Well, whenever the federal, state, or local governments face financing difficulties, it is investment spending that gets cut first. Personnel costs are politically difficult to touch, and social spending is largely predetermined, whereas there are no strict rules for investment. We have always had the problem that current consumption is consistently prioritised over future investment.

As early as 2013, the German Council of Economic Experts had urgently called for the country’s eroding production potential to be strengthened with more – much more – public investment. But what happened? Nothing – or at least not enough! And because private investment also depends on public infrastructure, this too is now weakening across the board. After several years of recession, the situation is even more urgent than ever. Moreover, we have long been living off the country’s substance, depleting it in the process. While the new billions earmarked for investment send a signal, on their own they are not enough to trigger a turnaround.

The special fund amounts to 500 billion euros. The federal government is likely to invest the money primarily in large infrastructure projects, including digitalization, which is also lacking. But one of Germany’s biggest problems is the backlog of investment in municipal infrastructure, estimated at between 186 billion euros and 225 billion euros, depending on the study. Of the 500 billion euros, 100 billion euros is intended for the federal states and municipalities, yet it is still unclear how much will actually reach the municipalities. On top of that, there are no specific investment requirements attached to the funds. If the spending is spread over several years, in the best case scenario perhaps 5 billion euros to 8 billion euros per year would reach the municipalities. That certainly helps, but in view of the massive investment backlog, it is hardly a turning point.

That is indeed a problem. In fact, the groundwork should have been laid beforehand. Key points include digitalization, reducing bureaucracy, deregulation, streamlining laws, shorter and faster administrative procedures – and if things go too slowly: in case of doubt, favour the applicant. Only then could one be sure that the billions actually flow quickly and reach their targets. I share your scepticism from the opening question.

Exactly. This was neglected, which is why delays, misinvestment, price surges, and piecemeal results now loom.

That is true, but unfortunately, future-oriented issues are often postponed or delayed in a democratic system – or they are not given the attention they deserve. Every incumbent government always looks toward the next election, which explains the short-term orientation of politics from a political-economy perspective. Moreover, for many structural reforms, a single legislative period is often not enough to reap the positive effects later. Overall, politics and voters are generally reluctant to limit current consumption in favor of future investment, because doing so would require making sacrifices in the present, given the necessary political effort or financial outlay.

Ultimately, this can probably only be achieved through a state reform and by extending or clustering election periods, so that politicians are willing to take risky decisions.

Experience from the Agenda 2010 reforms of the 2000s indeed illustrates this: the growth effects were undeniably positive – Germany moved from the European back of the pack to a leading position – yet the government was soundly voted out. Since then, politicians across the board have been reluctant to pursue reforms.

There is no alternative to democracy. But we naturally need to ask ourselves how democratic structures can be changed so that reforms become easier in the future and politics focuses more on the long term rather than the present.. A state reform, such as that recently proposed by an initiative of the Hertie School, is therefore more urgent than ever.

That could be a current option. One could set up an investment agency – a kind of trust institution – that could also disburse the funds under streamlined and accelerated bureaucratic conditions, following a clear plan with a defined maturity. A model could be the Acceleration Act during the energy crisis, which was dubbed „Deutschlandtempo.“ Of course, critics would immediately argue that such an institution would not be sufficiently democratically legitimised, especially since it involves the spending of debt that would later return to the core budget as interest and repayment obligations.

In principle, temporarily removing investment authority by outsourcing it to a separate institution – together with a streamlining of procedural channels – would also have the great appeal that this structure could serve as a model for regular legislation. Why not transfer it as a blueprint to the core budget?

Studies show that we indeed have an extreme present-oriented preference among voters. They are generally reluctant to sacrifice present consumption for future gains. This is why the abandonment of the promised climate payments from the CO₂ tax for households was, psychologically, one of the nails in the coffin for the coalition government.

They can at best attract a bit more attention. What really matters, however, is what happens with voters on the ground – again, the municipalities. Overall, when assessing reforms, voters always compare themselves to reference groups to see whether they are better or worse off. For this reason, every reform must be as balanced as possible, requiring sacrifices from everyone, and it must not favor special interest groups, as is often the case with individual subsidies. Otherwise, the underlying policy would be rejected immediately. And what do voters value – yet often underestimated by politicians? Education spending is generally well received, as are investments in transport arteries or digital connectivity right into people’s homes. Here, politicians hesitate and miss out on earning significant voter approval.

I’m afraid I have to disappoint you. Studies show that information is only absorbed in a filtered way – it reaches consciousness almost via gut feeling. Even an increase in information is initially filtered to confirm what voters want to believe. At that point, it doesn’t matter whether the voter is more or less intellectual. In fact, cleverness can sometimes hinder an accurate perception of political realities. Those who consider themselves clever – and we all do to some extent – often use information selectively to rationalise cognitive errors. And where additional information does not confirm pre-existing beliefs, it is frequently perceived as unreliable.

Information is always important, but the concept must also be convincing – in its objectives, its calibration, and its social balance. In this regard, an institution could indeed help, serving as a trust body for the use of the special fund, ensuring the necessary fairness and clarity because it would be granted a certain special status and independence.

In any case, I do not expect that the truly pressing issues will be addressed effectively. Reducing bureaucracy and regulation, accelerating investments and business startups, increasing education spending – these are the tough challenges at which politics regularly fails. Today, addressing these matters would be even more important than the many billions at stake now. Currently, 2.9 million people aged 20 to 34 lack a formal qualification – and this is not limited to those with a migration background. That is 19 % of an entire generation. They are missing from the productivity figures. Or consider migrants, who are being integrated into the labour market far too slowly. Here, we are missing out on growth, innovation, and modernisation. These are the real political challenges – but they do not lend themselves to a ceremonial ribbon-cutting, as with the opening of a new production facility or a stretch of highway.

The American behavioral economist Dan Ariely once said, in essence: „Money is the most expensive way to motivate people. Social norms are not only cheaper, but often more effective motivators than cash.“ People can be moved to change their behaviour much more easily if you meet them where their values and norms lie. Moreover, the effect of money often does not last long due to habituation. Money also crowds out any intrinsic motivation. In this respect, it might even be more effective and successful to first initiate a state reform that also signals an economic renewal.

It will soon become apparent that the federal government’s interest and debt-servicing payments are set to rise. In the core budget, they will then take absolute priority, as they are contractually agreed and financial markets are extremely sensitive to them. And what will they crowd out if they continue to grow? Naturally, investment will be the first to be displaced.