DOES "STARVE THE BEAST" WORK?

Jerry Tempelman, Jerry
2006 Cato Journal   unpublished
Starve-the-beast proponents believe that in order to tame the beast, one needs to starve it, with the beast being an obvious reference to Thomas Hobbes's Leviathan depiction of an out-of-control state apparatus. The idea of tax reductions as a way to enforce discipline in government spending holds regardless of whether the nation is in the midst of an economic expansion or a recession. Following the recurrence of federal budget deficits that coincided with the enactment of federal tax cuts
more » ... g 2001-2003, the starve-the-beast approach to fiscal policy that once was one of the underpinnings of the Reagan Revolution has become increasingly controversial. It is no longer mainly the political left that criticizes the starve-the-beast approach. Even some Republicans who once participated in the move to a smaller government during the Reagan presidency now criticize starve-the-beast thinking. Recently, William Ni-skanen (2005) has used statistical evidence to demonstrate that a decrease in taxes in a given year is followed by an increase in spending the next. Bruce Bartlett (2005) has proposed raising taxes, namely by introducing a value-added tax, presumably to prevent having to increase less efficient income taxes later. Criticism of the starve-the-best approach to taxation is intuitively persuasive. The 2001-2003 tax cuts did not result in any meaningful spending reductions and, if anything, were followed by spending increases instead, on items such as the Medicare prescription drug bill, the war in Iraq, and Hurricane Katrina relief efforts. After a brief period of budget surpluses at the end of the Clinton administration, budget deficits have returned, and with them concerns over fiscal sustainability. The starve-the-beast approach to fiscal policy considers reductions
fatcat:5ugkf7w3efcbpons5k43jcchkm