Starve-the-beast

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"Starving the beast" is a political strategy which seeks to cut taxes and, if budget deficits or shortfalls come about because of the tax cut, to then seek to reduce government spending.

The term "beast" is used to denote government spending and infrastructure.

When Ronald Reagan ran for U.S. President, he foreshadowed the strategy during a presidential debate. Reagan claimed of opponent John Anderson, "John tells us that first we've got to reduce spending before we can reduce taxes. Well, if you've got a kid that's extravagant, you can lecture him all you want to about his extravagance. Or you can cut his allowance and achieve the same end much quicker."[1] It appears the earliest reference to "starving the beast" in those words was made by former Reagan administration budget director David Stockman, who used the term in his 1986 book The Triumph of Politics: Why the Reagan Revolution Failed.

A current example is the tax cutting policy of the George Bush administration. Bush stated in August 2001, "so we have the tax relief plan, which is important for fiscal stimulus, coupled with Social Security being off limits except for -- except for emergency. That now provides a new kind -- a fiscal straightjacket for Congress. And that's good for the taxpayers, and it's incredibly positive news if you're worried about a federal government that has been growing at a dramatic pace over the past eight years and it has been."[2]

The national debt grew 37% in the first five complete fiscal years of the present Bush administration. In the first five complete fiscal years of the Clinton administration it grew 23%. The proportion of borrowing to fund expenditures was 13% in 2005. In 1997 that proportion was 1%.[3][4][5]. These are the most recent matching figures and years available for those administrations at the references.

A well-known proponent of the strategy is tax-cut activist Grover Norquist.[6][7] Vice-President Dick Cheney said "Reagan proved deficits don't matter" as then-Treasury Secretary Paul O'Neill warned of financial dangers presented by them ahead, according to O'Neill.[8]

Some empirical evidence shows that the strategy may be counterproductive, with higher taxes actually corresponding to lower spending: "Controlling for the unemployment rate, federal spending [from 1981 to 2000] increased by about one-half percent of GDP for each one percentage point decline in the relative level of federal tax revenues." The article (written by William Niskanen and Peter Van Doren of the Cato Institute) shows that "a tax increase may be the most effective policy to reduce the relative level of federal spending," though the authors oppose tax increases for other reasons.[9][10][11][12]

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Portions of this article have been adapted from Wikipedia, the free encyclopedia. Copyright Notice can be found here.