Consolidate the State budget painlessly, instructions for use

Werner Vontobelarticle published on An informant on October 27, 2024, translated by Good for the head

When it comes to cuts and eliminations, the rule is this: you must first eliminate what you can give up. But what should we give up when the Confederation has to fill a budget hole of 4.5 billion francs every year? This is the question that a commission of experts appointed by the Federal Council had to ask itself. The answer is known. The savings program provides for cuts of more than 1.7 billion in social spending – among others in creches and AVS.

It is also expected to save 1.4 billion in spending on transport, training and research as well as climate policy. These cuts are sustainable and necessary to prevent the public debt from increasing further. This is the only way the Confederation will still be able to deal with a new crisis that could be as big as the Covid pandemic, without having to make painful emergency cuts.

But the Confederation could achieve this goal by increasing taxes. This would also lead to cuts and eliminations. However, it is not public spending, but private spending that should be reduced by 4.5 billion, and each taxpayer could decide for themselves what he or she wants to give up. If the Expert Commission were to consider this alternative – which there is very little evidence to support – it should have asked itself in which area we spend the most money for what we could give it easily. In individuals or in the public sector?

The disposable in private consumption

The answer is easy to find. Just go shopping in Zurich or open any newspaper and read what the rich spend their money. 2,400 francs per month for a horse box, about 100 million francs for Federer’s main residence or second residence with his boathouse on the shores of Lake Zurich, 10,000 francs for a bottle of champagne in a night club.

In contrast, the “wastes” of public money found by the Commission of Experts are, at best, trifles. Switzerland is certainly still relatively full of public goods, but if there is real waste, it is mostly in private consumption.

We can also approach the question systematically. Total household income is around 560 billion francs, with at least 360 billion going to the richest 40%. If the latter had to pay the 4.5 billion only, their income would decrease by 1.25%. In return, they should not give up anything. They should simply reduce their savings rate from 36% to 34% of their gross income.

Even at retirement age, the richest 40% could still put aside a tenth of their income. At the bottom of the income scale, couples with children will quickly lose a tenth or more of their already small disposable income when public childcare subsidies are cut. He is under stress, and the scales quickly tip in the wrong direction.

Switzerland is saving nothing

From a purely economic perspective, increasing taxes on the rich instead of reducing government spending would even be a blessing. Switzerland is saving far too much anyway. Over the last ten years alone, the surplus in the current account balance was 464 billion francs (as at the end of June). But as our assets abroad continue to depreciate, our fortune abroad has only increased by 140 billion. Since the end of June, the franc has continued to appreciate. If, at the end of the year, it is still as strong as today, this 140 billion will also have disappeared. We would then have saved all that money for nothing.

The least possible damage for the least possible number

If the goal of economic policy was to do the least harm to the least number of people, it would have been in the public interest to limit private rather than public waste: to raise taxes rather than cut public costs.

But the commission of experts did not think about this, or at least it did not think much. If she had expressed such views publicly, she could hardly have avoided proposing a direct federal tax increase. Since this rises as a percentage of the income increase and largely saves low incomes, it is the preferred weapon against private waste. But obviously private waste collectors do not see it that way, and their lobby knows how to listen in Bern.

Recently, plans from the Department of Finance have been made public, according to which capital payments of the 2nd and 3rd pillars in the future should be taxed more or less with tax relief. This would still give the Confederation an additional 220 million francs per year.

But we are already firing red bullets at this proposal. The PLR ​​and the UDC “firmly” reject this idea. Even the Sunday newspaper sided with the latter with a headline referring to “Keller-Sutter’s attack on the middle class and big earners.” ” We would not like to imagine what would have happened if the expert committee had recommended financing the entire 4.5 billion with an increase in taxes.