MacroScope

Death not an option for German pension debate

It may not be legislation, but a recently passed “pension guarantee” has re-kindled debate over a pillar of Germany’s welfare state – the notion of “inter-generational justice”.

The agreement, which basically calls for nationally funded retirement benefits to be locked in at current levels for all eternity, has not gone down as smoothly as its sponsors would have liked, since many nowadays see the country’s sagging birth rate as a sign coming generations will struggle to support their predecessors in old age. Two years ago when elections were far off, the government headed in a different direction, deciding to gradually expand the retirement age to 67 from 65 in order to offset both the birth rate and rising life expectancy.

While the agreement had already been supported by both parties in the awkward left/right governing coalition, some policymakers cried hypocrisy last week when it passed a final hurdle in parliament.

Outspoken Finance Minister Peer Steinbrueck kicked off the generational sparring when he called the agreement “absurd” and pointed out that the current generation of pensioners is doing better than any other in the past. Increases in retirement benefits outpaced salaries in July in one of their fastest jumps since reunification almost two decades ago, he noted. The statements could hardly have pleased his fellow SPD party member Frank-Walter Steinmeier, the Social Democrat candidate for Chancellor who had supported the idea.

Economy Minister Karl-Theodor zu Guttenberg, a rising star from the conservative CSU/CDU bloc also took his own pot shots at the agreement, calling it nothing but a “pure declaration”.

U.S. state budgets battered by recession

Eighteen months into the worst recession in decades, and the pain of the downturn is reaching into nearly every U.S. state, city and municipality.

With ever more people out of work, consumer spending has dried up, depriving local government of sales tax revenue. The continued housing slump has wiped out real estate transfer taxes, while declining corporate profits have eroded business tax revenue.

From Maine to California, the slump has drained coffers at the very time that the cost of providing jobless benefits and healthcare has risen, straining public finances.