On Starving the Beast
The idea of using budget deficits as cover to cut spending that couldn’t otherwise be cut—a concept known as starving the beast—seems to be resurfacing (see here and here). This is a view I once held back in the 1970s. Just cut taxes, I thought, and pressure to balance the budget will manifest itself in the form of spending cuts that will reduce the size of government and increase growth, which would further reduce the size of government as a share of GDP.
The problem is that this idea presupposed that there was significant support in Congress to reduce the deficit. Unfortunately, there has been no serious concern about the deficit in either party since the end of the Clinton administration. While both parties share some blame in this regard, there’s no question that more of it belongs to Republicans. They cut taxes willy nilly during the George W. Bush years, massively expanded entitlement spending by enacting the Medicare drug benefit without paying for a penny of it, started two wars without paying for them either, and approved all pork barrel projects proposed by any Republican no matter how worthless.
In the process, Republicans also destroyed whatever political support there was for a balanced budget—along with their own credibility on the deficit. Consequently, the whole premise of starve-the-beast theory has gone straight down the toilet. Yet, to my amazement, Republicans and Republican lackeys continue to talk about cutting taxes with no corresponding spending cuts as if it is the height of fiscal responsibility. (See this silly Larry Kudlow column and Diane Rogers’ evisceration of it here.) When pressed, they fall back on starving the beast even though there is not one iota of evidence giving it operational meaning since at least 1996, when Ross Perot last ran for president. It has become, in fact, nothing but a license for Republican fiscal irresponsibility.
A couple of years ago I went through the history of starve-the-beast theory in great detail here. Ironically, the originator of the idea turned out to be none other than John Kenneth Galbraith. To the extent that I personally had any role to play in putting this awful idea into play I regret it.
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Stockman regrets it too
You saw the interview. "It doesn't work. Game over."
What *does* still work? The Reaganomics Strategy:
Borrow money from our children and from abroad, and use the money to buy votes here with the world's oldest pander ("I'll cut your taxes").
While simultaneously screaming about the irresponsible deficit.
The crazy wrestler had it right
The only solution that I have seen work is that put together by former "wrestler" and governor, Jesse Ventura. Raise taxes until there is a balanced budget, then any cuts that produce a surplus are rebated to the taxpayers. Congressmen would then be judged by how big the rebate checks were.
Ventura was a bad governor
as is now widely acknowledged, at least in my part of Minnesota. Ventura did NOT raise taxes, in fact he cut them (remember how he hated paying the annual license tab fee on all his cars? Remember how he took the axe to it? We were all so happy to pay so much less (Oh, but then we couldn't fund road repair, and eventually a bridge fell down).
Remember how he rebated us the surplus in the state "rainy day fund"? Those $600 rebate checks made him a nice guy and popular, but we could sure use that money NOW. As it is, most of us can't remember how we spent the Jesse tax rebates, and most of us thought a rainy day fund was a good idea (we do that with our personal budgets here in Minnesota -- it's called "being fiscally responsible").
Oh yeah, then he moved the majority of school funding to the state level . . . remember that "new miracle"? The problem was there was no long term funding plan, so he floated the idea of broadening the sales tax. He sent out his dog and pony show on that one (I went to some of the meetings) and the idea went over like a lead balloon with the citizens. Taxes on clothing? You've got to be kidding. This ain't Illinois!
His idea to broaden the sales tax would have worked, but it was so unpopular (Jesse hadn't heard of doing research before enacting policy changes, everything was knee-jerk with him), and today we are struggling with school funding (and everything else, as we are looking at huge shortfall, and there is ZERO appetite to raise taxes (and Pawlenty is trying to run for president, so he has to maintain his "I didn't raise taxes" boast -- as if anyone cares or even knows who the guy is on a national level).
Ventura was proof that three party government doesn't work very well. He had the advantage of ruling during an era of budget surpluses, so he could look like a "good guy", but in the end he was a big zero on visionary leadership, and many problems we have today can be tracked back to bad policy decisions made during the Ventura years.
Did he reduce government?
Wasn't that the point of Bruce's post, that starve the beast has not reduced the federal government? Wasn't I making a suggestion as to how to actually reduce the federal (not Minnesota's) government? You guys are the idiots who elected him, not me, but starting from a balanced budget and having legislators win reelection by how big the rebate checks are will certainly reduce government far better than anything else I have seen.
Ben Stein seems the only rational fox news economic guru
When he is not hawking credit reports Ben Stein can still make some sense disputing the illogical argument (so popular on Fox's investment shows) that in an environment stressed by huge deficits simply cutting taxes will somehow reduce the deficit. He sliced Cavuto and the "expert panel" to pieces on their folly.
What is more troubling is that the expert panel had no other tricks in their economic bag beyond.....cut taxes.
Isn't the more fundamental
Isn't the more fundamental problem that cutting the deficit increases the deficit? Any sustained reduction in the government's net contribution to the economy has two outcomes: tax revenues decrease and transfer payments (automatic stabilisers) increase. See here: http://1.bp.blogspot.com/_a-xfgIB_zfs/S32EIAYVDvI/AAAAAAAAAT8/WN9PJsr8QI...
vimothy
I see "starve the beast" as
I see "starve the beast" as creating a counter intuitive have-your-cake-and-eat-it-too syndrome. There was never any mechanism to automatically cut spending when revenues drop. As a result, politicians and taxpayers got to cut taxes and bring home the bacon at the same time, where both get conditioned into unsustainable bad behavior, and allow government to grow, particularly under "starve the beast" small-government adherents. The true small government position is to not cut taxes, but raise taxes for all the goodies and adventures. Taxpayers need to feel the pain of government spending to truly appreciate the benefit of small government, something which has not occurred under "starve the beast" practices.
I am convinced a balanced
I am convinced a balanced budget amendment -- with all its problems -- is the only solution that will work in the U.S. It's just too easy to get elected by promising to cut taxes while simultaneously increasing spending.
Starving the Beast
Thanks, Mr Bartlett, for this commentary on 'starving the beast' and the link to your Independent Review essay. The sought-for crisis has arrived, but not in the form of discretionary budget cuts and entitlement reform: rather in the guise of spiralling deficits and a monstrous debt--for which the tax cut enthusiasts have little of substance to offer.
Why it is essential, even though it is false
Republicans depend on this message (or think they do) because it is essential to the coalition Reagan built, which enabled them to pass off a fundamentally corporate-friendly worldview as a populist appeal to the average American (who hates taxes). Anti-tax rhetoric is so seductive that even the Democrats have adopted it. Give it up, and you effectively give up any chances of winning elections. The last major candidate who was honest about taxes was Walter Mondale in 1984, and look where that got him?
Fiscal Fantasy And The Republican Party.
I posted this on my blog a few weeks ago, but it still applies.
There is a serious disconnect with Republicans concerning fiscal policy. and government spending, and it's on display right here. "Republicans have long believed that cutting taxes will lead to cutting spending." It will???? Is there some sort of placebo effect going on here that I don't know about? This is magical thinking, much like the belief in homeopathic medicine. President Warren G. Harding cut taxes in 1921, spending increased. JFK cut taxes, and spending increased. Reagan cut taxes, spending increased. Anyone else see a pattern here? Cutting taxes has never led to cuts in spending.
The graph [here] is a comparison of government spending vs. economic growth, measured in Gross Domestic Product. You may look at this chart and see that spending flat lined after each of the tax cuts mentioned above, which should be interpreted as either spending cuts, or at least a freeze in spending. This is not correct.After each tax cut, spending still increased. But the economy grew as fast or even faster than the rate of government spending. And note that when the economy slows and goes into a recessionary period, the spending rate, suppressed in the graph because a the good economy, inevitably catches up. Long term positive economic trends, when they occur, whether caused by tax cuts or not, actually create enormous pressure on legislatures to increase government spending. The money is there and neither Democrats or Republicans have much of an incentive not to spend it. The first round of tax cuts by the Bush administration, designed to give back the surplus created during the Clinton / Gingrich years, was a move in the right direction. Too bad they lost this policy philosophy soon afterwards.
E. D. Kain said a few weeks back - "Few Republicans will tell you that they are proud of the spending record during the eight years of the Bush administration.". OK. Fine. So who is calling for a repeal of all the crappy gobs of extra bureaucracy enacted during the horrible Bush administration. Anyone hear Republicans calling for a repeal of the new Medicare-D entitlement? What about the failure that is No Child Left Behind? What about the ever bloated Department of Homeland Security, which, was shown only last month to be ineffective at stopping terrorist threats. The creation of the DHS added tons of ineffective layers of bureaucracy where simply a few changes in the way law enforcement shares data would have done nicely. None of the major conservative mouthpieces are calling for the repeal of any of these Bush era expansions of government; not Limbaugh, not Levin, not Hannity, not Beck - and neither is candidate Scott Brown.
Only real actual cuts in spending lead to cuts in spending. Period!
Well, I don't think starve
Well, I don't think starve the beast has played out as intended -- but at the same time I bet if we had a balanced budget that ObamaCare would be a done deal.