Atlantic Review appreciates that two Wall Street Journal contributors respond to our blog post on their article.
George Pieler and Jens Laurson took issue with the French finance minister's claim that German productivity ails Europe's economy. Joerg Wolf agreed with their criticism in Atlantic Review's post Germany as Maya the Bee, but expressed disagreement on the issue of tax cuts, even though that was not a central part of their article.
Jens Laurson and George Pieler have now submitted the following riposte, which we appreciate and are happy to post here:
In commenting on our Wall Street Journal piece ("Not so Faaaaast, Germany"), Joerg Wolf, Editor of the Atlantic Review, disagrees with the following observation: "Germany should cut taxes. But it should do so for its own good..."
Mr. Wolf makes three points which we should like to examine; hoping to clarify an evident misunderstanding that has arisen.
Mr. Wolf says Germany has been advised to cut taxes "especially of top earners, over the past twenty years. Such advice is neither helpful nor original and creative." Well, neither originality nor creativity was our intent, nor is that an argument against the argument. The question is, whether it is good advice. Certainly if it is such oft-repeated advice there must be something to it? For the record, we think cutting taxes is good-indeed essential-advice. This is partly because Germany has one of the highest top personal tax rates in world (47%). More worryingly, the German state absorbs nearly half the nation's GDP which means an astonishing, if hidden loss of productivity. This formula has worked for Germany so far, a reflection of popular acceptance of high taxes in exchange for government-guaranteed income security programs. We don't think that will work so well in the future, though. The German tax cuts over the last two decades Mr. Wolf mentions, in any case far outweighed by the tax increases in the same time, are irrelevant to this discussion.