Bas Jacobs, Professor of Public Economics at Erasmus School of Economics, provides commentary on the new coalition agreement in a variety of media outlets. There are several great aspects about it, but Jacobs notes that much could well be improved.
Rutte IV's biggest beneficial contribution is the EUR 60 billion climate and nitrogen policy package. This makes a significant contribution to reversing climate change. However, implementing a CO2 tax on all emissions would have cost far less money and been much more successful. Additionally, it is a positive development that educational expenditures are now being raised. For decades, the returns have been increasing.
The new coalition agreement falls short of major fundamental changes of the tax system, labour market, and housing market. Except for the childcare allowance, the benefits system is scarcely being altered. Professor Jacobs is unambiguous in his assessment: 'Rutte IV lacks a coherent macroeconomic and fiscal policy strategy. Again, murky investment funds are established with temporary monies, while public investments need structural funding'. Additionally, abolishing the social loan system is a bad idea. It had no influence on the student intake. That money might have been spent on expanding and improving higher education.
The Rutte IV administration desires an increase in the budget deficit to 1.75 percent of gross domestic product (GDP). As a consequence, the national debt as a percentage of GDP will approach 60%. The Maastricht Treaty, which the eurocountries ratified, stipulates that national debt shall not be increased further. While several nations have a greater amount of debt, the Netherlands has long been a stickler in Europe for other countries' lack of fiscal discipline. Therefore, Jacobs believes we cannot afford to exceed that 60% mark today. The fact that so much more money is being spent currently is mostly a result of political decisions, he argues. 'Numerous disagreements between parties have been resolved via the use of additional funds.'
Purchase power is diminished
Jacobs refers to the gain in buying power as a limited increase. ‘If inflation continues to be as high as it is currently, at over 5%, and wage growth stays at an average of 2%, the Cabinet's contribution will be insufficient to keep you out of the red. However, the cabinet has little control over rising energy expenses. The ultimate conclusion will be determined by the calculations performed by the Netherlands Bureau for Economic Policy Analysis.’