivial matters. This, however, does not help with major problems.
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