CATO Inst. Supports Keynesian Economics

Let’s Copy the Baltic Nations and Really Cut Spending Posted by Daniel J. Mitchell Too bad American policymakers can’t copy the Baltic nations of Estonia, Latvia, and Lithuania. Like the United States, these nations got in fiscal trouble, thanks to the combination of excessive spending and an economic downturn triggered by falling real estate prices. But unlike the United States, these nations... [more]

Let’s Copy the Baltic Nations and Really Cut Spending Posted by Daniel J. Mitchell Too bad American policymakers can’t copy the Baltic nations of Estonia, Latvia, and Lithuania. Like the United States, these nations got in fiscal trouble, thanks to the combination of excessive spending and an economic downturn triggered by falling real estate prices. But unlike the United States, these nations didn’t follow the Keynesian policy of more deficit spending. Lawmakers in the Baltic nations recognized, to borrow the words of Dan Hannan, that “you cannot spend your way out of recession or borrow your way out of debt.” So they reduced spending. Not in the Washington sense, where politicians get to increase spending and call it a cut because outlays didn’t rise even faster. The Baltic nations imposed real cuts. And not just for one year, but in both 2009 and 2010. http://www.cato-at-liberty.org/lets-copy-the-baltic-nations-and-really-cut-spending/ So how are Lithuania, Latvia, and Estonia doing today? Their current unemployment rates: Estonia: 14.3% Lithuania: 17.3% Latvia: 17.2% Thanks CATO for mmaking one of the best cases for Keynesian economics I have ever seen! [less]