U.S. vs. Europe, v.2.0

By Jeff Harding:

I saw this article in Bloomberg about the potential new Minister of Finance, Hermann Otto Solms, a.k.a. Hermann Otto Prince zu Solms-Hohensolms-Lich. The September 27 elections are expected to result in Solm’s party, the Free Democratic Party to win enough seats to become a coalition partner with Angela Merkel’s Christian Democratic Union.

The man who may become Germany’s finance minister after next month’s elections, Hermann Otto Solms, says tax and spending cuts are needed to lift the nation out of its worst economic crisis since World War II.

“We believe that tax reductions are good for growth and employment and if you have more employees you have more taxpayers,” Solms said in an interview on Aug. 25 in his Berlin office overlooking the 19th century Reichstag building that houses parliament. A “big tax reform” is a non-negotiable demand for potential coalition talks after the Sept. 27 vote.

Solms, 68, a vice-president of Germany’s parliament who rides a BMW motorcycle, wants to guide his Free Democratic Party back to power after 11 years in opposition. Chancellor Angela Merkel says she wants to dump her current Social Democratic coalition partner and govern with the FDP. Polls since December have given the two allies a combined 50 percent or more, enough to form a government. …

If he gains office, Solms will inherit falling tax revenue and borrowing forecast to surge to a postwar record. The budget posted a 17.3 billion-euro ($24.7 billion) deficit in the first half of this year as the government boosted subsidies for companies to keep workers on the payroll during the crisis, the Federal Statistics Office said Aug. 25. The budget was close to balanced in 2008.

Solms’s party leader, Guido Westerwelle, criticized the government’s first stimulus package, worth 50 billion euros, as the “most expensive election campaign in German history.” …

The FDP’s platform calls for simplified, lower income tax rates between 10 percent and 35 percent. Germany’s top income tax bracket is currently 45 percent and the lowest is 14 percent. The CDU wants to drop the lowest bracket to 12 percent and raise the threshold for the 45 percent rate to 60,000 euros from 52,000 euros.

The FDP also wants to revamp inheritance tax on family businesses, which Solms said “is driving lots of business people abroad.”

While praising what he called Merkel’s swift reaction to the global financial crisis last year, Solms said Merkel’s bad-bank law was problematic because “no bank will take advantage of it unless they’re on the brink of insolvency.”

He also condemned Merkel’s moves on bank supervision, saying “here, nothing has happened.” …

Solms studied agricultural economics in the U.S. from 1969-1970 at Kansas State University in Manhattan, Kansas.

On the spending side, according to Bloomberg reporter Leon Mangasarian, who was kind to furnish this information to me, his plans are a thing of beauty:

Solms says he wants to slash the number of employees (currently over 100,000) at the Federal Employment Agency; eliminate some healthcare funding; cut finance ministry staffing and end German development aid to countries like China. He said this would save a double-digit figure in billions of euros (he wouldn’t be more specific).

How could you not vote for this guy if you were German. Reduce taxes and reduce government spending. This is the road to recovery.