German elections are approaching. The question facing the electorate is not whether to reform Germany's welfare state, but how and how fast. Whatever happens, Germany will remain far to the left of the U.S. in its institutions; but it will surely move in a direction that conservatives in this country would recommend. There is no other way to solve the enormous problems that European economies are facing. This from The Financial Times (tip to RealClearPolitics):
Gerhard Schröder, the present chancellor, earns respect for having started the reform process. His welfare reforms have made it harder for the long-term unemployed to claim permanent benefits. His reforms have often been criticised as being non-transparent, incoherent and insufficient. But at least they were a start.
Ms Merkel is more ambitious. She has promised to modernise Germany's obscure income tax system and to cut company contributions to unemployment insurance. If she wins, she will be in a position to implement her agenda because her party enjoys a majority in the Bundesrat, the upper chamber of parliament. She will maintain that majority for at least two years. If Mr Schröder wins, he will need at least tacit support from the opposition for any of his reforms to pass.
An example of Ms Merkel's determination to embrace audacious reform came last week when she appointed as her finance spokesman Paul Kirchhof, a former Constitutional Court justice.
Mr Kirchhof has campaigned for a flat income tax rate of 25 per cent and for the total abolition of Germany's 418 categories of tax subsidies. His plan stands few chances of being implemented, even if he were to become finance minister in a Merkel cabinet. But the appointment has demonstrated that Ms Merkel intends to think boldly about a comprehensive tax reform.
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