The debt incurred by the federal government to combat the pandemic will be lower than feared. Nevertheless, some would like to calculate these creatively instead of paying them off properly. But that would damage the debt brake, which rightly enjoys broad support.
The Federal Council would like to have reduced the corona debt in the next 11 to 13 years.
That must sound like music to politicians’ ears: the Federal Council has declared that it wants to reduce the corona debt without the need for austerity programs or tax increases. Debt reduction should be carried out in such a way that the recovery of the economy is not impaired. Actually, if possible without politicians who are willing to spend noticing it. But does that correspond to the will of the voters?
In 2001, voters included the debt brake in the Swiss constitution with a rarely large majority of 85 percent. They did this to force politicians and administration to adopt sustainable budgets, after structural deficits had repeatedly occurred before. The instrument is now one of the most tried-and-tested mechanisms in Swiss politics and has saved the country from the debt economy of many other countries.
Since surpluses are not transferred to the next budget, but are posted to the compensation account and used to reduce debt, the federal government’s debt level has been reduced by around CHF 29 billion over the years.
The federal government was thus able to tackle the Corona crisis from a position of financial strength. This means that Switzerland has come through the pandemic remarkably well economically. At an estimated CHF 25 to 30 billion at the end of the year, the corona debt should be at least CHF 10 billion lower than initially forecast. They correspond to an additional expense of around one third of a regular annual budget.
The debt brake clearly stipulates what has to happen if such extraordinary debt becomes necessary: This must be paid off again within six years through savings in the regular budget. This is intended to prevent future crises from being tackled with an increasingly poor starting position.
In concrete terms, this would mean that four to five billion francs would have to be budgeted for debt reduction over the next six years, which would correspond to a good five percent of the total budget. The Federal Council and Parliament consider this unreasonable. The Federal Council wants to solve the problem by reserving expected additional distributions from the National Bank for debt reduction and unbudgeted extraordinary surpluses for the rest.
He calculates that the corona debt can be reduced within the next 11 to 13 years. A change in the law should make this possible. The aim is that politicians do not notice anything in the ordinary budget process. After all, she would have to discipline herself a bit during this time by not being able to spend any extraordinary additional income.
But for many parliamentarians, not only from the left spectrum, but also from the center, even that is too restrictive. They want to at least partially “magic away” the corona debt by offsetting it against the debt reduction that has been successful since 2003. As an option, the Federal Council has launched the idea of doing this halfway. Some politicians would rather just forget the 25 billion.
Of course, one can argue that the federal government has little debt in an international comparison. But that’s a big plus and should stay that way. It would be correct to follow the path specified by the debt brake of a proper reduction within six years. The Federal Council’s proposal to allow around twice as much time for this and to use only extraordinary funds is already an almost painless compromise.
It is understandable that spending-friendly politicians would prefer to calculate half or all of the debt. However, parties and parliamentarians would damage the institution of the debt brake the first time that a larger extraordinary debt became necessary due to the crisis. That would be an irresponsible violation of the will of the electorate.