Excerpt:
A few weeks ago, I wrote a column about a paper that decimated the conservative worldview. The study, by William Niskanen of the Cato Institute, found that the conservative “starve the beast” strategy does not work. Indeed, since 1981, he found that tax cuts tend to produce more spending, while tax hikes produce less.
I wrote that it would be interesting to see how conservatives reacted to having the factual basis for their entire domestic strategy exposed as a fraud. And it is interesting because “starve the beast” is so central to the GOP approach to governing and because the reaction is a case study in how the conservative movement reacts when its views are disproved.
Well, the right has had sufficient time to formulate its response. The results aren’t very impressive.
June 13th, 2006 at 8:08 AM
Huh? For as long as I can remember (two decades?) Republicans have advocated cutting taxes to stimulate spending…usually the taxes of the rich to stimulate investment. But from a GDP perspective, C and I both increase Y (Y=C+I+G+NX).
The big issue, of course, is that individuals have a likelihood to save some of the tax cut. So G goes down, and C (or I) goes up by less than that. Unless the government feels like making up the difference with a deficit. What? Deficit spending in times of economic contraction to stimulate growth? Again, sounds Republican.
Anyone care to fill me in on why I’m mistaken?
June 13th, 2006 at 1:36 PM
I think you’re usng Republican and conservative interchangeably and that’s not really true in terms of what the article is talking about. In this particular case, they’re talking about the Grover Norquists of the world with their “starve the beast” idea. The idea that tax cuts boost consumer or investment spending isn’t really relevant (though it is an interesting debate as an aside).
Starve the beast is what the article is criticizing, the idea that by cutting taxes and forcing deficits, you can reduce the size of federal government. See http://en.wikipedia.org/wiki/Starve-the-beast .
The article above (and the study in question) takes a direct look at that theory.