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COLUMN: Spending cuts can mean revenue loss

Political Profundities

Published: Tuesday, February 19, 2013

Updated: Tuesday, February 19, 2013 13:02

 

In Utah, we hear a lot of blame going around for our budgetary woes. We like to blame California Democrats and New York Democrats. Massachusetts Democrats are a favorite target. No good debate is complete without a little Obama-bashing. But mostly, it is just Democrats in general. We understand they have big hearts, but our big brains tell us their policies just don’t work — for balancing the budget, that is.

The argument generally boils down to something like this: Since transactions rarely occur without both parties benefitting, money continually multiplies in value as it cycles throughout the economy. Money is continually being pulled from the economy by the government and funneled into bloated bureaucracies which fail to re-multiply it. Thus, government should be minimized to those bare functions which we deem necessary to the continued operation of the free market.

This is a great argument, I admit. I am fully convinced spending should be cut. I also admit freely Republicans have, for all intents and purposes, deforested a slim strip of rainforest in Brazil with the amount of oxygen and paper they have consumed in their endless pleas for spending cuts. Nevertheless, for the massive expansion of the federal government that has occupied the past half century, the greater part of the blame lies squarely with the Grand Ol’ Party.

First, I will address the massive expansion of the federal government that has resulted from Republican policies. Remember Ronald Reagan, the hero of the conservative movement? Ronald Reagan, who was so popular he won all but a few states both times he ran for president and set a popular vote record that would not be matched for decades? Ronald Reagan, who was so influential he realigned America from a blue-leaning nation to a red-leaning nation for three decades? That same Ronald Reagan presided over the biggest expansion of the federal debt in the past half-century, increasing the debt by 189 percent during his two terms. This was done partly by slashing taxes on wealthy individuals to about half their previous rate and partly by overseeing a massive expansion of federal spending. Compare this to the measly 60 percent record Obama is taking crap for. Worst case scenario, by the time Obama leaves office he will have increased the debt by 100 percent. President George H. W. Bush increased the debt by 55 percent while in office for one term. President Clinton, with by far the best record, only increased the debt by 37 percent during his combined two terms in office. President George W. Bush signed into law Medicare Part D, which The American Conservative referred to as a “far larger expansion of the welfare state” than what Obama has done and increased the debt by 89 percent. Keep in mind Obama inherited a larger deficit than any of his listed predecessors — more than $1 trillion — and an economy that had just fallen off of the biggest cliff since the 1920s. I’d say he’s done pretty good.

Next, I want to bring your attention to a particularly detrimental mentality pervading conservative orthodoxy which has actually accomplished the exact opposite of its intended purpose. I am referring to the “starve the beast” mentality. The idea is simple. Think about the federal government as a giant beast, always hungry for our money. If we keep feeding it, then it just keeps growing, and we can never, ever get our money back. So instead of feeding it, we should starve it. If we cut taxes and let the deficit grow large enough, then chaos will ensue that will be the Democrats’ fault. Finally, when economic collapse is imminent, the Democrats will negotiate with us and we can cut the budgets of popular social welfare and unemployment programs that otherwise would never be considered.  

Sounds reasonable, right? Just one problem. Renowned economist and late chairman of the libertarian Cato Institute William Niskanen published a paper in 2002 showing evidence that from 1981-2000 there was actually a strong negative relation between the relative level of federal spending and tax revenues. In other words, the more you cut taxes, the faster spending grows. This may seem counter-intuitive, but think about it this way: the public is judging the value of social programs compared to the taxes they are paying to subsidize them. If taxes go up, then some of those social programs start to look a little less attractive. Congressmen respond to the signals they receive from their constituents, so it makes sense the system would respond by cutting spending when taxes are high.

So what does this imply for the “starve the beast” mentality? It implies it is severely misguided, it causes numerous harms and it fails to accomplish any reasonable goal. It is like playing roulette, except instead of betting your life on a pile of cash, you are betting the entire global economy on nothing.

 

– Peter Daines is a senior in the political science department. He has been involved in the leadership of multicultural and diversity clubs such as the Latino Student Union and Love is for Everyone. Send comments and questions to pdaines33@gmail.com.

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