Wednesday, June 8, 2011

Economic Comparisons between U.S. AndGermany

Writing about German Chancellor Angela Merkel's visit to Washington, the New York Times's David Leonhardt writes, "Yet for all the strengths of the United States, almost nobody claims that the economy is in especially good shape. It so happens that our current out-of-town guests could teach us a few things."  Leonhardt asserts, ". . . .the American economy’s strengths may still be greater than the German economy’s. But Germany sure does seem more serious about dealing with its weaknesses."  That seriousness includes both spending cuts through efficient government and careful stimulus.

The most telling contrast may be between average workers.  Leonhardt reports,
Inflation-adjusted average hourly pay has risen almost 30 percent since 1985 in Germany, the kind of gains American workers have not enjoyed since the ’50s and ’60s. In this country, hourly pay has risen a scant 6 percent since 1985.
Conversely, American workers work more hours.  An Inland Voyage quotes Robert Reich to show that American workers must work increased hours to maintain a middle class life style.
Coping mechanism No. 2: Everyone works longer hours. By the mid 2000s it was not uncommon for men to work more than 60 hours a week and women to work more than 50. A growing number of people took on two or three jobs. All told, by the 2000s, the typical American worker worked more than 2,200 hours a year — 350 hours more than the average European worked, more hours even than the typically industrious Japanese put in. It was many more hours than the typical American middle-class family had worked in 1979 — 500 hours longer, a full 12 weeks more.
Most importantly, income inequality has not increased in Germany as it has here.
The top 1 percent of German households earns about 11 percent of all income, virtually unchanged relative to 1970, according to recent estimates. In the United States, the top 1 percent makes more than 20 percent of all income, up from 9 percent in 1970. That’s right: only 40 years ago, Germany was more unequal than this country.
"In fact," Leonhardt writes,"[in Germany] middle-class pay has risen at roughly the same rate as top incomes."

Yesterday's taxation quotations, especially the statement "According to the Norquistian theology, a good small-government conservative can’t agree to close a tax loophole that’s bad public policy in order to entice Democrats into agreeing to spending cuts" produced sobering displeasure. Leonhardt adds to the discontent:
Some Democrats say Social Security and Medicare must remain unchanged. Most Republicans refuse to consider returning tax rates even to their 1990s levels. Republican leaders also want to make deep cuts in the sort of antipoverty programs that have helped Germany withstand the recession even in the absence of big new stimulus legislation.

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