"Starve the Beast: Just Bull, not Good Economics"

Bruce Bartlett says starve and feed the beast theory -- a favorite of Republicans -- is a "crackpot theory" that serves as a rationalization "for Republican budgetary irresponsibility":

Starve the Beast: Just Bull, not Good Economics, by Bruce Bartlett: A prime reason why we have a budget deficit problem in this country is because Republicans almost universally believe in a nonsensical idea called starve the beast (STB). By this theory, the one and only thing they need to do to be fiscally responsible is to cut taxes. They need not lift a finger to cut spending because it will magically come down, just as a child will reduce her spending if her allowance is cut — the precise analogy used by Ronald Reagan to defend this doctrine in a Feb. 5, 1981, address to the nation.

It ought to be obvious from the experience of the George W. Bush administration that cutting taxes has no effect whatsoever even on restraining spending, let alone actually bringing it down. Just to remind people, Bush inherited a budget surplus of 1.3 percent of the gross domestic product from Bill Clinton in fiscal year 2001. ...

When Bush took office in January 2001,... He immediately pushed for a huge tax cut, which Congress enacted. In 2002 and 2003, Bush demanded still more tax cuts, even as the economy showed no signs of having been stimulated by his previous tax cuts. The tax cuts and the slow economy caused revenues to evaporate. ...

Spending did not fall in response to the STB decimation of federal revenues; in fact, spending rose from 18.2 percent of GDP in 2001 to 19.6 percent in 2004, and would continue to rise to 20.7 percent of GDP in 2008. Insofar as the Bush administration was a test of STB, the evidence clearly shows not only that the theory doesn't work at all, but is in fact perverse. ...

But there is a flip side to STB at work as well. If tax cuts starve the beast, then it logically follows that tax increases must feed the beast. This variation of STB was on full display in a Nov. 21 Wall Street Journal op-ed article by ... Republican operative Steve Moore ... and Ohio University economist Richard Vedder. The Moore-Vedder article argues strenuously that tax increases must never be considered no matter how big the deficit is. The reason, ... is that tax increases always feed the beast, leading to spending increases larger than the tax increase ...

By this logic, the tax increase enacted in 1993, which raised the top federal income tax rate to 39.6 percent from 31 percent, should have caused a massive increase in the federal budget deficit. In fact, it did not. ... And contrary to another commonly-held Republican idea — that all tax increases reduce revenue via the Laffer Curve — revenues rose from 17.5 percent of GDP in 1992 to 20.6 percent in 2000. ...

Starve the beast is a crackpot theory, and its flip side that higher taxes invariably feed the beast is no better. They are just self-serving rationalizations for Republican budgetary irresponsibility.