Winehole23
11-20-2012, 02:55 PM
And then Niskanen, looking over 25 years of budget data, noticed something about STB: It didn’t work. In fact, attempts to starve the beast by tax cuts seemed to lead to increased federal spending.
Niskanen looked at both spending and taxes as a percentage of GDP. On average, he found, if federal revenues declined by 1 percent, federal spending increased by 0.15 percent. When revenues rose, on the other hand, relative spending decreased. A further study in 2009 by another Cato economist, Michael New, came to the same conclusion after the gluttonous administration of George W. Bush. Under Bush and his mostly Republican Congress, new benefits like subsidized Medicare drugs and increased federal education spending followed on the heels of large tax cuts.
Niskanen’s explanation for the failure of STB was straightforward, a conjecture based on standard economics: When you cut the price of something, demand for it will increase. Lowering taxes without lowering benefits meant that tax- payers were getting the benefits at a discount. The government made up the true cost with borrowed dollars that future taxpayers would have to repay. There was a big difference, Niskanen said, between a kid on an allowance and the federal government: The government has a credit card with no debt limit.
A study by a pair of liberal economists in 2004 showed how thoroughly the desire to cut taxes had been made compatible with the desire to spend money and expand the government’s power. Among congressmen who had signed a pledge never to raise taxes, presumably on starve-the-beast grounds, more than 80 percent nevertheless voted for the mostly unfunded Medicare prescription drug benefit in 2003. More than 70 percent of them voted for the lard-packed farm and transportation bills in Bush’s first term.
http://www.weeklystandard.com/articles/gorging-beast_663547.html?page=1
Niskanen looked at both spending and taxes as a percentage of GDP. On average, he found, if federal revenues declined by 1 percent, federal spending increased by 0.15 percent. When revenues rose, on the other hand, relative spending decreased. A further study in 2009 by another Cato economist, Michael New, came to the same conclusion after the gluttonous administration of George W. Bush. Under Bush and his mostly Republican Congress, new benefits like subsidized Medicare drugs and increased federal education spending followed on the heels of large tax cuts.
Niskanen’s explanation for the failure of STB was straightforward, a conjecture based on standard economics: When you cut the price of something, demand for it will increase. Lowering taxes without lowering benefits meant that tax- payers were getting the benefits at a discount. The government made up the true cost with borrowed dollars that future taxpayers would have to repay. There was a big difference, Niskanen said, between a kid on an allowance and the federal government: The government has a credit card with no debt limit.
A study by a pair of liberal economists in 2004 showed how thoroughly the desire to cut taxes had been made compatible with the desire to spend money and expand the government’s power. Among congressmen who had signed a pledge never to raise taxes, presumably on starve-the-beast grounds, more than 80 percent nevertheless voted for the mostly unfunded Medicare prescription drug benefit in 2003. More than 70 percent of them voted for the lard-packed farm and transportation bills in Bush’s first term.
http://www.weeklystandard.com/articles/gorging-beast_663547.html?page=1