About three years ago I was in Boston and I chatted with a couple of German salesmen who were staying at our hotel.  They were in the city on behalf of a German manufacturer of lab equipment, and they had an appointment at Harvard.

I was interested in their standard of living and the effects of reunification and they explained to be the differences between the former West German states and those in the East, and how those in the East were not as “productive” as elsewhere and it would take much time to integrate them into their way of life.

I thought about those two gentlemen yesterday, when on The Dylan Ratigan Show I saw some amazing graphics that compared the relative economies and economic policies of Germany and the United States.  It turns out that David Leonhardt, economics columnist for The New York Times, had previously covered this ground.  He pointed out that both liberals and conservatives have used Germany as an example to support a) stimulus and b) austerity as a way out of our economic mess.  But, he said:

the full story is more interesting than any caricature. In the last decade, Germany has succeeded in some important ways that the United States has not. The lessons aren’t simply liberal or conservative. They are both…

The brief story is that, despite its reputation for austerity, Germany has been far more willing than the United States to use the power of government to help its economy. Yet it has also been more ruthless about cutting wasteful parts of government.

The German economy has outperformed ours since the middle of the last decade, Leonhardt says, and in the process, “most Germans have fared much better than most Americans, because the bounty of their growth has not been concentrated among a small slice of the affluent.” Here are a couple of the charts used on The Dylan Ratigan Show:

And here’s the unemployment rate comparison:

Leonhardt noted that the Germans have made cuts to unemployment benefits and have reduced early-retirement incentives, as well as attempted to “move the long-term unemployed into the labor force.” These are the things that you hear conservatives in the media talk about, as they argue for drastic budget cuts here at home. But the truth is that in terms of safety-net benefits here in the United States, the German system is still relatively generous.

The real point, and the real difference between the United States and Germany, though, is this:

But the German story is not merely about making government more efficient. It’s also about understanding the unique role that government must play in a market economy.

That role starts with serious regulation. American regulators stood idle as the housing bubble inflated. German banks often required a down payment of 40 percent.

Unlike what happened here, German laws and regulators have also prevented the decimation of their labor unions. The clout of German unions, at individual companies and in the political system, is one reason the middle class there has fared decently in recent decades. In fact, middle-class pay has risen at roughly the same rate as top incomes.

Labor unions.  Dirty words here in the United States, thanks to Republican meme-making and legislation, but not in Germany. From Wikipedia:

German industrial relations are characterized by a high degree of employee participation up to co-determination in companies’ boards (“Aufsichtsrat”), where trade unionists and works councils elected by employees have full voting rights. Local trade union representatives are democratically elected by union members and formally largely autonomous. Central boards of directors (“Vorstand”) are elected by delegates.

Trade unions in Germany define themselves as being more than a “collective bargaining machine,” but as important political player for social, economical and also environmental subjects, especially also for labor market policy and professional education.

Hmm.

And we’ve all witnessed the war on collective bargaining waged by Republican governors and legislators here in the U.S., but in Germany most workers are covered by a collective bargaining agreement:

The relative friendliness of the German government to labor unions and collective bargaining is perhaps the best reason to explain the following eye-popping income-disparity graphic from Ratigan’s show:

That graphic is difficult to fathom, and should be even more difficult to accept. The top 1% of wage earners here in America are cleaning up, while in Germany, the wealthy, while still doing well, are earning income at the same rate as 40 years ago.  Stunning.

Finally, Leonhardt says, there is the issue of taxes:

Germany does not have a smaller budget deficit because it spends less. Germany, you’ll recall, is the original welfare state. It has a smaller deficit because it is more willing to match the benefits it wants with the needed taxes. The current deficit-reduction plan includes about 60 percent spending cuts and 40 percent tax increases…

Here’s the chart: 

As Leonhardt says, no one is advocating “that the United States should want to become Germany.”  We are richer and still attract immigrants by, unfortunately, the truckload. But in our weakened condition we should be willing to deal with our weaknesses.  But we are not, at least in terms of the political parties cooperating with one another to address them.

Leonhardt:

Some Democrats say Social Security and Medicare must remain unchanged. Most Republicans refuse to consider returning tax rates even to their 1990s levels. Republican leaders also want to make deep cuts in the sort of antipoverty programs that have helped Germany withstand the recession even in the absence of big new stimulus legislation.

I resist the implicit “both sides are equally too blame” in that statement.  I don’t know many Democrats, if any, who say “Social Security and Medicare must remain unchanged.”  But there is a point to be made that Democrats must be willing to explain how those programs can be adjusted to keep them solvent in the future.

In the mean time, Republicans continue to insist that our problems should be solved on the backs of the poor, the disabled, and the soon-to-be elderly, as well as on the backs of our education-challenged children.  And they insist on these things while advocating even more tax relief for the wealthy.

Why, just the other day, one of their most viable, “adult” presidential candidates, Tim Pawlenty, came out with a budget proposal that would lower tax rates for both the wealthy and corporations to cartoonish levels.

And it would be as funny as a cartoon, if our economic troubles were merely part of a Looney Tunes script. But they are not, and the Germans seem to understand that.