Politics still hasn't understood it

Politics still hasn't understood it

by Heinz-J. Bontrup

[This article posted on 3/18/2025 is translated from the German on the Internet, https://www.nachdenkseiten.de/?p=130332.]


Today, the old Bundestag is voting on an amendment to the Basic Law in a special session convened for this purpose. The aim is to exempt certain defense spending from the debt brake in the future. The economist Heinz-J. Bontrup has always criticized the debt brake as economically harmful and socially divisive, but considers the planned amendment to the constitution with the old Bundestag to be reprehensible and the armament to be unnecessary, since Germany is not under military threat. He advocates civil investment and calls for tax increases for the wealthy and lower interest rates. Neoliberals have been responsible for social upheaval over the last 40 years, but in crises, they then fall back on Keynes' state interventions, according to Bontrup.


The neoliberal ghosts need Keynes again

As early as 2009, the year the debt brake was written into the German constitution, I explained in several publications that the debt brake is economically counterproductive and will deepen the division in society. That is exactly what has happened. Never before has Germany been so rich on the one hand and so poor on the other. The well-known political scientist Christoph Butterwegge speaks of a “torn society”. Over the last 40 years or so, neo-liberals in politics, business, science and the media have been responsible for economic and social upheaval – not least for the political shift to the right. In their naive market madness, the neo-liberal ruling elites have privatized a great deal in a spectator democracy and pruned the state back to the necessary. Public goods were a horror, the social was defamed as a cost unit of the economy. Tax cuts for entrepreneurs and the wealthy, on the other hand, were almost canonized as growth drivers, and it was taken for granted that the trade unions and the employees would have to be put in their place. The doctrine was shareholder value. There was a gigantic redistribution from labor to capital income. The unemployed were fought instead of fighting unemployment as a “reserve army” to keep down wage demands. In addition, a labor class never thought possible has been created in Germany; today, despite work, people are poor and remain poor in old age, with only a meager pension.

The great British economist Sir John Maynard Keynes called rulers incompetent, malicious and insane. With such leaders in politics, our civilization would be nearing its end. The much-read US historian Barbara Tuchman put it a little more kindly, but also clearly, in her book “The Folly of Governments. From Troy to Vietnam”, when she writes: “In the art of government, it seems, the achievements of mankind fall far short of what it has accomplished in almost all other fields. Why do insight and reason so often remain ineffective?”

When neo-liberal minds are at a loss, they are quick to invoke the otherwise hated Keynes, who as early as the 1920s called for a strong interventionist state for capitalist systems. This was the case after the severe global financial crisis of 2007-2009 and also after the pandemic of 2020-2021. I give up “laissez faire”, that was Keynes' message. Markets have no “self-healing powers”. In a crisis, the state has to spend money by going into debt: the private sector does not do it. If no one spends more money, no one can earn more money. If only this economic triviality would be understood! In the capitalist crisis, the private sector is caught in the “individual economic rationality trap” it has set itself; an “austerity paradox” is emerging and the private sector can no longer find a way out of the crisis without state intervention.

That is why the neoliberals, in their desperation, personalized by the former BlackRock manager Friedrich Merz (CDU), who is preparing to become Chancellor, are now bringing Keynes back onto the financial policy playing field in order to save the system from itself. While Merz vehemently rejected government debt and the abolition of the debt brake while in opposition and during the election campaign, he now can't get enough of Keynesian deficit spending. One trillion euros of debt-financed government spending, albeit spread over the next few years, is unprecedented in German history. Three parties that lost votes in the federal election – especially the SPD – now want to have the old Bundestag, not the newly elected one, vote on the planned gigantic debt package. The potential coalition of CDU/CSU/SPD was only voted for by 37 percent of those eligible to vote, and a few party negotiators came up with the “results of the CDU, CSU and SPD exploratory talks” in back rooms on March 8, 2025.

Amendments to the Basic Law with the voted-out Bundestag are politically reprehensible

In doing so, they also came to the conclusion that the debt brake in the Basic Law, which they still do not want to abolish, should only be modified for armaments from a percentage, based on the nominal gross domestic product (GDP). The GDP in 2024 was 4,305.3 billion euros. That would already be a good 43 billion euros just for armaments. In addition, politicians and parties, encouraged by the media, seriously want to approve arms spending without any upper limit by suspending the debt brake. To get the Bundesrat to agree to this madness, the under-financed 16 federal states, which according to the debt rules must present a balanced budget today, are being enticed with a relaxation of the debt brake. In the future, the federal states, like the federal government, will be allowed to take out 0.35 percent of the nominal gross domestic product as loans. The civil expenditure program, on the other hand, is to be anchored in the Basic Law as a “special fund” (the correct term here would be special debt).

However, a two-thirds majority is needed to implement both proposals, which will not be achieved in the newly elected Bundestag and was also far from certain in the Bundesrat. That is why they want to use political trickery, even if the Basic Law amendment is constitutionally permitted with the old Bundestag in accordance with Article 39 of the Basic Law. This shows once again what Keynes thought of representatives of the people. Only the people should decide on changes to the constitution, as practiced in Switzerland.

The planned even greater armament cannot be topped in stupidity

“Putin will not bomb Berlin,” says Sönke Neitzel, Professor of Military History and Cultural History of Violence at the University of Potsdam. He doesn't know of anyone who considers such a thing to be realistic. ”It is more likely that Russia will concentrate on limited testing of NATO with the aim of politically destroying NATO. In addition to the 100 billion euros that have already been earmarked for rearmament in the form of special debt in the course of the so-called “turning point” (Olaf Scholz) in 2022, with a change in the Basic Law, and that with a poverty rate of around 17 percent in the country, a further 500 billion euros are now earmarked for armaments; largely exempt from the restrictions of the debt brake.

In particular, the SPD should not dare to invoke Keynes here, who strongly rejected a Keynesian defense policy. He saw the danger and knew where armament ultimately leads: to war, which then happened with the Second World War. However, just as at the end of the Weimar Republic, the warmongers are emerging again today. It is unbelievable. Here, lies and brazen assertions are being made. The security of Germany is supposedly in danger because of an underfunded Bundeswehr. The truth is: “German defense spending (according to NATO criteria) rose from 34.7 billion euros in 2014 to 57.7 billion euros in 2022. That's a whopping 66 percent increase in eight years. “It is a myth that the Bundeswehr is poorly equipped because it receives too little money” (Herbert Wulf: Haushalts-Déjà-vu, in: Wissenschaft & Frieden, 2023/4). The Bundeswehr simply has to learn to handle money rationally.

We would have to be made “fit for war” (according to the German Defense Minister Boris Pistorius of the SPD). Bundeswehr soldiers are advised to make their will as a precaution. The “evil empire”, then still the Soviet Union, as dubbed by neo-liberal US President Ronald Reagan, would today, if applied to Russia, lead to servitude under dictator Putin in Germany and all of Europe. At this point, one can only urgently recommend that people engage with history and the actual facts and, above all, read the preamble to the German constitution. Russia has never attacked Germany. But the opposite is true. Russia is economically, apart from its raw materials, only a dwarf and in conventional armaments far inferior to the NATO states, even without the USA. However, Russia is on a par with the USA in terms of nuclear armaments. How can anyone believe for a nanosecond that Russia could be defeated militarily?

Tax increases for the wealthy are necessary

In addition to the armament, a further 500 billion euros are to be written into the Basic Law as special debts in order to circumvent the debt brake. The government spending provided for here, spread over ten years, can be largely understood, even if some spending is being discredited as consumptive government spending by some radical neo-liberals. The fact is that Germany is suffering from massive underinvestment. There are not only infrastructure problems. Energy, climate protection, health, pensions, care, education and social housing construction are areas where huge unsolved problems involving billions of euros in expenditure await. The money that is pointlessly to be poured into non-reproductive defense spending would have to be optimally allocated here for civilian tasks.

However, despite the necessity of financing through government debt, financing through taxes should not be forgotten. In this context, the reintroduction of a wealth tax on the financial assets of private households, which amount to around nine trillion euros, and an increase in inheritance tax and capital gains tax rates are recommended. This would also allow the “functionless investor” (Keynes), the rentier, to be socially sanctioned, at least to some extent. In view of the huge tasks that lie ahead for Germany, the partial sale of the gold reserves at the Deutsche Bundesbank should also be considered, without the additional supply causing a major price collapse on the market. And since all EU member states are facing similar challenges and pressures on their economies and budgets, with public debt in many countries significantly higher than in Germany, the European Central Bank (ECB) must set the key interest rate at zero again. This is necessary if only because otherwise the wealthy will profit from the national debt through high interest rates, and because low interest rates encourage private investment, which is just as necessary as public spending.