Germany uses Ponzi schemes to support older Ponzi schemes

The falloff of birthrates among Europeans has been one of the most compelling demographic trends of the last few decades. For various reasons, countries like Germany have fallen far below the replacement rate in fertility, and that portends disaster for the socialist states that rely on new workers to provide for retirees. The newer generations will not generate enough money to pay for the extensive net of social services to which Europeans have grown accustomed. Germany, however, has a solution, but one that compounds the problem instead of solving it:

Germany’s Federal Statistical Office predicts that the country’s current population of 82 million will decline to between 69 million and 74 million by 2050 — less than the population in 1963, when Germany had 75 million people.

As well as having detrimental effects on the country’s economy, that kind of demographic implosion would spell disaster for Germany’s creaking social security system, which relies on contributions from the current working population to finance the pensions of retirees. A combination of low birthrates and longer life expectancies means fewer people of working age supporting more retirees — and the pension math no longer works. With mass immigration a politically difficult option, and radical pension reform unpopular, encouraging more births is the easiest alternative.

So what did von der Leyen do which apparently gave Germans a sudden urge to procreate? The answer is simple: She paid them.

One of the cornerstones of her family policy is benefit payments for parents, known as Elterngeld (literally “parents money”). Under the new benefit, introduced in January 2007, the state pays the parent who stays home with the child 67 percent of that parent’s current net income, up to a maximum of €1,800 ($2,810) a month, for up to 12 months. If both parents elect to take time off, the total number of months the benefit is paid, split between both parents, goes up to 14 — a measure intended to encourage fathers to take time off work.

Let’s lay this out properly. Germany sees economic disaster from their declining birth rates, thanks to the heavy burden of social-service entitlements for the older population. New births haven’t kept pace with the minimum necessary to generate revenues for these services. Does Germany act to reduce the financial burden and eliminate some services? No — they establish an entirely new class of entitlement to solve the problem.

How exactly does this help? The increase in government payouts only adds to the massive deficits that their social network already generates. In order to pay for that increased burden, Germany will have to produce even more children — which will trigger higher payouts and larger deficits. It’s a massive application of the hair of the dog, only in this case, the hangover gets extended instead of the drunk. It’s a Ponzi scheme to fund another Ponzi scheme.

And this involves much more than pay-for-play and state-sponsored leaves of absence, which costs the businesses in money and efficiency, further burdening the tax base. Germany will also start providing state-sponsored day care, with mandates for providing slots for all these subsidized children, regardless of age. How much will that cost Germany, and which generation picks up that tab?

Germany and the rest of Europe needs to awaken from their decades-long dream of easy socialism. For that matter, so do many Americans. Entitlement programs will bankrupt nations before too long, and the answer to the problem is not more entitlement programs. It’s far past time to realize tht government does not exist to provide cradle-to-grave services for its citizenry, and that attempts to fit it into that peg have disastrous long-term economic consequences. Instead of extending the net from cradle-to-grave to waterbed-to-cradle-to-grave, Germany should dismantle its current Ponzi schemes and allow the private sector to use its creativity to generate better, less costly, and more efficient solutions.