Related to Boaz’s entry at Cato Unbound, readers should check out this Jonathan Rauch article, from the Atlantic (also available free to non-subscribers).
In it, Rauch relates some work done by another Cato-ite, William Niskanen. One excuse for running up the deficit during GOP administrations is that it restrains spending. But Niskanen finds that tax cuts actually correlate with spending increases. One possibility is that tax cuts reduce the perceived cost of increasing spending (the public doesn’t "feel" deficits for a long time); and when the perceived cost of something goes down (e.g. government spending) you typically do more of it (e.g. George W. Bush and the GOP Congressettes).
Dan Drezner, however, points out that the theory of Starve the Beast actually says that spending will eventually be forced down, preferably when a Democrat has to do the cutting. He argues Niskanen should look at what happens after, say, a five-year lag.
Interesting questions. I don’t pretend to have the answers. Has anyone seen any more data on this?
I plan to post on that story when I get a little time. I don’t really buy the “starve the beast” philosophy as an effective tool, but this take doesn’t seem much better. It’s appealing at first glance, but…
1) If a couple percent shift in taxes will substantially affect voters appetite for government spending, why haven’t Europeans been clamoring for big spending cuts for the past few decades?
2) When we talk “tax cuts” we’re usually talking about income taxes and corporate taxes. With a progressive tax system, that usually means the bulk of the benefit goes to the higher earners. Is it really the millionaires and big business which demand increased social spending? I have trouble believing the top quintile was responsible for the medicare drug bill, etc.
The bottom quintile gets a lot of the social welfare spending, but they don’t pay much in the way of taxes in the first place. What difference would a tax cut make to their appetite for government spending?
3) It’s a lovely hypothesis, but are voters really making electoral decisions on that margin? Personal income/wealth is dependent on so many factors besides minor tax shifts that I have trouble believing that’s a significant factor in their policy preferences. With withholding payments, voters just don’t see/think about minor changes in their tax situation, relative to their appetite for public spending.
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