Comment: The debt brake is not a brake on investments

The federal government is struggling with the budget for the coming year and calls for a reform or even abolition of the debt brake are becoming louder. There are good reasons to keep them.

The debate on the supplementary budget was just a preliminary skirmish. Ultimately, only loans that have already been taken out and that are now placed on a constitutionally clean basis will be rebooked. After all, the extensive abandonment of problematic additional budgets will help in the future to get a better overview of public finances.

However, the real challenge still lies ahead – plugging the billion-dollar holes in the climate and transformation fund as well as in the budget for the coming year. The debate on the supplementary budget gave a foretaste of what is now at stake, namely the debt brake. The SPD and the Greens would like to get rid of it, supported by some economists and business representatives who are worried about subsidies.

Many people are now saying that the debt brake is a brake on investment. But if you look at politics realistically, that is nonsense.

Three reasons for the debt brake

For several reasons: Firstly, adhering to the debt brake has given politicians in Germany significantly more leeway over the years than other countries have. This helped in overcoming the Corona crisis – and is also important in order to be able to overcome possible future crises.

Secondly, the comparatively low debt ensures low interest rates, also because investors believe that Germany is particularly creditworthy. Higher debts, on the other hand, lead to higher interest rates – and not just for the state; If interest rates rise, this puts a strain on companies’ investment activities.

Third: The state investment rate does not depend primarily on revenue, but on the very simple question of what politicians spend money on, i.e. on their priorities. Anyone who says that investments are the most important thing cannot first decide on all other spending and then be surprised to find that there is not enough left for infrastructure, digital and research.

Future Investment ability endangered

By the way: the idea of ​​allowing more debt as long as it does not exceed the amount of investments is not new – that was the rule in the Basic Law until the introduction of the current debt brake. Unfortunately, this requirement did not work and did not lead to more investment.

Conclusion: The detour through additional debt may sound tempting in the short term; However, lowering the debt brake will have the opposite effect and put a lasting strain on investment activity.