Cato’s Daniel Mitchell Calls For US To Imitate Mass Unemployment Policies of The Baltics

The Cato Institute’s Daniel Mitchell says the United States ought to consider taking a page out of the Baltic playbook:

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. Here’s the data from the European Union for the Baltic nations. [at right]

So how’s this working? Well, terribly! Estonia has a 14.3 percent unemployment rate and it’s doing way better than the other two:


Unemployment in European countries – Google Public Data ExplorerEdit note that back in the spring of 2007, Mitchell was hailing the Baltics as a model of economic success. Then came some of the most severe crashes in Europe.