Starving the Beast: Can it work?

Great Debates
1

So three times in the past week I’ve run into here on the boards the concept that the Republicans want to cut taxes to ‘starve the beast’. In addition, I think I first ran into the concept in the mid-80s. I’m sure it predates that.

That is, large scale tax cuts will bring down government revenues to the point where the New Deal and Great Society will have to be either radically scaled back or even eliminated completely.

Fair enough, to a point.

Now, I’m all for smaller government. But, as I’ve stated before, I’m also a practical man with a certain amount of experience observing politics on the Hill.

Let me also say that I’m a major deficit hawk. I hate the damn thing. If possible I’d chase it down, put it in a bag, then beat the bag with an aluminum bat, the throw the bag in the Potomac and chuckle while it drowned.

And I’m doubting that ‘starve the beast’ can work. Both for economic and political reasons.

First off, cutting taxes is a good thing in my book. But cutting them while also running a large deficit in perpetuity strikes me as insane. Sure, I’m understanding the Laffer Curve. But the LC assumes that at some point stimulus is no longer required and deficits can be eliminated. It is to laugh.

So we have tax cutting and deficit spending.

I can’t see this starving the beast but rather leading to the devaluation of the US dollar.

In my opinion the elimination of the social programs resulting from the New Deal and the Great Society (welfare, social security, et al) would lead to massive civil unrest and a demand on the part of the electorate for their reinstitution. The poor and the underclass may not vote now but make their economic circumstances progressively harder over say, 10 years, and they’ll begin to do so.

And that will lead to the unemployment of the party that ‘starved the beast’ (I can’t get enough of that line :slight_smile: ) and the empowering of a party that promises to restore what was removed. This will lead to the reinstatement of those social programs that are so costly. Yet the only means of doing so will be to raise taxes significantly which would again lead to political rebellion among the middle and upper classes who would feel that bite most sharply.

But without tax hikes to pay for those programs a continuing large deficit would be needed. And eventually those deficits will reach a point where the devaluation of the currency to pay down the national debt becomes an imperative (the point where it becomes increasingly difficult for the federal government to borrow the money via Treasury bills). At that point the federal governments only options become to either announce that they WON’T pay off the debt and T-Bills become worthless (not unlike the notes issued by the states prior to the Articles of Confederation) or simply to expand the money supply by printing more dollars and paying off those notes with devalued currency.

So I’m of the opinion that ‘starve the beast’, however attractive it might be in some ways, is politically unfeasible and has the long-term potential to be disastrous.

Thoughts?

2

My understanding of the Laffer Curve is that at some point lowering taxes will generate less revenue for the government. The trick is to find the amount of taxes that generate maximum revenue.

The problem I have with “Starving the Beast” is that even Republicians who talk about smaller government do not reduce the amount of spending.

3

I think I agree with your assessment of the probable outcome(s) of a “starve the beast” policy set, but I disagree that it’s not politcally feasible, at least in the short term. Because it’s the type of faith-based conceptualizing that’s typical of true believers, it’s very attractive to the ideologues currently influencing Washington power circles. The same neocons who truly believe the Big Dawg policy of foreign interventionism is the best and safest course for the US (or her elites, anyway) are the same folks who find the STB scheme plausible as a means of reducing or eliminating social programs. They cannot imagine the consequences you’ve outlined because they are not anticipated by their ideology. (It’s the same cognitive dissonance that rejected State Dept predictions for post-war Iraq.)

JMO

4

The biggest problem with “Starving The Beast” is that the end result typically isn’t a reduction in the size of government, but the election of someone who promises to balance the budget without cutting spending, by raising taxes back again.

I am strongly for much smaller government, but as a practical person, I see almost no chance of that happening. If Reagan couldn’t cut the budget, I don’t see how anyone else will. The political forces and special interests are just too strong.

And this problem is getting worse, in that the most expensive government programs are those for the elderly, and that group is gaining in power and size as the boomers retire. I fully expect entitlement spending to explode, and for us to hit a real crisis when the day comes that we can no longer borrow from our social security trust funds and have to actually start supplementing them. That’s going to cause a budgetary disaster.

Eventually, where were headed is to have a really large, wealthy retirement class, funded by an increasingly smaller, poorer, and overtaxed working class. This will be totally unjust, and will put a huge brake on economic growth. The question is, will the boomers be responsible enough to be willing to cut their own entitlements? History says no.

(I use ‘we’ even though I’m Canadian, because we have exactly the same problem - with the same result)

5

namely “pork barrel” politics… same everywhere I suppose.

6

I like Friedman’s thesis, which I’ll paraphrase since I don’t remember the exact quote: The government will always spend every penny it takes in, plus a bit more. The deficit is a necesary evil to prevent the government from growing even further."

So, I would say it all depends on how you manage it. A deficit can be used as one tool to reign in spending, but it needs to be coupled with serious budget restraint.

Bush is cutting taxes and raising expenditures. His tax cuts aren’t big enough, or structured correctly enough, to set the economy on fire (the current GDP growth notwithstanding), so I don’t see us growing out of this deficit unless the growth of gov’t expenditures is reduced signficantly. Let’s hope Bush is saving that action for his 2nd term.

7

The cynic in me suspects that part of starving the beast is a way to create a short term economic crisis whereby the few that already allegedly own 40% of our goods and resources will be able to buy up much more of it for pennies on the dollar. Yeah, that smacks of conspiracy theory, which in general I dismiss, but is there any economic logic along these lines? Devalue the dollar enough to buy stuff up cheaply? I’m not quite sure.

I also think that the fear of that great boogie-man, Big Government, is a red herring waved in front of us by those who would benefit from much smaller government. The US is a big country with a huge economy and lots of people benefiting in ways that most other nations don’t. Our taxes are relatively low compared to most industrialized nations, and even with all the waste we have had, in general we get pretty good service for what we spend.

I think that the biggest domestic danger to our liberty is that of unfettered Big Business, which if essentially unregulated, can do whatever it damn well pleases without having to face direct change by the citizens US as those serving in government face. We certainly need efficient government, and there are numerous things that make sense contracting out to the private sector. Yet I believe that we also need government that is properly scaled to serve the needs of those being governed.

There is plenty of waste that could be eliminated, but you never hear those in the two major parties discuss Sacred Cows that go untouched. One example would be reducing the US nuclear arsenal to 50% of what we have. If we could have all other nations that have these weapons agree to a multilateral, verified 10% a year reduction to that point or beyond, we could still kill everything on Earth 10 times over and yet pump something like $15 billion a year into the economy. More importantly, that money currently goes into a black hole; the product is not used, and it would probably cost us much, much more if it were. If it were put into use for the general public, that money would get used over and over again. Additionally, this would free up the same monies spent by other nuclear nations that might be put to good use by the worldwide economy by boosting trade.

I’m sure that we could think of a few other Sacred Cows to tip before just knocking over the Great so-called Beast.

8

Wow, you’ve got a lot of work ahead of you to prove that statement. Or you do you expect us the just take your word for it?

A common falacy held by those who don’t understand how the market works. “Big Business” (whatever that is) faces direct change everytime you go to the store and have the option of buying a product from Company A or Company B. Compare that to the typical 4 year term of most elected officials. And if both Companies surivive, you are free to live completely unaffected by the Company you don’t choose. Not so with government. Monopolies have inherent negative components. They are extremely rare in the business world, but exist as an essential element of the very nature of government. If you fear the concentration of power, you’d best direct your fear at the government.

9

Wouldn’t an economic crisis cause inflation causing the price of items to increase.

10

Just to throw a wrench into these works, can any of you who are accusing the Republicans of this strategy point to a cite for it? I’ve run accross mention of it a few times, but it is always in the context of “Those naughty repubs want to ‘Starve The Beast’”.

I’m just asking.

11

Only as a consumer.

If they pollute the air or water in any of a number of different ways, I am not free to live unaffected. If they convince the government to let them clearcut the public forests where I hike, I am not free to live unaffected. If they fight energy conservation regs tooth and nail, so that we increase our dependence on imported oil, and we then have to care too much about a group of rather unpleasant countries, I’m affected even if I ride a bicycle.

I’d hate to tie myself to an abstract belief that a particular power concentration is always the one to fear, regardless of the circumstances. At any given time, I think it’s good to look up and see who seems to actually be winning most of the battles.

As a result, these days I’m a hell of a lot more concerned about concentration of corporate power, and corporate influence on my government, than I am about government power. I didn’t feel that way 25 years ago, but things have changed.

12

Clinton proved Friedman wrong. Then Bush did too - in the other direction, since we aren’t just talking a ‘bit’ more, but a huge pile more.
Getting back to the OP, I’ll second xeno’s comments.

13

Paul Krugman Explains It All For You

The full article pretty much covers your question.

14

No, at some point raising the taxes will lead to decreased revenue.

Lowering taxes would obviously lead to less revenue. Although a tax cut could have a stimulating effect on the economy leading to higher tax revenue as the economy grows faster.

15

Thank you ElvisL1vex. But that article is also a “they believe …” sort of thing. It seems to include some quotes, but it does not include a sylabus or links that I can check. If I’ve learned anything since I started posting here, references need to at least acknowledge their sources.

I’m not saying that some conservatives do not adhere to this strategy. I’m just curious as to how they put it. I’ve yet to see a single issue where both sides did not misrepresent the other in some fashion. And I am troubled that this particular issue has little or no references from those supposedly holding to its tenets.

16

I think the ‘starve the beast’ tactic is a equivalent to a game of chicken. Fiscal brinksmanship.

It used to be that Republicans were the deficit hawks and Democrats were the deficit doves. Now it’s the opposite. So, in some bizarro-world sense, I suppose that means the ‘starve the beast’ strategy is working.

But as several of the posters have pointed out, both parties are ignoring the elephant in the room, which is the growth of non-discretionary entitlements, esp. Social Security and Medicare.

If things continue on their present paths, by about 2050 or so, the combined payroll tax rates for those two programs could be something like 40%. (This is leaving aside incomes taxes.)
I think a lot of the tax-rate based supply side economics arguments are, how shall we say, short on evidence. But at some point, I do think we’ll get to the hump of the Laffer curve.

17

I thought it was Nixon. :slight_smile:

18

Just a quick look at what the US government has brought us through taxation over the years is a fair amount of proof. These funds have given us the infrastructure of highways that we all use, gave us the first public schools & libraries, social security, unemployment insurance, a massive military & usually adequate policing. They fund our parks systems, environmental protections, and scientific research that could not or would not have been brought about through the means of private investment. Our democracy has not fallen in two hundred years, even through the lean times, and none of this could have come about without the tax burden we have put up with. What countries do you suggest do a better job providing its citizens with the way of life they have by utilizing lower taxation?

Are some of these things currently in disarray or even jeopardy? Can there be fingers pointed at mismanagement, and there is pork in most or all of these different aspects of governance? Of course. Certainly, there may well be some things done better by private industry or things we might be able to do without. But I’m not certain that eliminating sources of funding is necessarily the answer in most cases.

There is a great deal of consolidation that has gone on, especially over the last decade, in various industries. We may not have many monopolies, but we have a greater number of mega-corporations that we have had in a while. Sure, one can certainly vote with their dollars to some extent. However, if these mega-corps find common obstacles that block them through regulations that exist, they might move in certain aspects against those regulations that could resemble a monopoly. At least, it’s a lot easier to coordinate than having dozens of little corporations trying the same thing. Do you think that that it’s possible that two or three mega-corps in any given field of industry might agree to act in concert to use quasi-monopolistic clout without being a bonafide monopoly?

One frequently Big Business mentioned is that most major media in this country is in the hands of a few corporations whereas a decade or two ago, there were two or three times that number. The pharmaceutical industry and the auto industry are also two other examples of big business that are fairly heavily regulated. They would not be as well regulated by an anorexic government that does not have the means to do so. Would you like to see most regulations for industries such as these go by the wayside? You don’t think they might cut some corners that would endanger your well being for the sake of saving a few bucks, do you?

Technically, we must realize that unless backed against a wall, Americans do not use the powers they have to regulate our government more efficiently. Never the less, that concentration of power is can be changed within the system by the people over time. Telling a business entity such as General Motors for example, to stop doing this or that, is pretty difficult unless those protesting own the majority of GM stock. Or unless they invoke the government to do so.

19

Both Everready and Coil are right about the Laffer curve.

To the left (appropriately) of the maximum, raising taxes raises revenue. Most Democrats argue we are in this region.

To the right (appropriately) of the maximum, raising taxes decreases revenue. Supply-side Republicans argue we are in this region.

I think it’s fair to say that anyone who thinks they know what tax rate produces the maximum revenue is more than a bit overconfident.

Note that the Laffer curve looks at things just from the government’s perspective of maximizing revenue. Someone who’s aiming for the maximum point is implicitly saying we should only take the government’s desire for revenue into our decision making and we should totally discount the fact that people dislike being taxed.

Note also that the Laffer curve implicitly holds the structure of taxes (income vs. consumption, progressivity vs. flatness, for instance) constant. Alterting the structure could change the revenue without changing the rates.

20

Not sure what you’re looking for then, pervert. Grover Norquist was heavily quoted in that article in his capacity as current chief promoter of starving the beast, and it’s not at all hard to find out more about him and how he influences Karl Rove and thereby this administration’s policies. It’s hard to see how those policies are not, in fact, being implemented.His organization. If you’re looking for anything critical, it almost has to be in so-called liberal media. Risibly, Fox condemns him for leftism.

Discussion about the nondemocratic and stealthy means the Bush administration is employing to dismantle the New Deal itself seems pointless, but certainly someone here will jump in.