Polish economics
Thursday, April 23, 2009
President Obama's model for spending the nation out of recession is Franklin D. Roosevelt's New Deal. A better example is the Reaganite bearing of post-communist Poland.
In the midst of the global financial crisis, Poland's economy is forecast to grow by almost 1 percent. According to business economists and the Economist magazine, Poland likely will be the only European country with a growing gross domestic product in 2009. Germany's GDP is expected to shrink by more then 5 percent, Britain's by almost 4 percent, France's by 3 percent and the Czech Republic's by 3 percent. With a projected GDP drop of about 3 percent, the United States doesn't look any better.
Poland stands out because of its commitment to free-market policies. Facing down the global economic crisis, leaders in Warsaw have slashed marginal tax rates, cut government spending and temporarily suspended some government regulations.
On Jan. 1, Poland cut its top marginal tax rate from 40 percent to 32 percent - and that's just a start. Last year, Polish Prime Minister Donald Tusk announced plans to move to a flat-tax rate of 19 percent in 2010 or 2011. What Poland understands is the importance of the marginal tax rate. The less you take from each additional zloty (the Polish currency) that people earn, the harder they work, the more they invest and the bigger the economic pie becomes.
Contrast Polish common sense with President Obama, who says ever-more government spending is the solution. According to him, "Economists on the left and right agree that the last thing the government should do during a recession is cut back on spending." Poland apparently found contrary advice from other economists. As revenue has fallen, the Polish government has done precisely what Mr. Obama says not to do: cut back on government spending. Warsaw lowered government spending by 6 percent this fiscal year, while Mr. Obama's budget is scheduled to soar by 32 percent.
Poles who suffered under communist central planning don't believe more government is the answer to an ailing economy. An old Polish proverb warns: "Do not push the river, it will flow by itself." That's one of many lessons Mr. Obama and his advisers could learn from this rare, growing European nation.