"According to the coalition agreement, the major challenges of digitization and climate protection are to be tackled with a new strategy that focuses on faster modernization of the state and the economy, innovation and investment. That's already the right message. The trick is in the implementation. People often ask - quite rightly - who is going to finance all this, is it even possible, and can the state handle it all? My answer: The transformation of the economy, the state and society is nothing new. This has happened many times and in many places in the past. In many countries, the market economy and competition have repeatedly mobilized enormous investments, enabled groundbreaking technological innovations and created great prosperity. States have set decisive framework conditions for this, such as property rights, the competitive order, public goods and services, taxes, regulation and administration.
We can therefore meet the new challenges if we make effective use of the opportunities offered by the market economy. Government frameworks provide incentives for private investment in new technologies. Prices signal scarcity and return opportunities. Specifically, when climate policy focuses on a price for greenhouse gas emissions, and this CO2 price signals the cost of global warming, there is great pressure to change behavior and trigger large-scale investment and technological innovation. An international climate club as well as a cross-sector and cross-national emissions trading system and a minimum price for CO2 emissions, as named in the coalition agreement, can help here. [...]
As far as financing is concerned, I am pleased that the coalition has emphasized debt sustainability and wants to realize the necessary spending within the framework of the German debt brake - and without raising taxes. Higher taxes would hurt private investment. The state can take on debt insofar as it can count on growth and higher tax revenues in the future. Compliance with the debt brake ensures that debt sustainability in this sense remains guaranteed. The debt brake counteracts excessive debt propensity - for example, because it makes it easier to avoid difficult political disputes. The government spending ratio was already above 50% last year. Government spending and transfer payments are therefore already very extensive.
In its medium-term financial planning, the federal government has already earmarked 50 billion euros a year for public investment. That's 30 percent more than for 2019. Investments by the states, municipalities and public companies are added to this amount. In addition, the government has the option of eliminating environmentally harmful subsidies, which are now estimated at up to 65 billion euros. In particular, the government should put all expenditures to the test and carry out a strict reprioritization. In addition, not all expenditures must automatically increase with economic performance. [...]
The summaries of all researchers in German are available here.