Can a Celtic Tiger Change Its Stripes?

According to Pat Garofalo's research, it can! Ireland has long been a favored economic example for conservatives, who loved its ridiculously low tax rates -- so low that the country's role as a corporate tax shelter actually distorted measures of its economic growth. Now that Ireland has been caught up in the financial crisis, conservatives are changing their tune and saying Ireland's big government led to disaster. Here's CATO's Dan Mitchell, in 2002:

Ireland already has shown that tax cuts are a recipe for prosperity. Thanks to Reagan-style tax-rate reductions, including a corporate income tax rate of just 10 percent, Ireland has become the “Celtic Tiger” and is now the European Union’s second richest country.

And in 2010:

There are lots of lessons to learn from Ireland’s fiscal/economic/financial crisis.There was too much government spending. Ireland also had a major housing bubble. And some people say that adopting the euro (the common currency of many European nations) helped create the current mess.

It's also worth noting that besides lauding Ireland's baseline economic policies, conservatives also praised Ireland for its decision to immediately adopt austerity policies (as early as April 2009) in the face of the recession, with massive budget cuts. Other troubled countries, like Spain, were more reluctant to embrace austerity, and as Paul Krugman has frequently observed, seem to have been rewarded for that decision.

-- Tim Fernholz

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