Lessons from Ireland

Five Lessons from Ireland de Dan Mitchell:

I’ve already commented on Ireland’s woes, and opined about similar problems afflicting the rest of Europe, but the continuing deterioration of the Emerald Isle deserves further analysis so that American policy makers hopefully grasp the right lessons. Here are five things we should learn from the mess in Ireland.

• 1. Bailouts Don’t Work – .. bailing out creditors such as bondholders.
  
• 2. Excessive Government Spending Is a Path to Fiscal Ruin – .. the government probably could have weathered that storm if politicians in Dublin hadn’t engaged in a 20-year spending spree.
  
• 3. Low Corporate Tax Rates Are Good, but They Don’t Guarantee Economic Success if other Policies Are Bad – Ireland used to be a success story. They went from being the “Sick Man of Europe” in the early 1980s to being the “Celtic Tiger” earlier this century ..
  
• 4. Artificially Low Interest Rates Encourage Bubbles – .. being part of Europe’s monetary union also meant that Ireland did not have flexible interest rates.
  
• 5. Housing Subsidies Reduce Prosperity – Last but not least, Ireland’s bubble was worsened in part because politicians created an extensive system of preferences that tilted the playing field in the direction of real estate ..