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Archive for the ‘Germany’ Category

According to leftists like Bernie Sanders, European nations have wonderfully generous welfare states financed by high tax rates on the rich.

They’re partly right. There are very large welfare states in Europe (though I wouldn’t use “wonderfully” and “generous” to describe systems that have caused economic stagnation and high levels of unemployment).

But they’re wrong about how those welfare states are financed. Yes, tax rates on the rich are onerous, but not that much higher than in the United States. Instead, the big difference between America and Europe is that ordinary people pay much higher taxes on the other side of the Atlantic.

Indeed, I’ve previously cited Tax Foundation data showing that the United States arguably has the most “progressive” tax system in the developed world. Not because we tax the rich more, but simply because we impose comparatively modest burdens on everyone else.

And now we have some new evidence making the same point. Joseph Sternberg of the Wall Street Journal has some very sobering data on how the German tax system imposes a heavy weight on poor and middle-income taxpayers.

Europeans believe their tax codes are highly progressive, giving lower earners a break while levying significant proportions of the income of higher earners and corporations to fund generous social benefits. But that progressivity holds true only for direct taxes on personal and corporate income. Indirect taxes, such as the value-added tax on consumption and social-security taxes (disguised as “contributions”), are a different matter. The VAT disproportionately affects lower earners, who spend a higher proportion of their incomes. And social taxes tend to kick in at lower income levels than income taxes, and extract a higher and more uniform proportion of income. …if you look at the proportion of gross household income paid in all forms of tax, the rate varies by only 25 points. The lowest-earning 5% of households pay roughly 27% of their income in various taxes—mainly VAT—while a household in the 85th income percentile pays total taxes of around 52%, mostly in social-security taxes that amount to nearly double the income-tax bill.

Here’s a chart the WSJ included with the editorial.

As you can see, high payroll taxes and the value-added tax are a very costly combination.

And the rest of Europe is similar to Germany.

…Germany is not unique. The way German total revenues are split among income taxes, social taxes and the consumption tax is in line with the rest of Western Europe, as are its tax rates, according to OECD data. If other countries are more progressive than Germany, it’s only because Germany applies its second-highest marginal income-tax rate of 42% at a lower level of income than most.

Speaking of the OECD, here’s the bureaucracy’s data on the burden of government spending.

Germany is in the middle of the pack, with the public sector consuming 44 percent of economic output (Finland edges out France and Greece for the dubious honor of having the most expensive government).

The overall burden of the public sector is far too high in the United States, but we’re actually on the “low” side by OECD standards.

According to the data, total government spending “only” consumes 37.7 percent of America’s GDP. Only Ireland, Switzerland, and Latvia have better numbers (though my friend Constantin Gurdgiev explains we should be cautious about Irish economic data).

But I’m digressing. The point I want to emphasize is that punitive taxes on poor and middle-income taxpayers are unavoidable once politicians decide to impose a large welfare state.

Which is why I’m so inflexibly hostile to any tax increase, especially a value-added tax (or anything close to a VAT, such as the BAT) that would vacuum up huge amounts of money from the general population. Simply stated, politicians in Washington will have a hard time financing a bigger burden of government if they can only target the rich.

Sternberg makes the same point in his column.

Tax cuts have emerged as an issue ahead of Germany’s national election next month, with both major parties promising various timid tinkers… Not gonna happen. The VAT and social taxes are too important to the modern welfare state. The great lie is that there are a) enough “rich people,” b) who are rich enough, that c) taxing their incomes heavily enough can pay for generous health benefits and an old-age pension at 65. None of those propositions are true, and the third is especially wrong in an era of globally mobile capital and labor. That leaves the lower and middle classes, and taxes concealed in price tags or dolled up as “insurance contributions” to obscure exactly how much voters are paying for the privilege of their welfare states. …reform of the indirect taxes that impose such a drag on European economies awaits a more serious discussion about the proper role of the state overall.

Exactly.

There’s no feasible way to ease the burden on ordinary German taxpayers (or regular people in other European nations) unless there are sweeping reforms to reduce the welfare state.

And the moral of the story for Americans is that we better enact genuine entitlement reform if we don’t want to suffer the same fate.

P.S. If you don’t like German data, for whatever reason, I wrote last year about Belgium and made the same point about how a big welfare state necessarily means a bad tax system.

P.P.S. By the way, even the OECD admitted that European nations would grow faster if the burden of government was reduced.

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I periodically share data showing that living standards are higher in the United States than in Europe.

My goal isn’t to be jingoistic. Instead, I’m warning readers that we won’t be as prosperous if we copy out tax-and-spend friends on the other side of the Atlantic (just like I try to draw certain conclusions when showing how many low-tax jurisdictions have higher levels of economic output than the United States).

I’m sometimes asked, though, how America can be doing better than Europe when we have more poverty.

And when I ask them why they thinks that’s the case, they will point to sources such as this study from the German-based Institute of Labor Economics. Here’s some attention-grabbing data from the report.

The United States has the highest poverty rate both overall and among households with an employed person, but it stands farther away from the other countries on its in-work poverty rate than its overall poverty rate. The contrast between the US and three other English-speaking countries — Australia, Ireland, and the United Kingdom — is particularly striking. Compared to those three nations, the United States has an overall poverty rate only a little higher but an in-work poverty rate that is much higher.

And here’s the main chart from the study, with the United States as the bottom. It appears that there twice as much poverty in the USA as there is in a stagnant economy like France.

There even appears to be more poverty in America than there is in Spain and Italy, both of which are so economically shaky that they required bailouts during the recent fiscal/financial crisis.

Sounds horrible, right?

Yes, it does sound really bad. However, it’s total nonsense. Because what you read in the excerpt and see in the graph has nothing to do with poverty.

Instead, it’s a measure of income distribution.

And, if you read carefully, the study actually admits there’s a bait-and-switch.

The…approach to measuring poverty is a “relative” one, with the poverty line set at 60 or 50 percent of the median income.

Think about what this means. A country where everyone is impoverished will have zero or close-to-zero poverty because everyone is at the median income. But as I’ve explained before, a very wealthy society can have lots of “poverty” if some people are a lot richer than others.

And since the United States is much richer than other nations, this means an American household with $35,000 of income can be poor, even though they wouldn’t count as poor if they earned that much elsewhere.

This is like grading on a rigged curve. And if you read the fine print of the IZA study, you’ll see that the “poverty” threshold for a four-person household magically jumps by $16,260.

For a household of four (two adults, two children) the difference between the official US threshold and the 60-percent-of-median threshold amounts to more than $16,000 ($24,000 versus $40,260). This means that the size of the working poor population in America according to the official poverty measure is significantly lower than the size obtained in studies using a relative threshold.

In other words, you can calculate a much higher poverty rate if you include people who aren’t poor.

By the way, since the IZA report acknowledges this bait-and-switch approach, I guess one would have to say that the study technically is honest.

But it’s still misleading because most people aren’t going to read the fine print. Instead, they’ll see the main chart showing higher “poverty” and assume that there is a much higher percentage of actual poor people in the United States.

Moreover, some people may understand that there’s a bait-and-switch and simply want to help fool additional people.

And I’m guessing that this is exactly what the authors and the IZA staff expected and wanted. And if that’s the case, then the study is deliberately misleading, even if not technically dishonest.

I’ll close by stating that I don’t mind if folks on the left want to argue that market-based societies are somehow unfair because some people are richer than others. And it’s also fine for them to argue that we should be willing sacrifice some of our national prosperity to achieve more after-the-fact equality of income.

But I’d like for them to be upfront about their agenda and not hide behind dodgy data manipulation.

P.S.When you do apples-to-apples comparisons of the United States with the best-performing economies of Europe, you find that the poor tend to be at the same level, but every other group is better off in America.

P.P.S. You probably won’t be surprised to learn that both the Obama Administration and the leftists at the OECD prefer the “relative” definition of poverty.

P.P.P.S. The problem with our statist friends, as Margaret Thatcher explained, is that some of them are so upset about inequality that they’re willing to make everyone poorer if that’s what it takes to reduce income differences.

P.P.P.P.S. Indeed, this “Swiftian” column about reducing inequality is satire, but one wonders whether statists would actually accept such an outcome.

P.P.P.P.P.S. Data from China demonstrates why our attention should be on poverty reduction rather than inequality.

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As I peruse the news, I periodically see headlines that are misleading in some fashion.

And if the headline is sufficiently off-key or bizarre, I feel compelled to grouse.

Now I have a new example, though I’m not sure whether to call it dishonest or clueless.

The EU Observer has a brief report that poverty has reached record levels in Germany.

Despite a booming economy, 12.9 million people in Germany were living below the poverty line in 2015, the Equal Welfare Association reported on Thursday. Based on figures from the Federal Statistical Office the alliance found a record high poverty rate of 15.7 percent in 2015.

By the way, I can’t resist pointing out that there is no “booming economy” in Germany. Growth in 2016 was only 1.9 percent.

Yes, that’s decent by European standards of stagnation and decline, but it’s far from impressive in any other context.

But I’m digressing. Let’s get back to the main point of today’s column.

As you can see from the story’s headline, the implication is that lots of people are left behind and mired in deprivation even though the economy is moving forward.

But there’s a problem with both the story and the headline.

If you read carefully, it turns out that both the story (and the study that triggered the story) have nothing to do with poverty.

No link at all. None. Zero. Nada. Zilch.

I’m not joking. There’s no estimate of the number of people below some measure of a German poverty line. There’s no calculation of any sort about living standards. Instead, this story (and the underlying report) are about the distribution of income.

…people [are] defined as poor when living on an income less than 60 percent of that of the median German household.

One might be tempted at this point to dismiss this as a bit of journalistic sloppiness. Indeed, one might even conclude that this is a story about nothing.

After all, noting that some people are below 60 percent of the median income level is about as newsworthy as a report saying that half of people are above average and half are below average.

But there actually is a story here. Though it’s not about poverty. Instead, it’s about an ongoing statist campaign to redefine poverty to mean unequal distribution of income.

I’m not joking. For instance, the bureaucrats at the Paris-based Organization for Economic Cooperation and Development actually put out a study claiming that there was more poverty in the United States than in nations such as Greece, Portugal, and Turkey.

How could they make such a preposterous claim? Easy, the OECD bureaucrats didn’t measure poverty. Instead, they concocted a measure of the degree to which various countries are close to the left-wing dream of equal incomes.

And the Obama Administration also tried to manipulate poverty statistics in the United States in hopes of pushing this statist agenda of coerced equality.

Robert Rector of the Heritage Foundation wrote about what Obama tried to do.

…the Obama administration…measure, which has little or nothing to do with actual poverty, will serve as the propaganda tool in Obama’s endless quest to “spread the wealth.” …The current poverty measure counts absolute purchasing power — how much steak and potatoes you can buy. The new measure will count comparative purchasing power — how much steak and potatoes you can buy relative to other people. …In other words, Obama will employ a statistical trick to ensure that “the poor will always be with you,” no matter how much better off they get in absolute terms. …The weird new poverty measure will produce very odd results. For example, if the real income of every single American were to magically triple over night, the new poverty measure would show there had been no drop in “poverty,” because the poverty income threshold would also triple. …Another paradox of the new poverty measure is that countries such as Bangladesh and Albania will have lower poverty rates than the United States, even though the actual living conditions in those countries are extremely bad.

Even moderates such as Robert Samuelson recognized that Obama’s agenda was absurd. Here is some of what he wrote.

…the new definition has strange consequences. Suppose that all Americans doubled their incomes tomorrow, and suppose that their spending on food, clothing, housing and utilities also doubled. That would seem to signify less poverty — but not by the new poverty measure. It wouldn’t decline, because the poverty threshold would go up as spending went up. Many Americans would find this weird: People get richer but “poverty” stays stuck.

To put this all in context, the left isn’t merely motivated by a desire to exaggerate and misstate poverty. That simply the means to an end.

What they want is more redistribution and higher tax rates. The OECD openly admitted that was the goal in another report. Much as all the fixation about inequality in America is simply a tool to advocate bigger government.

P.S. Germany is an example of a rational welfare state. While the public sector is far too large, the country has enjoyed occasional periods of genuine spending restraint and German politicians wisely avoided a Keynesian spending binge during the last recession.

P.P.S. Though Germany also has its share of crazy government activity, including a big green-energy boondoggle. And lots of goofy actions, such as ticketing a one-armed man for have a bicycle with only one handlebar brake, taxing homeowners today for a street that was built beginning in the 1930s, making streetwalkers pay a tax by using parking meters, and spending 30 times as much to enforce a tax as is collected.

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Since I’m always reading and writing about government policies, both in America and around the world, I’m frequently reminded of H.L. Mencken’s famous observation about the shortcomings of “tolerable” government.

If you take a close look at the world’s freest economies, you quickly learn that they are highly ranked mostly because of the even-worse governments elsewhere.

Even places such as Switzerland have some misguided policies.

But there’s a silver lining to this dark cloud. The incompetence, mendacity, and cronyism that exists all over the world means that I’ll never run out of things to write about.

So let’s enjoy a new edition of Great Moments in Foreign Government.

We’ll start with the utterly predictable failure of an entitlement program in the United Kingdom.

The government must stop ‘nannying’ British parents and do away with universal free childcare, a new report has urged. Families most in need of help are not getting it because Government subsidies are poorly targeted, the Institute of Economic Affairs publication said. Many families on average earnings are spending more than a third of their net income on childcare, the report claimed, saying too much regulation in the sector has hiked prices. …One study has estimated that keeping parents in work costs £65,000 per job, the report claimed, describing current policy as ‘costly and inefficient’. …home-based childminders are priced out of the sector, it said. Co-author of the report Len Shackleton, an editorial research fellow at the Institute of Economic Affairs, said: ‘Government interventions in the childcare sector have resulted in both British families and taxpayers bearing a heavy burden of expensive provision.

Gee, a sector of the economy gets more expensive and inefficient once government gets involved.

I’m totally shocked, just like Inspector Renault in Casablanca.

Sentient human beings, of course, are not surprised. After all, just look at what government intervention has done for healthcare and higher education.

I’m still waiting for an example of a government “solution” that makes a problem better rather than worse.

Let’s now turn to Germany. I’ve previously referenced the country’s intelligence community because the BND managed to lose the blueprints for its costly new headquarters building.

But apparently the incompetence goes well beyond architecture. Another German intelligence division, the BfV, had an Islamic terrorist on staff. Here are some excerpts from a report in the Washington Post.

German intelligence agents noticed an unusual user in a chat room known as a digital hideout for Islamic militants. The man claimed to be one of them — and said he was a German spy. He was offering to help Islamists infiltrate his agency’s defenses to stage a strike. Agents lured him into a private chat, and he gave away so many details about the spy agency — and his own directives within it to thwart Islamists — that they quickly identified him, arresting the 51-year-old the next day. Only then would the extent of his double life become clear. The German citizen of Spanish descent confessed to secretly converting to Islam in 2014. From there, his story took a stranger turn. Officials ran a check on the online alias he assumed in radical chat rooms.

And they found out that the terrorist had a rather colorful past.

The married father of four had used it before — as recently as 2011 — as his stage name for acting in gay pornographic films. …which could cast a fresh light on the judgment and vetting of the German intelligence agency at a critical time.

These revelations have generated some concern, as one might expect.

News of the case sparked a storm of outrage in Germany, even as critics said it raised serious questions about the country’s bureaucratically named domestic spy agency, known as the Federal Office for the Protection of the Constitution (BfV). …“It’s not only a rather bizarre, but also a quite scary, story that an agency, whose central role it is to engage in counterespionage, hired an Islamist who potentially had access to classified information, who might have even tried to spread Islamist propaganda and to recruit others to let themselves be hired by and possibly launch an attack” against the domestic intelligence agency, said Hans-Christian Ströbele, a member of the Parliamentary Control Committee that oversees the work of the German intelligence services.

You won’t be surprised to learn that the German government is not alone. The U.K. government also has hired terrorists to work in anti-terrorism divisions.

In the United States, by contrast, we import them and give them welfare. I’m not sure which approach is more insane.

The only saving grace is that terrorists sometimes display similar levels of incompetence, as illustrated in the postscripts of this column.

Let’s close with a trip to Canada. Our friends to the north generally are a sensible bunch, but you can find plenty of senseless policies, particularly in the French-speaking areas.

And I’m not sure whether to laugh or cry about this example of bureaucratic extortion.

A Camrose man is ticked about his ticket — a $465 traffic violation issued by Edmonton police — for having a cracked driver’s licence. Dave Balay admits he’s guilty of having a small crack in his licence. But he doesn’t think the penalty fits the crime. He was returning home from visiting a friend Wednesday evening when he was pulled over on Anthony Henday Drive. …He gave the officer his driver’s licence, registration and insurance card. …”He came back, and the younger policeman said he was going to give me a ticket for my driver’s licence being mutilated,” said Balay. “I said, ‘Mutilated? I didn’t even know there was such a thing.’ Then he gave me a ticket for $465.” The mutilation referred to was a crack in the top left corner of Balay’s licence. “Maybe not even quite an inch long,” said Balay, adding the crack doesn’t obstruct any pertinent information. …”I think I outright laughed, and said, ‘Seriously? Four-hundred-and-sixty-five bucks for this crack?’ [The officer] said, ‘It’s a mutilated licence.’ …”Had I scratched out my eyes or drawn a mustache on my face, or scratched out the licence number or something, then, yeah, give me a ticket for that. That should be an offence.”

But the local government says Mr. Balay should be grateful that he was treated with such kindness.

Edmonton police released a statement Friday suggesting the officer actually gave Balay a break. According to the statement, the officer had grounds to lay a careless driving charge, which carries a fine of $543 and six demerit points. But because Balay was co-operative, the officer issued a lesser fine for a cracked driver’s licence.

Though Mr. Balay doesn’t think he’s been given a break.

Balay said he won’t pay the fine, even if that means serving jail time or community service. “I don’t have $465,” he said. “…I do some part-time substitute teaching, supply teacher. It’s a week’s wage.”

Good for Mr. Balay. Hopefully the publicity that he’s getting will force the revenue-hungry bureaucrats in Edmonton to back down.

Meanwhile, this story adds to my ambivalence about Canada. On the minus side of the ledger, there are absurd policies granting special rights to alcoholics, inane harassment of kids selling worms or lemonade, fines on parents who don’t give their kids carbs at lunchtime, and punishment for kids who protect classmates from knife-wielding bullies.

Then again, Canada is now one of the world’s most economically free nations thanks to relatively sensible policies involving spending restraint, corporate tax reform, bank bailouts, regulatory budgeting, the tax treatment of saving, and privatization of air traffic control. Heck, Canada even has one of the lowest levels of welfare spending among developed nations.

Though things are now heading in the wrong direction, which is unfortunate for our northern neighbors.

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Mancur Olson (1932-1998) was a great economist who came up with a very useful analogy to help explain the behavior of many governments. He pointed out that a “roving bandit” has an incentive to maximize short-run plunder by stealing everything from victims (i.e. a 100 percent tax rate), whereas a “stationary bandit” has an incentive to maximize long-run plunder by stealing just a portion of what victims produce every year (i.e., the revenue-maximizing tax rate).

Tyler Cowen of George Mason University elaborates on this theory in this very helpful video.

As you can see, Olson’s theory mostly is used to analyze and explain the behavior of autocratic governments. Now let’s apply these lessons to political behavior in modern democracies.

I wrote last year about a field of economic theory called “public choice” to help explain how and why the democratic process often generates bad results. Simply stated, politicians and special interests have powerful incentives to use government coercion to enrich themselves while ordinary taxpayers and consumers have a much smaller incentive to fight against that kind of plunder.

But what’s the best way to think about these politicians and interest groups? Are they roving bandits or stationary bandits?

The answer is both. To the extent that they think their power is temporary, they’ll behave like roving bandits, extracting as much money from taxpayers and consumers as possible.

Though if you think of democracies as duopolies, with two parties and rotating control of government, then each party will also behave like a stationary bandit, understanding that it’s not a good idea to strangle the goose that lays the golden eggs.

And this is one of the reasons why I’m a big fan of “tax competition.” Simply stated, politicians and special interests constrain their greed when they know that potential victims have the ability to escape.

Here’s a report from the Wall Street Journal that is a perfect example of my argument.

Germany could reduce its corporate tax rate in the wake of similar moves in the U.K. and the U.S., German Finance Minister Wolfgang Schäuble said. Europe’s largest economy should simplify its complex tax system for companies in order to…remain competitive internationally, Mr. Schäuble told The Wall Street Journal in an interview. He also said that while Germany opposed beggar-thy-neighbor tax competition between mature industrial nations, Berlin would also consider cutting tax rates if necessary.

And such steps may be necessary. In other words, Germany may reduce tax rates, not because politicians want to do the right thing, but rather because they fear they’ll lose jobs and investment (i.e., sources of tax revenue) to other jurisdictions.

U.S. President-elect Donald Trump has said he would like to cut the corporate tax rate from 35% to 15% as part of a broader tax overhaul. In November, U.K. Prime Minister Theresa May said the main corporate rate there should fall from 20% to 17% by 2020. These followed announcements about corporate tax-rate cuts by Japan, Canada, Italy and France.

Let’s look at another example.

I made the economic case for Brexit in large part because the European Union is controlled by anti-tax competition bureaucrats and politicians in Brussels.

Well, it appears that the British vote for independence is already paying dividends as seen by comments from the U.K.’s Chancellor of the Exchequer.

Philip Hammond warned yesterday that the Government will come out fighting with tax cuts if the EU tries to wound Britain by refusing a trade deal. …Yesterday, Mr Hammond was asked by a German newspaper if the UK could become a tax haven by further lowering corporation tax in order to attract businesses if Brussels denies a deal. In his strongest language yet on Brexit, the Chancellor said he was optimistic a reciprocal deal on market access could be struck… But he added: …‘In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do. …We will change our model, and we will come back, and we will be competitively engaged.’ …Earlier this year Mrs May committed Britain to having the lowest corporation tax of the world’s 20 biggest economies. The intention is a rate of 17 per cent by 2020.

In other words, yet another case of politicians doing the right thing because of tax competition.

The stationary bandits described by Olson are being forced to adopt better tax policy.

So it’s very appropriate to close with some wise counsel from a Wall Street Journal editorial.

The EU needs more tax competition from government vying to stimulate business investment. …The real tax-policy scandal is that so few European governments understand there’s a cause-and-effect relationship between oppressive tax rates and low economic growth.

P.S. Since we’re looking at tax competition, Europe, and bandits, keep in mind there’s considerable academic work showing that Europe became a rich continent precisely because there were many small nations that competed with each other. Those jurisdictions felt pressure to adopt good policy because the various leaders wanted lots of economic activity to tax. All of which helps to explain why modern statists are so hostile to decentralization and federalism.

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Even though it has the largest economy in Europe, I routinely ignore Germany. This isn’t because of deliberate malice or neglect, but rather because the country has boring economic policy.

Unlike Estonia and Switzerland, it doesn’t have any really good policies that are worth applauding.

Not does it have really bad policies that deserve to be mocked, so it doesn’t get the negative attention that I shower upon nations such as France, Italy, and Greece.

Heck, about the only really interesting thing about German policy is whether the country’s politicians will be dumb enough to underwrite the profligacy of some of their neighbors.

Let’s try to atone for this oversight by giving some attention to the peculiar German tendency to be a bit over-zealous about generating money for the government.

  • The Germans, after all, came up with an odd scheme to make streetwalkers pay a nightly tax via parking meters.
  • The Germans also imposed a tax on online coffee beans that cost €30 to enforce for every €1 collected.
  • The Germans even fined a one-armed bicyclist because he didn’t have handbrakes on both handlebars.

We have another example of über-intense tax enforcement to add to our list.

The BBC reports that homeowners on a German street are having to pay for a road that was built by the Nazis.

Homeowners on a street in Germany have been told they must foot the bill for their road’s construction – even though it’s been there for nearly 80 years. …The bills included a conversion from the Nazi-era Reichsmark currency into euros for the original road surface, first laid in 1937… The figures were also adjusted for inflation. …a court has now confirmed that they must cough up the cash. It determined that while construction began in the 1930s, the road was only officially completed in 2009 when pavements were added. For the intervening period it was considered to be under development. …Auf’m Rott’s current residents will be shelling out for the “Hitler asphalt”, streetlamps dating back to 1956, a sewer from the 1970s, and pavements and greenery added in 2009.

How stereotypically German. Not only is there an unusual tax, but they even have the records from the 1930s and went though all the trouble of adjusting the numbers for inflation.

Wow, no wonder other Europeans think the Germans aren’t very compassionate.

By the way, I suspect the German homeowners also think their country isn’t very considerate. The homeowners aren’t getting hit with some annoying-yet-trivial €100 euro charge.They really are “shelling out.”

…city authorities told them pay an average of 10,000 euros ($11,000; £8,400) per household

I guess I’m lucky that Fairfax County in Virginia, which just re-paved my local street, didn’t send me a similar bill!

Though in the interest of fairness, let’s contemplate the German system, which apparently is vaguely based on a user-pays principle.

In Germany, residents have to pay a “development contribution” to the local authority for things like new roads, cycle paths and street lighting.

Part of me actually likes this approach. It’s better to have local communities pay for local infrastructure rather than having some convoluted and wasteful nationwide program (like we have to some degree in the United States) that is susceptible to waste and cronyism.

On the other hand, surely there must be something wrong with doing some routine maintenance on a street and then using that as an excuse to send homeowners a giant bill for expenses that mostly occurred during the Hitler era.

P.S. I haven’t totally ignored Germany. Over the years, I’ve bemoaned the fact that the ostensibly conservative Christian Democrats aren’t conservative and complained that the supposedly classical liberal Free Democrats aren’t classical liberals.

P.P.S. Though I’ve also given the Germans some modest praise for a period of spending restraint last decade and also for largely resisting the siren song of Keynesianism  during and after the recent recession (by the way, you won’t be surprised to learn Krugman botched the numbers when writing about Germany’s fiscal policy during that period).

P.P.P.S. And I have pointed out that the German government occasionally can waste money with Gallic flair. Or even display Greek levels of government incompetence. So, unlike the Washington Post, I would never refer to the country as being “fiscally conservative.”

P.P.P.P.S. By the way, it’s not just the German politicians who are in love with the idea of taxation. There are even some German taxpayers who protest because they want to be saddled with higher tax burdens (though I wonder if they’d be as hypocritical as their American counterparts if they faced a put-up-of-shut-up challenge).

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If you want to pinpoint the leading source of bad economic policy proposals, I would understand if someone suggested the Obama Administration.

But looking to Europe might be even more accurate.

For instance, I’d be hard pressed to identify a policy more misguided than continent-wide eurobonds, which I suggested would be akin to “co-signing a loan for your unemployed alcoholic cousin who has a gambling addiction.”

And now there’s another really foolish idea percolating on the other side of the Atlantic Ocean.

The U.K.-based Financial Times has a story about calls for greater European centralization from Italy.

Italy’s finance minister has called for deeper eurozone integration in the aftermath of the Greek crisis, saying a move “straight towards political union” is the only way to ensure the survival of the common currency. …Italy and France have traditionally been among the most forceful backers of deeper European integration but other countries are sceptical about supporting a greater degree of political convergence. …Italy is calling for a wide set of measures — including the swift completion of banking union, the establishment of a common eurozone budget and the launch of a common unemployment insurance scheme — to reinforce the common currency. He said an elected eurozone parliament alongside the existing European Parliament and a European finance minister should also be considered. “To have a full-fledged economic and monetary union, you need a fiscal union and you need a fiscal policy,” Mr Padoan said.

This is nonsense.

The United States has a monetary union and an economic union, yet our fiscal policy was very decentralized for much of our nation’s history.

And Switzerland has a monetary and economic union, and its fiscal policy is still very decentralized.

Heck, the evidence is very strong that decentralized fiscal systems lead to much better outcomes.

So why is Europe’s political elite so enamored with a fiscal union and so opposed to genuine federalism?

There’s an ideological reason and a practical reason for this bias.

The ideological reason is that statists strongly prefer one-size-fits-all systems because government has more power and there’s no jurisdictional competition (which they view as a “race to the bottom“).

The practical reason is that politicians from the weaker European nations see a fiscal union as a way of getting more transfers and redistribution from nations such as Germany, Finland, and the Netherlands.

In the case of Italy, both reasons probably apply. Government debt already is very high in Italy and growth is virtually nonexistent, so it’s presumably just a matter of time before the Italians will be looking for Greek-style bailouts.

But the Italian political elite also has a statist ideological perspective. And the best evidence for that is the fact that Signore Padoan used to be a senior bureaucrat at the Paris-based OECD.

The Italian finance minister…served as former chief economist of the OECD.

You won’t be surprised to learn that French politicians also have been urging a supranational government for the eurozone. And presumably for the same reasons of ideology and self-interest.

But here’s the man-bites-dog part of the story.

The German government also seems open to the idea, as reported by the U.K.-based Independent.

France and Germany have agreed a new plan for closer eurozone political unionThe new Franco-German agreement would see closer cooperation between the 19 countries.

Wow, don’t the politicians in Berlin know that a fiscal union is just a scheme to extract more money from German taxpayers?!?

As I wrote three years ago, this approach “would involve putting German taxpayers at risk for the reckless fiscal policies in nations such as Greece, Italy, and Spain.

But maybe the Germans aren’t completely insane. Writing for Bloomberg, Leonid Bershidsky explains that the current German position is to have a supranational authority with the power to reject national budgets.

The German perspective on a political and fiscal union is a little more cautious. Last year, German Finance Minister Wolfgang Schaeuble and a fellow high-ranking member of the CDU party, Karl Lamers, called for a euro zone parliament (not elected, but comprising European Parliament members from euro area countries) and a budget commissioner with the power to reject national budgets if they contravene a certain set of rules agreed by euro members.

And since the German approach is disliked by the Greeks, then it can’t be all bad.

Former Greek finance minister Yanis Varoufakis, Schaeuble’s most eloquent hater, pointed out in a recent article for Germany’s Die Zeit that, in the Schaeuble-Lamers plan, the budget commissioner is endowed only with “negative” powers, while a true federation — like Germany itself — elects a parliament and a government to formulate positive policies.

But “can’t be all bad” isn’t the same as good.

Simply stated, any sort of eurozone government almost surely will morph over time into a transfer union. And that means more handouts, more subsidies, more harmonization, more bailouts, more centralization, and more bureaucracy.

So you can see why Europe’s political elite may be even more foolish than their American counterparts.

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