Estonia: A Lesson for the U.S. Government

The U.S. federal government has claimed that it is devoted to decreasing spending and creating a balanced budget so that America can start decreasing its national debt. While verbally U.S. politicians have promised changes, they have not acted on those promises. In regard to spending, there is an extreme lack of austerity in most Western nations, except for one that is often overlooked: Estonia. Estonia is outperforming all of its other European neighbors and likely will continue to do so in the future. Why? Because Estonia is one of the only countries in the Eurozone that has actually implemented spending cuts, tax reform and free market economic principles, says Matthew Melchiorre, a journalism fellow at the Competitive Enterprise Institute.

What benefits did Estonia reap from their tax reform, spending cuts and a hands-off approach to the economy? According to European Commission data:

– In 2010, the country increased economic growth by 2.3 percent, while the rest of Europe was suffering economically.

– In 2011, Estonia increased economic growth by 7.6 percent, which is an increase of 5.3 percent in economic growth in one year.

Estonia, by contrast, fixed its economy and then increased taxes slightly and decreased spending.

– The Baltic state fixed its economy by adopting a hands off approach, and let the markets work out the inefficiencies that were causing economic decline.

– It started to close the gap between labor productivity and wages by the second year after implementing its program.

U.S. policymakers could learn substantially from the actions of Estonia

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