Tuesday, November 16, 2021
Fight against the debt brake
“The key to the interests of young people”
National debt is a burden for future generations – and that is why the state has to save. This narrative pissed off Carl Mühlbach and his colleagues from Fiscal Future. You are demanding more spending, especially on behalf of young people – with economic arguments.
National debt is a burden for future generations – and that is why the state has to save. This narrative pissed off Carl Mühlbach and his colleagues from Fiscal Future. You are demanding more spending, especially on behalf of young people – with economic arguments.
ntv.de: Many young people have been taking to the streets in recent years because they are concerned about how politicians will influence their future today, for example through a failed climate policy. How did you come to be concerned with fiscal policy of all things?
Carl Mühlbach studied economics in Heidelberg and Cambridge. The 25-year-old is currently doing his Masters in Public Economics at the Free University of Berlin.
(Photo: Mühlbach)
Carl Mühlbach: I was politically active before, for example as a student representative in Bremen. At that time we demonstrated against tough austerity measures in education. It was only later that I learned that these cuts were due to the introduction of the debt brake. I then became specifically active in the initial phase of the corona pandemic. As an economics student, I was bothered by the large discrepancy between the state of economic research and the public debate on debt. When it was said, for example, that the new debt due to the Corona aid packages would have to be repaid soon. Equally misleading is the myth that Germany was only able to afford the extensive Corona aid because of the black zero of previous years. In order to clarify this and to objectify the debate, I created Fiscal Future. We are now around 70 people, most of them students. We launched a website, translate the scientific knowledge and are active on Twitter and Instagram.
What do you think is the problem with frugal budgetary policy? It is – according to the common narrative in Germany – made especially for the young generation so that they do not burden them with a high mountain of debt in the future.
Economically, that’s nonsense. The public debate systematically overestimates the cost of public debt, while underestimating the devastating consequences of not investing. Contrary to what is often suggested, the state does not have to save to repay its debts, but can usually replace old government bonds with new ones when they expire. Quite the opposite: if national debt is to remain constant in relation to economic output – a common definition of financial sustainability – it even has to constantly take on new debt in a growing economy. Repaying all government debt, on the other hand, would not only be unnecessary, but extremely dangerous, because government bonds play an important role in the economic and financial system. Above all, however, you can see the consequences of the previous austerity policy: With digitization, Germany threatens to be left further and further behind. More money urgently needs to be invested in education and infrastructure – and of course in the fight against climate change. The policy based on this savings narrative with the debt brake anchored in the Basic Law prevents enough money from being available for such important future investments. From an economic point of view, there would be enough leeway
You refer to the state of economics. However, there are also economists who see it very differently. In the past week in particular, two of the four economies vocalized vehemently in favor of maintaining the debt brake. Don’t you sometimes have doubts about your position?
It is true that there are other positions as well. There are still economists who believe that climate protection does not require any additional government investment and that it is just a regulatory problem. But these are positions that are becoming a minority in economics, even in Germany. And seen globally, that’s already an outsider’s opinion.
Young people are obviously concerned with issues such as saving the earth from climate change, as well as with issues such as social justice or the refugee crisis. That they are interested in the economic theory of public finances seems rather unusual. What response do you get, especially from people who are not currently studying economics?
We are currently around 70 active. Even if this is a completely different dimension than, for example, Fridays for Future, I was positively surprised by the interest. Especially since we are not just business students, we have diverse backgrounds. Fiscal Future is the first organization that offers young people the opportunity to get involved in financial policy. And financial policy is the key to the interests of us young people, be it the climate, education or social justice.
Do you have specific goals or demands, comparable to the CO2 targets of the climate movement, such as which state investments should be achieved and when?
We want the debt brake to be replaced or modernized so that sufficient investments can be made. It is disappointing that this did not happen in the current coalition negotiations. What is proposed as a substitute for investments in other ways is more of a consolation, not the main prize, for us. But we continue to advocate reform of the debt brake. Every year in which Germany does not invest enough in climate protection, education, digitization, etc. is a lost year.
How is Fiscal Future fighting for this goal? Can we expect major demonstrations against the debt brake?
No, the theme is hardly suitable for large demos in the style of Friday for Future. I could well imagine smaller protests, for example in front of the Ministry of Finance. Above all, however, we see our task in informing ourselves and others. We take part in discussions, organize events and talk to politicians, economists and youth organizations. We are also receiving increasing feedback that financial politicians are using our website to prepare for debates on the subject of public debt, which encourages us. I think we’re already making an impact, albeit a small one.
Max Borowski spoke to Carl Mühlbach.