Starve the Beast

when we discussed tax policy, I introduced the concept of "Starve the Beast."

Remember the basic budget problem: we like our government programs, but we do not like taxes. For conservatives, the calculus is different: they do not like our government programs (think Reagan Dime); they also do not like taxes. But since Americans punish politicians who propose cutting programs, how to shrink government?

By starving the beast: defund government, through tax cuts, so we get it to the size it can be drowned in a bathtub' (paraphrasing power broker Grover Norquist: see Hacker and Pierson, xxx)

Conservative economist William Niskanen reports that this does not work:

Again looking at 1981 to 2005, Niskanen then asked at what level taxes neither increase nor decrease spending. The answer: about 19 percent of the GDP. In other words, taxation above that level shrinks government, and taxation below it makes government grow. Thanks to the Bush tax cuts, revenues have been well below 19 percent since 2002 (17.8 percent last year). Perhaps not surprisingly, government spending has risen under Bush.

Tax cuts work in symbolic politics, but they alone they do not add up to sound economic policy.