creators.com opinion web
Liberal Opinion Conservative Opinion
Froma Harrop
Froma Harrop
31 Jul 2014
Doing Well by Doing Good -- but Better by Doing Bad

How curious to watch "60 Minutes," the famously hard-hitting TV newsmagazine, bless JPMorgan Chase CEO Jamie … Read More.

29 Jul 2014
What Scares Americans About the Child Migrants

The numbers are small for a large country like this, but the alarm is big over the influx of Central American … Read More.

24 Jul 2014
To Share Is Not Always to Share Alike

The online rental booking service Airbnb is a fast-growing empire that pairs travelers with people wanting to … Read More.

Raise Taxes To Cut Government?

Comment

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 raising 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



Comments

5 Comments | Post Comment
Congress allocates funding. Congress borrows the money. Congress has been Democrat-ruled for 40 of the last 52 years. Congress (Democrats) are crippling the economy and our Country, once again. (Still) This is the 21st century. The facts are everywhere. Why do you still bury your head in the sand?
Comment: #1
Posted by: David Henricks
Tue Jul 27, 2010 3:41 AM
No, Froma, you lie.
The debt doubled under Regan because Moynihan and the other Democrats in charge went back on their promise to him to cut spending (after all, the Democrats controlled the House back then, and the House controls the budget).
So stop lying about Reagan and the other Republicans just because you don't like them. Try telling the truth for a change, such as that after the Bush tax cuts, the government set a record for the highest level of tax reciepts in a single year.
Comment: #2
Posted by: Nick_in_Virginia
Tue Jul 27, 2010 9:46 AM
If Ms. Harrop is going to throw out a strawman, she should at least make it a semi-truthful one.
There is not one Republican in favor of cutting taxes who:
1) believes the effect of those cuts is "less money" for the government, and
2) then believes that shrunken pot of "money" will thereby force the issue of shrinking the government. (As if that means a darn thing to THIS Congress anyway!)
Cutting taxes INCREASES revenue -- it is proven to do so.
Comment: #3
Posted by: Geckzilla
Tue Jul 27, 2010 9:49 AM
Re: David Henricks
Ms. Harrop may have hit on the right idea, but for the wrong reasons. Revenue to the Government will go down as the tax rate exceeds a certain level, resulting in ever increasing deficits which ultimately will force the public to change their voting pattern and ask for a smaller government.
Comment: #4
Posted by: Roger Gerrard
Tue Jul 27, 2010 12:40 PM
Nice try Froma. It is expenditures much more than tax cuts that create deficits. I was at the Pentagon in 1986 and have first hand knowledge how the Reagan tax cuts started to constrain the military budget even though the cold war was still going on. For your info total federal revenue in 82 was 1077bn, by 88 it was 1676bn. That looks like a 60% increase to me. In 04 it was 3932bn and by 07 was 5237bn. That is a 33% increase. Where do you think that money came from Froma? Answer: The tax cuts encouraged more spending by the public thus generating more tax revenue. Now don't get me wrong. I do not think extending the Bush tax cuts will encourage us to spend more money. But if we increase taxes, we darn well will decrease spending. So I say to you democrats, go for it and see what happens. Double dip recession anybody?
Comment: #5
Posted by: ken loehr
Thu Jul 29, 2010 4:44 AM
Already have an account? Log in.
New Account  
Your Name:
Your E-mail:
Your Password:
Confirm Your Password:

Please allow a few minutes for your comment to be posted.

Enter the numbers to the right:  
Creators.com comments policy
More
Froma Harrop
Jul. `14
Su Mo Tu We Th Fr Sa
29 30 1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31 1 2
About the author About the author
Write the author Write the author
Printer friendly format Printer friendly format
Email to friend Email to friend
View by Month
Marc Dion
Marc DionUpdated 4 Aug 2014
Lawrence Kudlow
Lawrence KudlowUpdated 2 Aug 2014
Mark Levy
Mark LevyUpdated 2 Aug 2014

16 Dec 2010 So You Thought Health Care Was Fixed

2 Jun 2009 Toad Hall Madness Fades, but Sadness Lingers

26 Nov 2009 Whom Can You Trust on Climate Change?