Please go to the link for the full article and charts:
https://open.substack.com/pub/paulkrugman/p/revenge-of-the-black-zero
How Germany became a cautionary tale
Back in 2010 -- just as the disastrous push for fiscal austerity in the face of high unemployment was gaining momentum across the advanced world -- my wife and I attended a conference at the Institut für Weltwirtschaft in Kiel, Germany. The keynote speaker was Wolfgang Schäuble, Angela Merkel's finance minister, widely considered the father of the "black zero," Germany's commitment to balanced budgets no matter what.
Partway through the speech Robin took off the headphones carrying the simultaneous translation to focus on Schäuble's body language. She eventually leaned over to say, "As we leave the room we'll be given whips to scourge ourselves."
Unlike U.S. conservatives, who rail about the evils of government debt, then pass budget-busting tax cuts which they claim will magically pay for themselves, the Germans have been serious about fiscal austerity. On the eve of the 2007 financial crisis America and Germany had similar levels of public debt as a share of GDP. Since then, however, Germany has kept debt low, while we very much haven't: (chart at the link)
snip
An obsession with debt and budget deficits did a lot to hobble recovery from the 2008 financial crisis in both Europe and America. After Covid struck, the Biden administration, having learned from that experience, made sure that the economy got the help it needed -- and we had a spectacular recovery. Germany, on the other hand, honored the black zero -- and got economic stagnation as its reward.