Starve the Beast: Still hungry after all these years

With the 2016 Presidential election primaries going on we’ve been hearing a lot of about how we need to cut government spending. Sometimes for ideological reasons, but often because we just can’t afford it anymore. The money isn’t there, the programs are unsustainable, the government debt is too high etc etc These lines are spoken by our Presidential candidates to our neighbors. I have no doubt most truly believe in fiscal responsibility and worry about the debt and sustainability of programs. These cuts may be painful, even unwanted, but something needs to be done.

The unfortunate truth is our current situation has been the result of a political strategy, a long term plan to force cuts to government programs that have long been targets of conservative ideologues. It’s called “Starve the Beast” and the goal is to rack up large deficits, using tax cuts, to justify the dismantling of government programs under the guise “There’s just no money”. Sound far fetched or conspiratorial? It’s not, and the proof is out there in the open.

The Cato Institute, a limited government think tank, has put out two reports criticizing starve the beast as ineffective policy[1][2]. Bruce Bartlett, a conservative historian, wrote an article in Forbes criticizing the policy, (who by the way said it’s a “completely bankrupt notion that belongs in the museum of discredited ideas, along with things like alchemy.”)[3] Clearly the strategy does exist. It’s not a modern tea party invention either.

Bartlett notes the first articulation of the idea came in 1978 by Alan Greenspan, (a stringent anti government devotee) who said to the Senate Finance Committee, “Let us remember that the basic purpose of any tax cut program in today’s environment is to reduce the momentum of expenditure growth by restraining the amount of revenue available and trust that there is a political limit to deficit spending.” My emphasis added. This was quickly followed by support from conservative journalist George Will who said, “The focus of the fight to restrain government has shifted from limiting government spending to limiting government receipts,”and later Milton Friedman, (another fervent anti government adherent) chimed in with, “the only effective way to restrain government spending is by limiting government’s explicit tax revenue–just as a limited income is the only effective restraint on any individual’s or family’s spending.”[3]

In the 1980 Presidential debate Ronald Reagan said, “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.” [4]

So, starve the beast is very real and it’s not a new idea. Knowing this greatly aids understanding of Republican behavior since 1981, which is the next part of our story.

Reagan signed a large tax cut in ’81 but also greatly increased government spending, mainly defense spending. Cutting taxes and increasing spending, logic would dictate one result and sure enough under Reagan there were record deficits, a near tripling of the national debt[5] and our debt to GDP ratio rose from 30% to 50% As seen below this was not insignificant and started a longer upward climb.

reagendebt

 

I’ll address this more in another post, but it’s incorrect to place the blame on Congressional Democrats, and in fact Republican David Stockman, director of the Office of Management and Budget under Reagan, places much blame on the President himself, and said “That’s one of the mysteries of the time”[6] about why Reagan’s actions didn’t match his rhetoric.

Well, when you know about starve the beast it’s not a big mystery.

Then in 1990 a Democratic Congress passed PAYGO, which said all spending hikes/tax cuts must be offset with accompanying taxes hikes/spending cuts. Basically, maintain balanced budgets. In 1992 Bill Clinton ran on a platform of tackling the (Reagan) debt, and passed a budget that made cuts to spending, and increased taxes on the rich. Starting after 1990 the government budget leveled off and trended steadily towards upwards, going into surplus, the national debt leveled off, and it appeared we achieved fiscal restraint.

Enter George W Bush. After passing a $1.3 trillion tax cut by skirting PAYGO rules, in 2002 a Republican Congress let PAYGO expire, (they upheld it under Clinton) and then Bush with a Republican Congress passed more tax cuts, ramped up defense spending, passed a medicare expansion, made no cuts to domestic spending and in fact increased it.[7]

The result was obvious: Even larger record deficits, another huge swell in the national debt.

Fast forward to the 2009-2011 period. There was an incendiary outcry from conservatives/Republicans about how bad the government deficits/debt were and that we must reduce them. I heard this from lawmakers, the media, internet, classmates and friends. I was flabbergasted at the time. It was just under a Republican President and Congress that record deficits were racked up without a single peep, (except from Ron Paul) and never once was the question, “How will this be paid for?” asked. It’s of course no surprise why this happened: starve the beast.

Now the policy has reached it’s final stage: The push for massive cuts to government programs. There is no longer any pretense about it. In our last Presidential election, the Romney/Ryan platform, (which was Ryan’s “Path to Prosperity”) called for drastic cuts to medicare, medicaid and general gov spending. This is less draconian than his previous budget proposal “Roadmap for America” which called for massive cuts in medicare, medicaid, elimination of CHIP (health insurance for children in low income households) privatizing social security and an overall drop in spending to levels not seen since 1950.[8] A later Ryan proposal “cuts deep into spending on health care for the poor and some combination of education, infrastructure, research, public-safety, and low-income programs”and the article notes Ryan was “pushing these ideas in the late-’90s and early-2000s, too, when deficits were far less of a threat.”[9] Ryan, who is an Ayn Rand worshipper, clearly has an ideological motive, not budgetary.

Grover Norquist, a major influence on the Republican Party, has pushed since the 80s the policy of never ever supporting any tax increase. Norquist has famously stated his goal is to shrink government down to the size where it can be drowned in the bathtub, and that he wants the American we had “until Teddy Roosevelt, when the socialists took over.”[10] Yet again, clearly ideologically fueled.

These ideas are not new. It goes back to the New Deal which split the Republican Party: those who largely accepted the New Deal and those who didn’t. The former went on to dominate the party, winning the Presidential nomination every election from 1936-1976, except for 1964. The latter however was always there. Led first by Robert Taft the “Old Right” strove to halt the New Deal and ideally roll it back.  This carried on through Barry Goldwater, Reagan, the ’94 Republican Revolution, now Paul Ryan and the Tea Party. Goldwater brought military intervention, Reagan on brought social conservatism, each upsetting the previous wave, but all are united in a clear lineage of hoping to roll back government to before the New Deal.

While I have no doubt many pushers of tax cuts do believe it will boost the economy/is morally right, it can’t be denied that starve the beast has been a factor in pushing for them, especially from influential Republicans like Greenspan, Friedman, Reagan, Norquist, and Paul Ryan. It really is a brilliant strategy. 1: It makes cuts to government spending far more acceptable. Social Security has gone from the third rail of politics to mainstream debate, now that it’s “no longer affordable”. 2: It gives the Republicans an easier time governing. 3: It allows them to be the party of lower taxes, while saddling Democrats with the pain of “fixing” the mess and be labelled as tax hikers. 4: Tax cuts are always a popular notion, so it keeps the idea entrenched, especially when they favor the wealthy. 5: It draws in moderate, well meaning people who may not like it, but feel we need to get spending under control.

So when you hear about how we need to cut programs, understand this budgetary situation was forced upon us, and has been driven by ideology. This isn’t saying we can’t ever touch government programs, just know the history that lead us here, and what motivated it. Democrats have been accomplices in all this. They passed PAYGO, spending cuts, accepted cuts to welfare, cuts on the wealthy in exchange for puny tax credits, budget sequestration and from the start of the Obama administration were eager to discuss a “grand bargain” and making changes to social security. It all stems from the belief of balanced budgets, and deficits as bad. While this post has addressed the politics behind deficits, in another post I’ll address the economics of deficits, and why we shouldn’t automatically hate them.

 

References/Sources:

1: http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2006/11/cj26n3-8.pdf

2: http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2009/11/cj29n3-7.pdf

3: http://www.forbes.com/2010/05/06/tax-cuts-republicans-starve-the-beast-columnists-bruce-bartlett.html

4: http://www.washingtonpost.com/wp-dyn/content/article/2006/05/07/AR2006050700924.html

5: https://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo4.htm

6: https://reason.com/archives/2014/04/24/rand-paul-is-right-jimmy-carter-was-thri

7: https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/reports/historicaltables_0.pdf

8: http://www.cbpp.org/research/the-ryan-budgets-radical-priorities

9: http://www.usnews.com/opinion/articles/2013/03/12/right-and-left-slams-paul-ryans-path-to-prosperity-budget

10: http://www.thenation.com/article/rolling-back-20th-century/

 

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