GHDI logo

The Federal Government's Counter-Cyclical Spending Program (December 20, 1974)

page 2 of 2    print version    return to list previous document      next document

The Union parties are extremely skeptical about the prospect of a premature revival of the economy. Suggestions to modify the proposal, however, were rejected by the majority in the Bundesrat. Bavarian finance minister [Ludwig] Huber spoke out in favor of relieving the burden on the economy through tax reductions rather than short-term cash injections. Therefore, he is of the opinion that it would be useful to introduce the option of loss carrybacks, since this sort of measure would also provide help to businesses that cannot take advantage of the allowance because they are incapable of investing. Schleswig-Holstein economics minister [Jürgen] Westphal called for the introduction of immediate advance payments of the investment subsidy, so that even financially weaker businesses would be able to invest without pre-financing the funds they expect to receive. In the opinion of [Rudolf] Eberle, economics minister of Baden-Württemberg, an upper limit for projects eligible for subsidies should be set at 50 million marks.

[ . . . ]

During the second and third reading of the economic stimulus program in the Bundestag, SPD deputy Alex Möller characterized the planned package of measures as “balanced and appropriate to the situation.” A sustainable revival of the economy, he said, cannot be achieved through subsidies. According to him, the program represents an optimal combination of measures to promote investment and increase demand. Because it is unclear what financial effects the program will have on the public budget, CDU deputy [Ernst] Müller-Hermann described it as an “unguaranteed check drawn on the future.” According to him, the attempt to gradually compensate for dwindling foreign demand with increased domestic demand is full of imponderables and risks. With their socialist experiments in tax, social, and regulatory policy, he said, the coalition triggered a crisis of confidence in industry that cannot be corrected by an economic stimulus program. Federal Finance Minister Apel emphasized his view that the program could in fact bring about an economic upswing in the early summer.

Essential amendments to the government draft, which were made by the Bundestag committees on Wednesday in response to new considerations by the federal government, were accepted by the Bundestag without any changes. These amendments pertain above all to the law on investment subsidies for rental apartments, cooperative apartments, and residential homes in subsidized housing projects. According to the promulgated version of the law, any builder of rental housing for which funds for subsidized housing projects are being used can also apply for the investment subsidy of 7.5 percent. This applies to structures for which building permits were filed after November 30, 1974, and before July 1, 1975, or to those on which construction began within the same period. Consideration is only given, however, to apartments that are not intended for further sale (i.e., condominiums) and are not intended as property (for use by the owner).

During the Bundestag debate, Federal Chancellor [Helmut] Schmidt incurred the growing displeasure of the parliamentarians in the opposition, who continually interrupted him with shouting, because he insulted them as a “gang of hecklers.” At the end of the debate, however, the chancellor backed down a bit: In light of the upcoming Christmas holiday, he explained, he would now correct his statement and say “you are, of course, a most honorable body.”

Source: “Economic Stimulus Program Can Take Effect – Bundestag and Bundesrat Approve It” [“Konjunkturprogramm kann in Kraft treten – Bundestag und Bundesrat stimmen zu“], Süddeutsche Zeitung, December 20, 1974, pp. 1-2.

Translation: Allison Brown

first page < previous   |   next > last page