As
the debate rages over letting some of the Bush tax cuts expire,
Republicans have raised their starve-the-beast theory from its coffin.
They insist that government (the "beast") can be shrunk by cutting
taxes: The less money government has, the less government there can be. Time has not been kind to this theory. The beast never did better than when tax-cutting Republicans were in charge. The
fiscal grown-ups who used to run the Republican Party didn't cotton to
reducing taxes before spending in normal times. But Ronald Reagan
offered the far more pleasurable doctrine of just cutting taxes. "Well,
if you've got a kid that's extravagant, you can lecture him all you
want to about his extravagance," Reagan said in his 1980 campaign. "Or
you can cut his allowance and achieve the same end much quicker." No
one turned the starving-beast theory into baloney faster than Reagan,
who followed his tax cuts with a spending binge fueled by massive
borrowing. What he did, in effect, was cut the extravagant kid's
allowance and then hand him 10 credit cards. The national debt
doubled under Reagan. It doubled again under George W. Bush, who
followed the same reckless path. (At least Reagan subsequently raised
taxes in the face of soaring deficits.) Frustrated fiscal
conservatives -- a group that includes Democrats, Republicans and,
above all, independents -- are assessing another tool for imposing
budgetary discipline: the "Fiscal Illusion" effect. Totally contrary to
starve-the-beast, it promotes (SET ITAL) raising (END ITAL) taxes as
the better way to contain government. University of Mississippi
economist Andrew T. Young describes how it works in the Cato Journal:
"A tax increase may make taxpayers hostile toward government spending
as they are forced to directly reckon with its costs. Likewise, tax
decreases may lessen the perceived cost of government spending,
increasing the quantity demanded." James Buchanan, a Nobel
Prize-winning economist, helped develop the "Fiscal Illusion"
hypothesis. It's obvious, he said, that "borrowing allows spending to
be made that will yield immediate political payoffs without the
incurring of any immediate political cost." Paying for tax cuts and
expanded government with debt has been the Republican free lunch. Since
raising taxes is zero fun, the party's swingers see no reason to change
their approach. Bruce Bartlett, an economic historian and former
Republican adviser, has called this position "completely indefensible."
As he recently told The Economist magazine: "In their view, deficits
cannot arise from tax cuts. No matter how much taxes are cut, no matter
how low revenues go as a share of GDP, tax cuts are never a cause of
deficits. They result only and exclusively from spending -- and never
from spending put in place by Republicans, such as Medicare Part D,
TARP, two unfunded wars, bridges to nowhere, etc." You can see why Bartlett is no longer a welcome presence on Fox News. Of
course, the bills don't go away. Future generations of taxpayers will
be paying for both their grandparents' government and their own. Which
makes even the idea of referring to the Bush tax cuts as "tax cuts" so
aggravating. Are Democrats equally to blame? No. Deficit spending is
warranted during an economic crisis. (By the way, their new health-care
initiative was fully paid for.) What worries fiscal conservatives most
about Democrats is that they might lack the guts to do what must be
done, which is raise taxes. Some "conservative" Democrats are afraid
of their own shadows, while others on the left resent having to clean
up after Republican orgies. They should all recognize: Honest budgeting
is something to be proud of. Once the economy comes back to life,
any responsible plan to address America's deep deficits will include
tax hikes. Let the brave step forward.
To
find out more about Froma Harrop, and read features by other Creators
Syndicate writers and cartoonists, visit the Creators Syndicate web
page at www.creators.com. COPYRIGHT 2010 THE PROVIDENCE JOURNAL CO. DISTRIBUTED BY CREATORS.COM
