Bush Praises Estonian Tax Policy-While Being Silent On Spending Policy
And more importantly, Bush leaves out the fact that the key to Estonia's success is that its tax cuts have been accompanied by spending cuts. According to statistics Estonia's database, government consumption fell from 19.9% of GDP in 2000 to 17.4% in 2005. And during 2006 the downward trend have continued. In America by contrast, government spending have risen during Bush.
This is important, because as Mankiw have pointed out before, tax cuts will only raise growth if they are matched by spending cuts.