Chancellor Olaf Scholz, in a Startling Contrast With President Biden, Cuts Germany’s Corporate Taxes To Boost Growth

Amid a stubborn recession, the chancellor of Germany, Olaf Scholz, is cutting corporate taxes to “stimulate growth.” It’s a contrast to President Biden’s policy of printing money to boost America’s moribund economy. This reflects Germany’s hard-learned lessons about inflationary spending.After contracting by 0.4 percent in the last quarter of 2022 and 0.1 percent and 0.2 percent in the first two quarters of 2023, Europe’s largest economy was flat at zero percent in the third quarter. Inflation stands at 6.1 percent, twice what it is in America.The “outlook for Germany looks anything but rosy,” the global head of macro at ING, Carsten Brzeski, told Reuters last month. The Economist asked if it is “once again the sick man of Europe,” judging that its “economic ailments are more serious than its politicians admit.”Mr. Scholz has recognized the problem. Rather than leaning on government spending, regulations, and incentives to favored industries — a hallmark of Mr. Biden’s $300 billion Inflation Reduction Act — the chancellor is cutting corporate taxes by $34.4 billion over four years.Germany’s chancellor, Olaf Scholz, center, at Gransee, north of Berlin, August 30, 2023. Michael Kappeler/dpa via APRegulatory reform is also a feature of Mr. Scholz’s plan. Aiming to reduce the hand of government in the private sector, he’s seeking to reduce Germany’s bureaucracy and digitalize functions to speed up its operations.Mr. Schlotz described his goals as making “everything go faster in Germany,” to give the economy a “boost” and encourage investment at home rather than driving it to countries with lower taxes and fewer regulatory hurdles.Germany’s economic woes spark comparisons to the crisis caused by Kaiser Wilhelm printing money to fight World War I and of the Weimar Republic doing the same in its aftermath. Required to pay punitive reparations under Versailles, Germany’s exchange rate rose to four trillion-to-one by 1923 from four-to-one against the dollar in 1914.To solve the crisis of Weimar, Hitler’s government seized greater control of economic matters, reining in free markets. Learning from that history, Mr. Scholz is hewing closer to the policies that launched the West German juggernaut that helped win the Cold War.Seventy-five years ago, on June 20, 1948 — what Germans call Day X — an economist, Ludwig Erhard, announced that the nation would be exchanging their near-worthless reichsmarks for a new currency, the deutschmark.In 1997, historian Amity Shlaes wrote in the New Yorker that Erhard, then director of the economic council for the British and American zones, “cautioned his listeners not to expect miracles,” but miracles it brought, with “items that had been almost impossible to obtain for years” from eggs to bicycles returning to stores.Concurrent with the currency exchange, Erhard eased rationing on “all but the most basic goods,” Ms. Shlaes wrote, and promised “an end to long-standing price and wage controls,” unleashing market forces. The commander of the American forces, General Lucius Clay, had his doubts.“Germans still proudly recount an exchange between Clay and Erhard,” Ms. Shlaes wrote, “‘Professor Erhard, you altered my regulations!’ Clay exclaimed. ‘No, Herr General,’ Erhard replied. ‘I didn’t alter them. I got rid of them!'”Prices and joblessness rose in the short term, but West Germany soon boomed. The premier of the Soviet Union, Joseph Stalin, recognized the threat of Berlin implementing capitalism and, days after the deutschmark debuted, launched his blockade of Berlin.Today, Berlin leads the Euro currency zone, so its troubles again threaten to bleed beyond its borders. With Western Europe facing a belligerent Russia and funding Ukraine’s resistance against it, economic growth is essential to the continent’s security and that of the world. The current ruler at the Kremlin, Vladimir Putin, is no doubt watching with dread as Mr. Scholz again liberates Germany’s people, administering the tonic proven to return its economy to good health.Could the results demonstrate to Mr. Biden that the only way to cure lackluster growth is with hard currency and smaller government, not the poison of inflationary spending and government control?

Chancellor Olaf Scholz, in a Startling Contrast With President Biden, Cuts Germany’s Corporate Taxes To Boost Growth

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