GOP's plan to "starve the Beast" promoted by Reagan and Grover Norquist

The irony of Reagan's insistence to starve the beast by cutting taxes is that, during his two terms, he raised taxes several times and increased the deficit. He apparently discovered that events and emergencies cause the need for tax increases. The GOP is following the plan, which is resulting in a "class war."---BBB

Ronald Reagan's plan for "Starve the beast."

Reagan gives a televised address from the Oval Office, outlining his plan for tax reductions in July 1981

"Starving the beast" is a fiscal-political strategy of some American conservatives to create or increase existing budget deficits via tax cuts to force future reductions in the size of government.

The tax cuts of former US President George W. Bush's administration, extended by President Obama, are an example. He said in 2001 "so we have the tax relief plan [...] 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."

Former U.S. vice-presidential candidate Sarah Palin expressly advocates the policy: "please [Congress], starve the beast, don't perpetuate the problem, don't fund the largesse, we need to cut taxes." U.S. Senator Jon Kyl (R-AZ), a member of the Senate Finance Committee, states "you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans."

History

Prior to being elected as the President, then-candidate Ronald Reagan foreshadowed the strategy during the 1980 US Presidential debates, saying "John Anderson 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." It appears the earliest use of the term "starving the beast" to refer to the political-fiscal strategy was in a Wall Street Journal article in 1985 where the reporter quoted an unnamed Reagan staffer.

Analysis: economic, academic, and "think tank"

Some empirical evidence shows that Starve the Beast may be counterproductive, with lower taxes actually corresponding to higher spending. An October 2007 study by Christina D. Romer and David H. Romer of the National Bureau of Economic Research found: "[...] no support for the hypothesis that tax cuts restrain government spending; indeed, [the findings] suggest that tax cuts may actually increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases."

William Niskanen, chairman emeritus of the libertarian Cato Institute, criticized “starve the beast.” If deficits finance 20% of government spending, then citizens perceive government services as discounted. Services that are popular at 20% off the listed price would be less popular at full price. He hypothesized that higher revenues could constrain spending, and found strong statistical support for that conjecture based on data from 1981 to 2005. Another Cato researcher, Michael New, tested Niskanen’s model in different time periods and using a more restrictive definition of spending (non-defense discretionary spending) and arrived at a similar conclusion.

Professor Leonard E. Berman of Syracuse University testified to a U.S. Senate committee in July 2010 that: "My guess is that if President Bush had announced a new war surtax to pay for Iraq or an increase in the Medicare payroll tax rate to pay for the prescription drug benefit, both initiatives would have been less popular. Given that the prescription drug benefit only passed Congress by one vote after an extraordinary amount of arm-twisting, it seems unlikely that it would have passed at all if accompanied by a tax increase. Starve the beast doesn’t work."

Economist Bruce Bartlett called Starve the Beast "the most pernicious fiscal doctrine in history."

Political commentary

Total tax revenues as a percentage of GDP for the U.S. in comparison to the OECD and the EU 15.

A well-known proponent of the strategy is activist Grover Norquist who famously said "My goal is to cut government in half in twenty-five years, to get it down to the size where we can drown it in the bathtub." 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.

Economist Paul Krugman summarized the strategy in February 2010: "Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit." He wrote that the "...beast is starving, as planned..." and that "Republicans insist that the deficit must be eliminated, but they’re not willing either to raise taxes or to support cuts in any major government programs. And they’re not willing to participate in serious bipartisan discussions, either, because that might force them to explain their plan — and there isn’t any plan, except to regain power."

"Feed The Beast"

There exists a related idea known as "Feed the Beast", which means increasing taxes for the purported purpose of balancing the budget only to make the government spend those inflows. Economists Stephen Moore and Richard Vedder have written in the Wall Street Journal editorial page that every new dollar of new taxes leads to more than one dollar of new spending according to their research. Their conclusions have been disputed by economist and writer Bruce Bartlett in The Fiscal Times, who stated that tax increases in the early 90s helped contribute to more austere budgets in the late 90s.