"Starve the Beast" does not work.

How can we forget President Ronald Reagan’s famous plan to reduce the size of government by reducing taxes and “Starving the Beast” of the funding necessary to maintain the colossal, all encompassing state which directs virtually every aspect of our lives? Reagan made plenty of inspiring speeches and is considered an icon of conservatism but, 30 years later, how have of his methods of reducing the government have actually worked out?



It seems unfortunate that, when Reagan took away the revenue from the ever expanding government, he forgot to also take away their credit cards as well. Instead of cutting back on the size of government, it seems that the policy of “starving the beast” has served only to exponentially grow the size of the national debt while removing the pain of increased taxes which helped to hold back expansive government programs.

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."

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Cutting back on the tax increases necessary to fund government spending has only served to encourage the public’s demands for more government services and has taken away the political cost to the politicians associated with giving people everything they wanted. It is no wonder that people have learned to rack up such huge debts in their personal lives; they are only following the example set by their government.

Looking at the numbers also shows that the “starve the beast” practice has had the EXACT OPPOSITE effect on government spending as intended.

Unfortunately there is no evidence that the big 1981 tax cut enacted by Reagan did anything whatsoever to restrain spending. Federal outlays rose from 21.7% of GDP in 1980 to 23.5% in 1983, before falling back to 21.3% of GDP by the time he left office.

When Bill Clinton became president in 1993, one of his first acts in office was to push through Congress--with no Republican support--a big tax increase. Starve the beast theory predicted a big increase in spending as a consequence. But in fact, federal outlays fell from 22.1% of GDP in 1992 to 18.2% of GDP by the time Clinton left office.

Although all of evidence of the previous 20 years clearly refuted starve the beast theory, George W. Bush was an enthusiastic supporter, using it to justify liquidation of the budget surpluses he inherited from Clinton on massive tax cuts year after year. Bush called them "a fiscal straightjacket for Congress" that would prevent an increase in spending. Of course nothing of the kind occurred. Spending rose throughout his administration to 20.7% of GDP in 2008.

Forbes

What I found striking is that, in spite of the tax increases in the Clinton years, the economy did not flounder as predicted by conservative economists and the cost of government, as compared to the size of the US economy, actually shrank during the tenure of the “big spending” Democrat.

Unfortunately, Republicans are living in a dream world and cannot fathom the idea of repudiating the memory of their beloved Reagan, so they cling on to the “starve the beast” dogma as a matter of faith, even though every fact and statistic proves that the policy has been an abject failure. The dogma has become so ingrained in the Republican psyche that it has become a substitute, in their minds, for controlling spending.

In effect STB became a substitute for spending restraint among Republicans. They talked themselves into believing that cutting taxes was the only thing necessary to control the size of government. Thus, rather than being a means to an end--the end being lower spending--tax cuts became an end in themselves, completely disconnected from any meaningful effort to reduce spending or deficits.

Forbes

The funny thing is, before the “Reagan revolution” the Republican party actually understood what fiscal restraint was all about.

Once upon a time Republicans thought that budget deficits were bad, that it was immoral to live for the present and pass the debt onto our children. Until the 1970s they were consistent in opposing both expansions of spending and tax cuts that were not financed with tax increases or spending cuts. Republicans also thought that deficits had a cost over and above the spending that they financed and that it was possible for this cost to be so high that tax increases were justified if spending could not be cut.

Dwight Eisenhower kept in place the high Korean War tax rates throughout his presidency, which is partly why the national debt fell from 74.3% of gross domestic product to 56% on his watch. Most Republicans in the House of Representatives voted against the Kennedy tax cut in 1963. Richard Nixon supported extension of the Vietnam War surtax instituted by Lyndon Johnson, even though he campaigned against it. And Gerald Ford opposed a permanent tax cut in 1974 because he feared its long-term impact on the deficit.

Forbes


Perhaps, if the Republicans were to get back to their REAL ROOTS, pre-Reagan, they could find the solution to the whole deficit boondoggle AND the uncontrolled expansion of government.

Instead of clinging to their low taxes dogma, they should embrace the Obama program of raising taxes in order to fund government programs. They should make sure that each and every government program would be accompanied by the tax increases necessary to fund those programs.

In short order, the people of America would realize the true cost of government largesse when they feel the hit in their own pockets for a change. On realizing how much all those government programs are actually costing the people of America, the people would be forced to wake up and demand a reduction of the size and scope of government in order to prevent, not just government insolvency but, their own bankrupting as well.

Maybe the only way to finally reduce the size of government is for the people to feel the pain themselves, instead of putting off that pain onto their children and grandchildren.

reply to post by FortAnthem


Great post, as a staunch constitutional conservative/libertarian and fan of Reagan I appreciate it. One thing that I would mention is the fact that the President has little to no control over fiscal and budgetary issues. The only thing he can do is sign a bill into law or veto it, and then even after a veto it can still be passed through into law with a majority vote in Congress. Please forgive me if you feel that I am insulting your intelligence because you already know all of that, but someone else may not. Unfortunately for Reagan (and America) Congress was Democratically controlled for the majority of his two terms in office, which is why he didn't accomplish as much as he would have liked. Reagan even tried compromising by agreeing to raise taxes and in return Congress would drastically cut their spending. To no surprise, the Democrats lied and ended up spending $1.70 for every dollar that the government brought in. Reagan did however prove that conservative policies and ideology does work because of all of the jobs that were created as a result of his actions.

Now having said all of that, as I look at the state of our Union today I have to tell you that I fully believe that the Constitution is dead and that we no longer reside in the Republic our founders fought and died for. Instead we live in a corrupt, immoral, mob-rule oligarchic pseudo-democracy. Our problems can not and will not be solved via the political process because we are too far gone. Our only hope is in the state legislatures and when individual states start telling the federal government to pack sand and then start seceding from the union. Then and only then can we "right the ship". In all honesty we should hold an Article Five Convention to fix it, and if that fails then it's time for states to go their separate ways. As far as I'm concerned Washington D.C is King George and it's time for him to be put in his place.

I think part of the problem back then was that the idea was "starve the beast...but let it live".

Today the solution needs to be "starve the beast...so it will die."

Originally posted by notsofunnyguy
I think part of the problem back then was that the idea was "starve the beast...but let it live".

Today the solution needs to be "starve the beast...so it will die."

Great point....well said

Originally posted by notsofunnyguy
I think part of the problem back then was that the idea was "starve the beast...but let it live".

Today the solution needs to be "starve the beast...so it will die."

That was the original intent of the policy.

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."

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Unfortunately, the law of unintended consequences took over.

A perverse effect contrary to what was originally intended (when an intended solution makes a problem worse), such as when a policy has a perverse incentive that causes actions opposite to what was intended.

The law of unintended consequences is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable outcomes. Akin to Murphy's law, it is commonly used as a wry or humorous warning against the hubristic belief that humans can fully control the world around them. Many fields of study in the sciences and humanities embrace this concept, including economics, history, philosophy, political science, and sociology.

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It sounded like a good concept but, unfortunately, when put into practice, it had the exact opposite effect on the size of the government.

Some do argue that it didn't work under Reagan because he had to fight against a Democratically controlled congress but, Bush II had full control of the House and Senate for 6 years and had the same results as Reagan.

Also, the reduction in the size of government under Clinton, in spite of the tax increases shows that the policy takes away the pain of the cost of government, thus encouraging out-of-control spending and government growth.

The economy expanded under Reagan because he rolled back the socialist controls put in place by Carter but, Reagan's "starve the beast" policy was a complete failure. The increased public spending probably also helped in the economic recovery but, it did nothing to control the size of government.

reply to post by FortAnthem

Interesting.

Alternate plan: Starve the beast to weaken it...then poke it with a spear till dead.

Originally posted by notsofunnyguy
reply to post by FortAnthem

 

Interesting.

Alternate plan: Starve the beast to weaken it...then poke it with a spear till dead.

My idea is to instead Feed the Beast until it is ready to pop.

Let the liberals have all of their fancy social programs but, make sure that they are paid for with actual revenues, not through more debt. Taxing the rich, even up to 100% of their income won't even make a dent into the budget surplus we have today. The middle class and the poor will have to chip in if they want to keep their government services flowing. That's right, if we ever want to get control of our finances, even the poor will have to chip in. Maybe not as much as the rich but, a small percentage of their earnings, perhaps less than 10% would be a huge step in moving the government toward solvency. There are only so many rich you can tax but, there are millions of the poor and the little bit that comes from each of them will quickly add up.

When the people realise just how much of their own money, not that of their distant, future ancestors, is needed to fund the Beast, they will finally get fed up with paying for programs that they may, or may not benifit from and will band together, hunt down the Beast and slay it themselves.

I say; lets Feed the Beast and Starve the People until they are driven into action against the Beast.

When the people are hungry and have nothing left to loose; that is the time when real change comes about.

I would just like to say that figuratively speaking, you can't starve "the beast" by giving it food and just hoping it doesn't partake in the sweet treats we give. In other words, us taxpayers giving them everything they want and hoping they will be responsible about it is frivolous.

As for adopting the ways of the State has provided for remedying the evil, I know not of such ways. They take too much time, and a man's life will be gone. Statesmen and legislators, standing so completely within the institution, never distinctly and nakedly behold it. They speak of moving society, but have no resting-place without it.

If a thousand honest men were not to pay their tax this year, that would not be a violent and bloody measure, as it would be to pay them, and enable the state to commit violence and shed innocent blood. This is, in fact, the only definition of a peaceable revolution, if any such is possible.

-HD Thoreau 1849

"Starving the beast" begins with your wallet and mine; Not in DC.

Great topic OP, and good posts all, especially OptimusSubprime. Nice to see posts with substance!