To Krugman and his power-elite pals, the only reason big government spending doesn't bring recovery is it's not big enough.

 

Estonia did the opposite of what Krugman prescribed over three years, and as a result shook off recession and returned to high economic growth. It now stands like a colossus disproving Krugman's policy prescriptions.

Fact is, Estonia tried stimulus after a steep recession in 2008. That "stimulus" shrank its economy a mind-boggling 18%, worse than anything seen now in Greece.

Instead of going into deeper debt, Estonia reversed course, slashing its budget to 6% of GDP. By 2011 Estonia racked up 7.6% growth, the highest in the EU and five times the EU average. Its credit was upgraded.

The Estonian success story highlights important lessons for both Western Europe and the U.S.:

• That cutting the size of government really is possible, contrary to the conventional wisdom that the rate of government growth can only be slowed and not reversed. Estonia went full Tea Party and reversed it.