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Estonia and Austerity: Another Exploding Cigar for Paul Krugman
Cato Institute ^ | June 7, 2012 | Daniel J. Mitchell

Posted on 06/07/2012 3:39:01 PM PDT by Krosan

I have great fondness for Estonia, in part because it was the first post-communist nation to adopt the flat tax, but also because of the country’s remarkable scenery.

Most recently, though, I’ve been bragging about Estonia (along with Latvia and Lithuania, the other two Baltic nations) for implementing genuine spending cuts. I’ve argued that Estonia is showing how a government can reignite growth by reducing the burden of government.

Not surprisingly, some people disagree with my analysis. Paul Krugman of the New York Times criticized Estonia yesterday, writing that the Baltic nation suffered a “Depression-level slump” in 2008 and has only managed an “incomplete recovery” over the past few years.

He blames this supposedly weak performance on “austerity.”

(Excerpt) Read more at cato-at-liberty.org ...


TOPICS: Business/Economy; Foreign Affairs; News/Current Events
KEYWORDS: debt; economy; estonia; krugman

1 posted on 06/07/2012 3:39:15 PM PDT by Krosan
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To: Krosan

The article references the austerity measures in Canada in the 1990s. I’ve mentioned that here several times. It was painful — but, ultimately worth it.

The article mentions that it was a left-wing government (the Liberals — which would be on the left of U.S. politics; but are much more centrist than the leftist NDP)that brought in the austerity measures. That’s only partly correct — they did implement austerity (after a Greece-style scare from the IMF); but they also bitterly opposed it previously, when the (somewhat) Conservative Mulroney government tried to rein in spending. Mulroney managed to at least get the operating costs of government (less money spent on interest) into the black. That left the Liberals to first eliminate the deficit, then start paying down the debt.

The slogan used by Mulroney’s Finance Minister (and much derided by the Liberals) was: “Short-term pain for long-term gain”. That slogan could also apply today.

BTW, there’s another important lesson that American conservatives should learn from Canada’s experience with austerity. Despite the fact that the Liberals were responsible for creating the debt, through decades of deficit spending. Despite the fact that the Liberals fought austerity measures every step of the way, using every trick in the book. Despite the fact that they mocked anyone who expressed concern about the debt. Despite all those things — it is the Liberals who got the credit for eliminating the deficits. Don’t let that happen to you. It’ll drive you nuts.


2 posted on 06/07/2012 4:02:29 PM PDT by USFRIENDINVICTORIA
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To: Krosan

Remember that Estonia has been under USSR’s thumb for many years and suffered a lot.

The best in the world are those htat have suffered under oppression (Think Churchill, Walesa, Mandela, etc.)


3 posted on 06/07/2012 4:22:59 PM PDT by bestintxas (Somewhere in Kenya, a Village is missing its Idiot, thankfully.)
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To: USFRIENDINVICTORIA

It has already happened with blacks and slavery/civil rights.


4 posted on 06/07/2012 4:32:59 PM PDT by 1010RD (First, Do No Harm)
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To: Krosan; dfwgator

Salve

Look back in XVI century you will know why.

Merci.


5 posted on 06/07/2012 4:55:10 PM PDT by MCSP2008 (Romanian native > ESL)
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To: bestintxas

Salve

History my friend, history. Look back.

Merci.


6 posted on 06/07/2012 4:56:20 PM PDT by MCSP2008 (Romanian native > ESL)
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