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Update on Germany


Wonder when folks worldwide are going to figure out that socialism (Marxism by any other name) creates a slave state hierarchy of worker ants which which support those who would crown themselves as queen(s)??????? 

We've witnessed communism (radical Marxism) fail time and time again over the past hundred years while capitalism has thrived. 

However, the (Clinton-Kerry-Kennedy-Pelosi +++) left Clown wants to push us farther and farther away from capitalism and model us after Euro socialists we're currently watching dive head first into the bottomless abyss they've created through Marxism. 

France and Germany economies and standards of living are going to  Red Devil in a hand basket and they would have us follow such a fine example.  Our own left refuses to learn from the glaring obvious.  Agree with stupid 


"Germany's Grand Illusion
by Nico Wirtz
Tech Central Station
"In the last quarter of 2005, Germany's economy is continuing down its path of weakness and fragility. Unemployment is rampant, economic growth has almost come to a halt and Germany's social security system and other welfare programs are chronically short on funds.




Last week, the partners of Germany's new "Grand Coalition", the CDU/CSU and SPD, signed off on their governing agreement. Now it's official: instead of long overdue reform to jumpstart the economy and restore consumer confidence, Germans will get more of the same rigid policies that have failed the country over at least the last three decades.



In the weeks leading up to the special election on September 18, many political commentators and foreign investors had hoped for a dramatic change for the better in Germany's public policy. These hopes were shattered as election results came in. Due to the disappointing performance of the CDU/CSU at the polls, a reform-minded government coalition between CDU/CSU and free-market FDP became impossible. Free Democrats and Christian Democrats were ready to roll up their sleeves and tackle the country's tremendous challenges in full awareness of the political realities: reform would be painful, but unavoidable if the country wanted to return to the path of prosperity.



The morning after was sobering. The election had produced no clear winner, leading to bitter exchanges not only about who would assume the chancellorship, but also about the direction of the country. So it comes as no surprise that the coalition agreement presented last week is merely the latest manifestation of the country's lack of direction. The result can be summarized in two words: "ignore" and "postpone".




The political agenda is dictated by the availability of federal funds. What would have been needed, a clear leitmotif in economic policy, is blatantly lacking. Moreover, the coalition agreement failed to produce a coherent and stringent concept for political modernization because core elements of Germany's economic malaise, the health care crisis and labor market reform to name just two, had been exempt from the coalition negotiations altogether.



Most worrisome about the coalition agreement is the fact that it ignores the most basic rule in economics 101: tax cuts, not tax increases, spur economic growth and investment. Instead, the agreement presents taxpayers with the biggest tax hikes in the history of the Federal Republic of Germany.



Before September 18, the CDU/CSU and FDP had presented a joint vision to move the country forward: elimination of subsidies, shrinking Germany's overwhelming bureaucratic apparatus, as well as simplifying the tax code and reducing taxes across the board. Two months later the CDU/CSU is humming a very different tune.



Tax relief and the rollback of overwhelming government intervention are no longer at the center of the coalition's grandiose vision to heal the "sick man of Europe". Quite the contrary: the increase of Germany's value added tax from 16 to 19 percent is presented as an economic silver bullet to revive domestic consumption.



CDU/CSU and SPD believe that with the VAT increase starting in 2007, Germans will go on an all out spending spree in 2006 to avoid the higher tax rate a year later. This shortsightedness is breathtaking. Even if domestic consumption were to rise in 2006, potential gains would by far be outweighed by a higher private savings rate starting in 2007 to pay for all the other government-expanding schemes and tax hikes the coalition has in store. In essence, the VAT hike will drain €72 billion over three years from Germany's economy without anything positive to show for it.



Adding insult to injury, the coalition agreement is tellingly silent on changing the country's socialist welfare programs. All of these programs, while already in the red, rely on future taxpayers to "secure" their existence. In their coalition agreement, CDU/CSU and SPD have once more dodged reality. Structural changes - complete or at least partial privatization - in the country's exorbitant welfare programs have been postponed until the end of time. The only "reform" the coalition could agree on is to raise monthly withholdings for Social Security from 19.5 to 19.9 of pre-tax income. In the contentious realm of health care policy, the parties agreed to postpone talks on the issue until late 2006.



Blatantly ignoring the advice of German economists and tax experts, Germany's emerging government is set on implementing disincentive after disincentive: On top of raising the VAT, it is also adding a special "wealth". Also, Germany's corporate tax system is in dire need of reform, yet the coalition once again opted for postponement. No debate on the issue is scheduled before 2008.



Overall, the coalition agreement looks like a victory for Social Democrat policies. The Christian Democrats have clearly sacrificed much-needed reform on the altar of political power for the sake of claiming the chancellorship. The bill will be footed by the German taxpayer.



Friedrich Merz, the former CDU/CSU parliamentary leader, said after the coalition agreement was published: "A tax-cutting party has been converted into a tax raising party." He hit the nail on the head, not only in the area of the emerging tax policies of this government, but also in assessing the coalition agreement in its entirety: More taxes, more bureaucracy and more redistribution.



During the campaign, the CDU floated the flat tax model as a viable solution to the country's ills. Instead, CDU/CSU and SPD will increase the existing tax burden and invent new taxes, increase subsidies for eco-energy fivefold, continue to subsidize coal until at least 2008 and prohibit dumping prices on groceries. The worst anti-market move to come from the agreement is a freezing of prescription drug prices for at least two years, until 2007.



The new government will expand government intervention and continue robbing Peter to pay Paul -- once more ignoring the fact that it was exactly this kind of redistribution that created the German malaise. German taxpayers better hold on to their wallets and brace themselves for a continuation of downturn: courtesy of the "not-so-grand-coalition" the anti-growth and anti-wealth policies are here to stay.



Entry #123


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