Who Hijacked Our Country

Saturday, May 09, 2009

European “Socialism” — Safety Net or Nanny State?

This article profiles a family near Heidelberg, Germany, and how they’re coping with both spouses being out of work. Archie Bunker types will blubber about “the welfare state!” and “worthless parasites!” But this family — a husband and wife and their four children — is surviving a lot better than their unemployed counterparts in the U.S.

Sarah Fuerstenberger is from Detroit originally and has lived in Germany most of her adult life. She says: “If we were in Detroit, we could worry every minute. But here, we’re safe because of the system. The German government is really good about taking care of people; we know we won’t be starving one way or another.”

According to the article, this is exactly why European leaders denied Obama's request last month for them to increase their own economic stimulus programs. Their reasoning is that their existing safety net is already keeping people afloat AND stimulating demand.

In other words, if unemployed people aren’t forced to choose whether they want to eat, pay the rent OR take their sick child to the doctor — they can actually go out and buy things, thereby stimulating the economy and keeping businesses from going under.

In addition to socialized medicine and generous unemployment benefits, a lot of German workers are helped by the practice of kurzarbeit — reduced working hours but without a reduction in pay. Whatever amount of money the company loses through this practice, is reimbursed by the government. This policy has allowed some of Germany’s largest manufacturers to reduce production because of decreased demand, without having to do mass layoffs. An economic adviser at the German Institute for Economic Research said: “Nobody is against it — not the trade unions, not the workers' councils, no political party. All are happy.”

And no, this safety net isn’t cheap. The average German worker pays about 52% of his/her income for taxes and social security. For the average American worker, that figure is about 30%. Is it worth the higher cost?

Sarah Fuerstenberger says: “Sometimes I think it’s not worth it when I look at what ends up in my bank account, but in times like these, I appreciate it.”

cross-posted at Bring It On!

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Blogger Lew Scannon said...

If the Americans didn't have the added anxiety about losing their jobs, there would be no incentive for them to drink heavily, swallow tranquilizers, or veg out in front of the television every day. In short, it's the perfect system for the very few to get very rich at the expense of the very many.

May 9, 2009 at 8:52 PM  
Blogger Enemy of the Republic said...

Yes, our tax rate is nothing next to the Europeans. But it's what our country does with our taxes that makes me sick, particularly when unemployment is rising--my husband has been struggling for work ever since the economy tanked. I'm all for the nanny state when it comes to living in a country that bases its economic policies on greed, enriching 4 percent of the country's populace and letting everyone else pay the price of their stupidity. Grrr! Go nanny state!

May 10, 2009 at 6:49 AM  
Blogger The Rambling Taoist said...

Ya know, all citizens end up paying one way or the other. In countries like Germany, they pay up front and receive the services they've financed.

Here, we don't pay that much up front and we get what we pay for -- not much. Oh, but we pay down the line -- higher crime, more murders, more drug abuse, more homelessness, etc.

May 10, 2009 at 10:04 AM  
Blogger Tom Harper said...

Lew: That's exactly it. The more troubled the times are, the more we drink, take drugs, watch TV and go shopping. We're like livestock, and our "owners" keep finding more ways to squeeze more value out of us.

Enemy: I wouldn't mind higher taxes if some of the money came back to us; if we actually benefited. I'm all for a nanny state. We're about the last industrialized country in the world that doesn't have one.

TRT: Good analogy. I too would rather pay up front, even if it's more. Crime, homelessness, that general malaise and low morale that are so prevalent -- it's much more expensive in the long run.

May 10, 2009 at 2:54 PM  
Anonymous kate said...

Are you saying the government (tax payers) pays unemployed people enough money to pay the rent, pay the utilities, buy groceries, AND go shopping to purchase things to stimulate the economy AND reimburse businesses to decrease production? Wow, Why doesn't the "government" run out of money? It's difficult for me to believe that all the people are ok with this.

May 10, 2009 at 5:04 PM  
Anonymous kate said...

Oh, one thing I forgot to mention. I'm not sure if Lew is correct or not, but I've worked with addicts for 24 years now and I have not found a connection between joblessness and drinking, drug use, tranquilizers, or tv. That's just my personal experience.

May 10, 2009 at 5:07 PM  
Blogger Tom Harper said...

Kate: That system seems to work for Europeans. The fact that unemployed people can still buy things means that money keeps flowing into stores and businesses that would otherwise go under. And for that reason, European governments didn't need to shell out trillions of dollars to bail out large corporations. The economy was already "stimulated" by the fact that unemployed people can still patronize local businesses.

Even though our taxes are lower, I think Americans are paying too much money in other ways. As the Rambling Taoist put it, Europeans are paying "up front" in the form of higher taxes, instead of paying "down the line" in the form of higher crime and more homelessness.

May 10, 2009 at 6:18 PM  
Blogger Lew Scannon said...

I wasn't insinuating that those with out employment are on drugs, drunk, etc.,etc, what I was saying that in these times, everybody is so stressed about the possibility of their job being outsourced, or just plain disappearing, that in order to alleviate that stress they turn to drugs, drink or television to tune out the voices in their heads.

May 10, 2009 at 7:02 PM  
Anonymous S.W. anderson said...

Lew Scannon makes an excellent point in his first comment. And, BTW, what a difference in attitude most people have about the well-heeled executive who gets loaded every evening on expensive scotch, or regularly treats himself or herself to some coke, as opposed to the poor, bored, out of work and out of luck schmuck who drinks beer all evening or smokes pot.

No, the economic system and public attitudes aren't completely responsible for individuals' bad habits. But I'm sure there's more than a vague, random connection.

May 10, 2009 at 8:47 PM  
Blogger Ricardo said...

You know, we had a cooperate nanny state for years designed to empower no one beyond CEOs but you'll never hear anyone reference that on the right.

The right would like to have you think that anyone unemployed in this country is a derelict no matter how bad the economy is taking. This is the opinion until the crap hits them. There is also the misconception that collecting unemployment is some sort of holiday at the expense of the working tax payers. first off, you have to work to qualify for unemployment. It's not a lottery! Second off there's not enough money to go around to ave so called holidays.

While the German system may come at a steep price, I would do it knowing what I know now so I agree with Sarah says in the article.

May 10, 2009 at 8:48 PM  
Anonymous S.W. Anderson said...

Take a step back and look at kurzarbeit and what it actually does. It's not just about playing nanny to the nonwealthy. What it's really about is ensuring stability and predictability for everyone.

Workers know they can buy a car or home without fear of getting behind in payments or suffering repossession or foreclosure because of a recession. Those who make and sell cars and homes, and lenders, know the same thing. So, even when the economy is limping along, you don't have the trauma to individuals, families and businesses that you have in the U.S.

Also, under Germany's system, the government pays makeup money directly to employers, which is simpler and less expensive than our system. Businesses are spared the expense and trouble of laying off or buying out workers to cut their payrolls. Individuals are spared the trouble, expense and uncertainty of repeatedly having to start over with yet another job search.

Also, individuals don't have to apply to state government for unemployment, raising its costs when revenues are down. And state governments, in turn, don't have to hope the central government comes through with additional money so states can extend the benefit period in longer recessions.

Thus, Germans benefit from greater stability, more peace of mind and a less-expensive means of getting through a recession than we do.

Conservative Republicans malign the Europeans' approach at every opportunity. I think they're scared to death of it ever being tried here because they know most people would like it and want to keep it. I think they also have a pretty good idea that if it were to be tried, it would quickly disprove their charge that such a system removes any incentive for people to work.

May 10, 2009 at 9:08 PM  
Blogger bob said...

I find this pretty interesting. I have friends who live in Germany. Do to the relative safety net provided by the government, it creates a number of outcomes, one which is overlooked in the US which would be relative economic stability.

Stepping back and seeing what has happened in the US over the past 30 years, one can see an increasingly unstable middle class and a growing gap between them and the upper classes. There has also been an almost continuous cycle of booms and busts in housing markets around the country. I attribute this as the result of a middle class increasingly dependent on asset value rather than more conventional methods of personal capitalization like investment and savings enabled by reliable income and increasing salaries. This in turn has created a huge amount of domestic migration as one city after another experiences its own cycle of boom and busts as more means to find asset value potential is sought. The latest "boom cities"? Austin TX and Raleigh Durham, NC.

But stepping back further, if you were to look at the time period of the 1950's-1970's, you would find a level of relative stability, less disparity, and more of an equilibrium in general. This can be attributed to the accumulative efforts of the programs setup by FDR and Harry Truman where the government had a great deal to do with the financial health of the avg. family. The best example would be the GI bill, which basically enabled soldiers access to college and cheap housing. In fact, a lot of the housing built post WW2 were descendants of homes developed for cheap and quick manufacture specifically for housing military personnel. So the 1950's offered not only cheap and affordable housing and college, but additionally most of the government programs like Social Security and so on actually worked as they were intended.

The irony here is that I can guarantee that any number of those middle aged good ole' boys in the Republican party look back fondly at the 50's as an era of plenty and stability. They can thank the many government programs that in the end reduced the cost of living for most Americans and in the end got them to spend more money.

The bottom line is that the way in which the US economy works now is not maintainable. You cannot continuously have the middle class being drained increasingly of their wealth- whether it be from wage stagflation or housing bubbles- only to have that wealth find its way into the upper crust whom gain more and more command of that capital. Government is supposed to create a degree of equilibrium, which in turn would help an awful lot of those working class conservatives who hiss the word : "Socialist!" anytime that any hint or suggestion is made in regards to changing the status quo for the better.

May 11, 2009 at 8:37 AM  
Anonymous S.W. anderson said...

Ricardo wrote: ". . . first off, you have to work to qualify for unemployment."
Right, but more to the point, every worker pays into the fund unemployment benefits come out of. The money does not come from general tax revenues.

Bob wrote: "But stepping back further, if you were to look at the time period of the 1950's-1970's, you would find a level of relative stability, less disparity, and more of an equilibrium in general."
Excellent point. For a complete understanding of the how and why of that, plus whole lot more, I strongly recommend Robert Reich's latest book, Supercapitalism.

May 11, 2009 at 12:09 PM  
Blogger Tom Harper said...

SW: I think kurzarbeit is a win for everybody. Companies can reduce their output if demand is down, without laying off workers. And like that economist said in the article, all of the political parties are in favor of it.

And this safety net makes for greater stability, like you said. Banks have less fear of their loans being defaulted on, since the "nanny state" keeps people afloat and able to pay their bills. And I agree that the rightwingers in this country are scared shitless to try this European system here, knowing that almost everybody would like it and there'd be no undoing it.

Ricardo: You're right, we do have a nanny state. We just don't call it that if large corporations are the beneficiaries of it. It's only "welfare" or "socialism" when needy people get helped by the government.

Bob: Interesting theory on why housing prices started going crazy during the '80s. I seem to remember it was around '87 or '88 that housing prices started skyrocketing. We bought our first house in '94, and it was really panicky watching rents go up and up and up. We moved from Marin County to Sonoma County in '89; it reduced our expenses by at least half. By '94 when we bought, it was still doable, but in the late '90s things started skyrocketing again. By the time we moved in 2004, Sonoma County and the Russian River area had mutated from a few funky towns to North Beverly Hills.

This whole concept of asset value really is perverted. It's like not being able to have your cake and eat it too. Somebody could be struggling to pay the bills, but if they own an expensive house, they're "wealthy." But the only way to access that wealth is to sell the house, and then you have plenty of money but no place to live.

You're right that our current economic system isn't maintainable. And yes it's ironic that a lot of older people who talk about "bootstraps" and "self reliance" seem to forget that their own success was helped by the GI Bill, FHA loans and other "welfare" programs.

May 11, 2009 at 3:39 PM  
Anonymous Bee said...

Bob is right on about the mentality of housing being promoted as an investment, rather than a home. In the time period he mentions, they were marketed as homes - the roof over your head, the place you'll raise your children, the house you'll die in. Starting in the 80's, they were marketed as "investments," which is the fastest way to a debtor society. People, convinced by the industry professionals that real estate values would only go up, never down, were frankly lied to. It was a tail wagging the dog scenario for decades - we're seeing the implosion now.

However, on the somewhat bright side, I am seeing, in the industry, a very slow shift back to the "house is a home" mentality being fostered. Once the economy picks up, though, that will change, I'm sure. We americans generally have a collective short term memory comparable to a tree-frog.

May 11, 2009 at 5:13 PM  
Blogger Tom Harper said...

Bee: No doubt this marketing of "investments" led to so many houses being bought on spec. Half the time these houses aren't even occupied, or they're occupied by renters who will be evicted at a moment's notice when the owner sells to make a profit.

I first noticed this around '87 or '88 in a small town on the Central California coast. It's a town too small to have many jobs and too far from anywhere to commute to. Housing prices doubled, and it was because of a bunch of new townhouses and condos that went up almost overnight, almost all of them owned by speculators. Multiply that shit by several thousand, and that's what's caused so much trouble.

May 11, 2009 at 5:51 PM  
Anonymous S.W. anderson said...

Bee wrote: "Starting in the 80's, they (homes) were marketed as "investments," which is the fastest way to a debtor society."
Another instance of too many people trying to make money off money instead of actually producing a product or service.

Investment is a good and necessary thing, but it can only be one aspect of a healthy, growing economy — not the whole thing or even the main thing.

May 11, 2009 at 7:09 PM  
Blogger Randal Graves said...

Since you all like something from Germany, I think you're all closet Nazis. You can't fool me.

May 12, 2009 at 7:19 AM  
Blogger bob said...

I'm originally from the Southeast and having lived in California for 9 years, I still find that the meaning of housing in this state is almost a religious thing. People see them more as a status symbol than anything, and mostly due to their expense.

Yet when I go home and visit my family, they live on 14 acres, have a decent house, an in-ground heated pool, a greenhouse, a 2 story workshop, an apple orchard, and a ridge behind the house with a hiking trail. The total assessed value as of last year was around $180,000, or approximately 50% the cost of a typical starter home in the not-so-nice parts of oakland.

Its totally crazy to me that people are so willing to pay so much to live in California as well as other places like New York, New Jersey, Mass, and so on. The bulk of the property "wealth" exists in older more established metros.

But if you look at this report:http://www.newgeography.com/content/00690-special-report-domestic-migration-bubble-and-widening-dispersion-new-metropolitan-area

There is a sort of domestic migration bubble occurring and it is doing so due to the extraordinary prices in these higher prices metros. The fastest growing metros are smaller and newer metros typically in the Southeast and especially Texas.

While this is all well and good particularly for these new areas, it makes you wonder what's going to happen to the more expensive areas- particularly the Northeast- if they can't find ways to get their costs under control. They could easily fall into a pattern of decline similiar to the rust belt states. At the same time, these new regions might as well assume the position of the first tier metros and themselves become expensive places.

The bottom line is that there is a huge demand for affordable living. Somehow, the idea that high home prices creates massive problems is never discussed in context to what it means for future economic growth. If you price people out of an area, then you are doing nothing to help your future economy. In fact, if you look at the quality of life factors, there are no cities in the Northeast or West Coast that make the cut- primarily because of their high housing costs.

I've mentioned this before, but my wife and I are in our early 30's. We recently visited Austin, San Antonio, Houston, Raleigh Durham and a few other places. Its extremely tempting to move to any of these places because our quality of life would be drastically better. I know many others of our age are making the same decision. So again- look around California. Look at the average age of the typical tech firm CEO. Certainly not spring chickens. Imagine what the area would be like come a day where its difficult to find young professionals to fill those voids.

Then again- I'm sure I'm reading too much into this. But at some point, methods for enabling families the ability to live reasonably in an area without crushing expense will have to be addressed. Otherwise this cycle of build, boom, outprice, and moving onto the next area will repeat over and over again, further turning the country into a migrant society with no real ties or roots to any particular region or area.

May 12, 2009 at 8:28 AM  
Blogger Tom Harper said...

Bob: Interesting link. I've also read that some people actually are moving to the most devastated Rust Belt cities because of the dirt cheap housing. Detroit and Braddock, PA (a small steel town near Pittsburgh) are 2 examples I can think of. Detroit's median home price is $19,000; in Braddock it's $6,000. (Those aren't typos.)

I think eventually more and more people will get tired of paying $800,000 for a postage stamp sized tract house in California or New York, and start moving to cheaper areas, whether it's the Sun Belt or the Rust Belt.

I've also noticed the same thing you're talking about, from trips around the country -- A huge house and yard in a beautiful neighborhood, costing less than a 1-story tract house in California.

May 12, 2009 at 11:58 AM  
Blogger bob said...

I think eventually more and more people will get tired of paying $800,000 for a postage stamp sized tract house in California or New York, and start moving to cheaper areas, whether it's the Sun Belt or the Rust Belt.Its already happening and has been happening for awhile now. Take a look at any of the city data web sites. Look at either Raleigh Durham, Austin, Atlanta, ect etc. The sites are stuffed with people moving out of the Northeast and West Coast. Their stories are the same: Young family with kids tired of living in overpriced major metro, wants cheaper housing, better schools etc etc etc... and so on.

Then look at the same sites for SF, LA, NY, and Boston. Those sites have a small percentage of those seeking to move there, and of those, the bulk are extremely young, just out of college folks.

Its been proven that middle class families with children tend to form more stable economies simply because they by default are required to be more static with their careers and areas in which they live. If you take away that level of stability they will move away as they have been doing.

I have to admit this kind of movement bothers me a bit because I am from the Southeast and have family there who are getting older and older, thus someday I will have to move back. It would sort of suck if the region becomes one giant hell-hole of a urban sprawl landscape. But I think its too late and the still-severely cheaper advantage the area offers will keep attracting families to it from those aforementioned places.

May 12, 2009 at 2:16 PM  

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