Red-red-green billions: The fairy tale of the lack of money for road construction and education

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The story of the missing billions has what it takes to become an election campaign hit.

At least they are already very happy to tell politicians from the SPD, the Greens and the Left Party.

The state has to invest more, it says, in new streets, buildings, digital administration and, of course, fast internet.

A lot, a lot of money is necessary for this, meaning tens of billions, and for this the federal government should also borrow heavily in the years after the Corona crisis.

More debts are "always better than ailing infrastructure or poor education," said SPD chairman Norbert Walter-Borjans a few days ago.

He always said that the debt brake had a flaw - a web flaw: it was making investments in the future that would bring something for the next generation, if in doubt impossible.

The calls for additional billions cannot come as a surprise.

Politicians always want more money; after all, they step up to change something, to implement their own ideas.

It doesn't work without money.

The promise to spend the money on a better infrastructure, from which future generations will also benefit, sounds almost noble.

Four out of five euros were consumed

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However, such promises have so far had little to do with reality.

If you look at the pre-crisis period, when there was more than enough money available thanks to the bubbling tax revenue, this becomes clear: Four out of five euros that were additionally spent in the years before the crisis did not flow into new streets or the fast Internet, they did went on it for short-term benefits, for example for the mother's pension and the pension at 63.

This is called “consumer spending” in the language of the housekeeper.

Only one in five euros was left for “investment expenditure”.

This is shown by a WELT evaluation of the federal budget for the years 2014 to 2019.

Back then the economy was booming and taxes were bubbling.

Federal income increased year after year, no additional debt was necessary, and reserves could even be built up.

It was the time of the black zero.

In 2014, the federal government received 295 billion euros, as a result, more funds were available to politics from year to year, in 2019 it was 357 billion euros.

The additional income in the years 2015 to 2019 add up to a total of 187 billion euros.

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Part of this 187 billion euros, namely around 50 billion euros, flowed into a reserve for bad times from 2015 onwards, so it was actually saved.

The money is still there now.

But the majority of the increase in income in the five-year period under review was consumed directly: an additional 111 billion euros in five years.

Investments increased by just 23 billion euros in the same period.

Effortless saving: 45 billion euros

Strictly speaking, the government had even greater financial leeway in the golden pre-crisis years. After all, not only did income increase, but many expenditures fell at the same time, without politicians having to cut anything.

Mention should be made here of the steadily falling interest expenses for the federal debt servicing.

The interest savings alone add up to 45 billion euros for the years 2015 to 2019.

This means: In purely mathematical terms, if you will, only half of these effortless savings, which the federal government simply accrued because of the low interest rates on the capital markets, were also spent on investments.

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Friedrich Heinemann, a finance scientist at the Leibniz Center for European Economic Research (ZEW) in Mannheim, does not see the reasons for the refusal to invest in the politicians alone.

"Many voters are often not honest with themselves," says the public finance expert.

Many would prefer to take the free daycare or the tax-subsidized pension before the money is built into modern infrastructure.

“You will benefit from one immediately, from the other maybe in ten years,” says Heinemann.

Every single voter is no different from the politicians.

What are future investments anyway?

Advocates of higher borrowing also see this problem.

Your proposal is therefore to allow new borrowing beyond the scope of the debt brake only if the money is actually spent on investments.

In this context, people like to talk about the golden rule.

But for this to happen, it would first have to be defined what can be viewed as an investment in the future of the country.

Does this only include spending on concrete and fiberglass, or does it include spending on education?

And is it not just as possible to justify higher social spending as investments in the future, because it promotes social cohesion?

"You have to find a rule that defines the investment term very narrowly," says Jens Südekum, professor of international economics at Heinrich Heine University in Düsseldorf.

Whereby there will always be blurring.

But that shouldn't prevent politicians from setting up a long-term investment program now, he appeals.

Above all, it is about continuity so that the construction industry, but also the administration, can plan and expand their capacities accordingly.

Südekum accuses politicians of not having used the financially lush years before the crisis to rebuild the necessary positions in building authorities and planning staff on site.

“In the municipalities, the billions have to be called up from the many funding programs, but unfortunately the structures for this were destroyed by huge austerity programs in the 1990s and early 2000s,” says Südekum.

The main brake is the "cumbersome bureaucracy"

Lars Feld, the top economist, sees it similarly: “There is no shortage of money in the federal budget for future investments.

The problem is planning and implementation, ”said the chairman of the expert council in an interview with WELT.

For example, not even a quarter of the amount for infrastructure investments, which was again significantly increased during the Corona crisis, has not yet flowed out.

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This is mainly due to the resistance in the population against the corresponding projects, especially from Greens voters, Feld reminds of the resistance against new roads, rails and power lines.

On the other hand, the Greens are calling for additional public investment of half a trillion euros for ten years.

“The Greens' 500 billion program are air bubbles.

In essence, it's just about getting rid of the debt brake, ”he says.

This fits in with the results of a ZEW survey among 350 financial experts from banks, insurance companies and large industrial companies.

At the end of 2019, shortly before the Corona crisis, you were asked what reasons you see for the weak investment of the public sector in Germany.

85 percent attributed this to the “cumbersome bureaucracy and long approval procedures”.

55 percent named "capacity bottlenecks in the construction industry", 48 percent the "resistance of affected citizens to investment projects".

This was followed by the "high non-investment government spending", ie above all social benefits, with 44 percent.

Only 33 percent saw the rules of the debt brake as the reason for the low investment.

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Source: WORLD