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Berlin Balances Budgets while Washington Drowns in Debt

Germany’s constitutional requirement for a balanced budget is blocking deficit spending and reducing that country’s national debt. A new, responsible Republican majority in Washington must follow a similar path.

Credit: Prachaya Roekdeethaweesab

U.S. public policymakers should consider valuable lessons from Germany on stopping and reversing Washington’s never-ending slide into more and more national debt. In 2009, German lawmakers successfully enacted the Teutonic equivalent of a balanced-budget constitutional amendment, a crucial step that returned the Federal Republic to its historic common-sense record of not routinely spending beyond its means. Today, Germany’s constitutionally mandated balanced budget is helping to prevent Chancellor Olaf Scholz’s radical-left government from engaging in deficit spending.

In a move that should make conservatives everywhere smile, the German constitutional court earlier this month blocked Berlin’s three-party “traffic light” ruling coalition from grabbing 60 billion euros of revenue raised to deal with the Covid panic but never spent. Scholz wanted to reprogram the money for his pet radical climate change projects, which have done much to begin dismantling Germany’s highly successful manufacturing economy.  


An actual vote to raise more green-agenda revenues in already heavily taxed Germany would have been politically toxic, but a fiat workaround is exactly what politicians do everywhere. After all, the Green Party explained, they are taking emergency action to save the planet as they try to mobilize Germany with the furor of the Prussian General Staff in 1914. In response to this sneaky and undemocratic (and unconstitutional) tactic, the opposition Christian Democrats (CDU) took Scholz to court and won. 

Whatever their other vices, the Germans have successfully used their constitution to restrict their wild spenders. Historically skeptical of deficits, Germans became concerned 15 years ago that the national debt was getting out of hand; it was not only undermining the country’s financial health, but it surpassed the 60 percent of GDP ceiling that was agreed to in Brussels. Instead of ignoring the red ink, the German political consensus, pushed by fiscal conservatives, amended the constitution, restricting the annual deficit to no greater than 0.35 percent of GDP absent a Bundestag-approved national emergency.  

Known as the federal Schuldenbremse, or “debt brake,” the fiscal restraint measure went into force in 2016, with 13 of Germany’s 16 federal states also agreeing not to take on any new debt after 2020. As a result, the German national debt started to fall, creating an enviable precedent for Washington, London, Paris, and Tokyo. 

In 1971, when President Nixon famously announced that “we’re all Keynesians now,” leaders in the German Federal Republic were not listening. For decades, Anglo-American economists have regularly preached to their German counterparts on the virtues of deficit spending as “government investments.” Washington and London financial advisors constantly urge Berlin appropriators to do away with the “schwarze Null,” the expression for the pesky German habit of keeping budgets in the black.

The Economist magazine, the London-based weekly whose globalist editors tend to be sermonic Keynesians, has for years regularly scorned German small-mindedness on refusing to borrow and run up the national debt. “Tie your hands, please,” sniffed The Economist in response to Germany’s debt brake constitutional amendment. Germans are skeptical that political fiscal wizardry creates real prosperity; they believe instead in work, savings, and manufacturing.


Confounding Keynesians, Germany’s economy has consistently performed reasonably well over the past half century, particularly before the left’s extreme climate change mandates. In a modern global economy that is increasingly drunk with borrowed and fiat money, Germany holds her ground as an export powerhouse. Among the G-8 partners, Germany recently replaced Japan as the world’s number three economy, while admirably resisting the practically universal slide into spiraling national indebtedness.  

The ratio of Germany’s €2.57 trillion national debt to GDP dropped in the past year from 69.3 percent to 66.4 percent. The U.K. debt-to-GDP ratio comes in at 97 percent, while Washington’s is at 129 percent and growing. The debt ratio in the United States is now worse than France’s (112 percent) and closing in on Italy’s (142 percent). Japan’s debt ratio is a whopping 264 percent and not looking back. China’s is 77 percent, if you believe Beijing’s data. 

Burned by irresponsible runaway inflation unleashed by the Weimar Republic in the early 1920s, Germans learned a bitter national lesson in letting politicians play tricks with the value of money. With the launch of the Federal Republic after World War II, state financial discipline was the norm for most Germans, whose tight-fisted, bürgerlich middle class reemerged after 1945 hostile both to Prussian militarism and Wall Street–style razzle-dazzle finance. 

In the early decades of West Germany, federal governments in Bonn, led both by the right and left, rejected playing the games of Keynes. In contemplating the famous British economist, the practical and sober-minded Germans realized that, while in the long run you are dead as Keynes said, you are also followed by children and grandchildren who have to clean up your financial mismanagement. 

When in the 1990s Germany encountered the national challenge of reunification—the costly business of incorporating the defunct communist GDR—it began to run significant federal budget deficits. Germans overwhelmingly agreed to pay higher taxes and accept debt as the costs of bringing in 16 million new citizens and six new states, while also moving the national capital from Bonn to Berlin. Worthy national missions can be the basis for new borrowing; the point is to use debt to help manage extraordinary times.

Today’s Washington-style, routine deficit spending is a destructive addiction. Uncle Sam’s fiscal outlay has consistently been in the red for the last five decades since Nixon’s 1969 balanced budget; only the exception of the Gingrich-Clinton 1998-2001 surpluses have interrupted Washington’s irresponsible spending spree. Amazingly, there was even a short time during the second Clinton term when brokers for Treasury bills complained their jobs were in danger.

When they were borrowing and raising taxes for reunification, German lawmakers clearly labeled some higher taxes as a “solidarity surcharge” (Solidaritätszuschlag) to link the new costs and debt to the specific national objective. Yes, tax money is fungible, but responsible and honest political leadership should try to connect new revenue levies to the identified government activities they finance. 

Imagine Congress instructing the IRS to impose, say, a Ukraine-war surtax on the American people, or collect a dedicated green-energy fee. The likes of Chuck Schumer and Mitch McConnell would never agree to linking new federal projects to specific tax levies because the American taxpayers would surely reject them. It is much easier for politicians to talk big on policy and then borrow more money to pay for it. 

That is an undemocratic formula for fiscal disaster, and it has become, alas, the unfortunate American way for the past five decades. For Washington insiders, who outrageously revert to “continuing resolutions” because they are incapable of even engaging in the normal budgeting process, what is the difference between $30 trillion in debt and, say, $40 trillion?

When it comes to the healthy German inclination to eschew debt, Americans can rightly complain that our Mitteleuropa cousins have pulled off much of their budget-balancing discipline by avoiding paying their NATO defense costs. Yet if the Germans can get away with it, who can blame Berlin? It is Washington’s fault for not pressing America’s dire financial need to rebalance defense spending with our allies. 

For the past three decades, Washington has paid out roughly $10–15 billion each year in European defense costs, which should today be red ink on the German taxpayer’s balance sheet. In his best outer-borough manner, President Trump made this point with Chancellor Merkel for four years. Nevertheless, under the Biden administration, even after Putin marched on Ukraine and Chancellor Scholz bluffed about modernizing the feeble Bundeswehr, Washington continues to ignore that Berlin pays far less than its fair share. 

In the Ukraine conflict, a higher U.S. priority than even maintaining Kiev’s independence should be ensuring that the geopolitical crisis leads to rightsizing military costs and sharing responsibilities between Washington and our European partners, particularly Germany. But American defense and diplomatic policymakers blindly refuse to grapple with recurring massive deficits and their coming impact on the U.S. international footprint. The budget in which it will cost Washington more to service the national debt than to run the Pentagon is right around the corner. 

Americans should not have to turn to Europeans to learn how to manage our financial house, but comparing our fiscal discipline to that of the Germans shows very clearly how our own policy elites are mismanaging our country’s future. Americans must insist that bringing federal spending under control is more important than any other foreign or domestic challenge, with the possible exception of fixing our unprotected national border. 

In Congress, Senators Mike Lee of Utah and Charles Grassley of Iowa proposed again earlier this year, for the umpteenth time, the balanced budget amendment. As Senator Lee explained: 

We cannot rely on self-imposed, statutory spending limits that Congress can waive with a simple majority. To restore fiscal responsibility, we must enact a permanent structural spending restraint. If we want to eliminate deficits, reduce the national debt, reduce spending, preserve our constitutional priorities, and save our economy, it starts with the balanced budget amendment. It is the only solution that guarantees the enforcement of future reforms.

Germany has demonstrated that this approach actually works.