Policy Positions

Can the Beast Be Starved?

Abstract: Some conservative economists have claimed that limited government may be brought about by “starving the beast”--cutting taxes and denying government revenue, thereby causing politicians to cut spending. Using data from the Office of Management and Budget and other public sources, this paper evaluates six claims that may be derived directly from this idea. While tax cuts do indeed limit revenue to the federal government, all other claims are demonstrably wrong. Neither spending, nor the deficit, nor the size of government has been curtailed by income tax cuts initiated during the 1948-2004 period. Tax increases, however, are associated with limited government.

Public opinion is the supposed driver in the “starve the beast” approach. When taxes are raised, the denial of revenue causes deficits, which prompt public outrage, which pressures politicians to lower spending. This paper shows that public opinion is generally insensitive to deficits, but responds by becoming more liberal when taxes are cut and more conservative when taxes are raised. Further, more liberal opinion is associated with subsequent higher spending, if modestly. Hence the “starve-the-beast” argument is exactly backwards: limited government is facilitated when taxes are raised to pay for government programs out of current revenues.