Bill Niskanen and Starve the Beast
Jonathan Chait writes about Bill Niskanen and "starve the beast":
Jonathan Chait: Your silence is deafening, conservatives - Los Angeles Times: A FEW WEEKS ago, I wrote a column about a paper that decimated the conservative worldview. The study, by William Niskanen of the Cato Institute, found that the conservative "starve the beast" strategy does not work. Indeed, since 1981, he found that tax cuts tend to produce more spending, while tax hikes produce less.
I wrote that it would be interesting to see how conservatives reacted to having the factual basis for their entire domestic strategy exposed as a fraud. And it is interesting because "starve the beast" is so central to the GOP approach to governing and because the reaction is a case study in how the conservative movement reacts when its views are disproved.
Out of the reams of conservative commentary published over the last month, I have found exactly two items reacting to Niskanen's research. Given his paper's devastating implications, the response is quantitatively--and qualitatively--pathetic.
The first is an Op-Ed column by Nick Schulz in National Review Online. Schulz found Niskanen's finding a big puzzle. "Why would tax cuts prompt more spending?" he asks. "The only explanation so far comes from Niskanen himself," who hypothesizes that tax cuts make government cheaper, so voters want more of it.
The only explanation? My column, which Schulz cites but apparently has not read, offered a different and (if I do say so myself) convincing explanation. I argued that Democrats are willing to inflict pain on constituents in the form of spending cuts in order to balance the budget but not in order to give tax cuts to the rich. So, when Republicans agree to raise taxes, large numbers of Democrats will join them to cut spending. This happened in 1982, '83 and '90. Democrats did it themselves in '93.
But when Republicans cut taxes, Democrats refuse to give them cover to make politically unpopular spending cuts. Republicans feel obliged to prove to voters that tax cuts aren't hurting their cherished programs. The latest case in point: the Bush tax cuts resulted in a Bush spending boom....
The only other response I could find comes in the form of a single-paragraph mini-editorial from National Review.
Niskanen's point--that since 1981 tax cuts go with spending increases, not spending restraint--is a fact. It is not a statistically significant fact, however--it may well be just our bad luck, where piece one of bad luck is named "Reagan" and piece two is named "Bush."
In my view, it's not that tax cuts provoke spending increases, it's that politicians--overwhelmingly Republican politicians these days--who seek to unbalance the budget unbalance it on both sides: tax cuts for the rich and Medicare spending that enriches PhRMA.
Over at his weblog, Greg Mankiw defends "starve the beast," protesting that:
Greg Mankiw's Blog: Starving the Beast: it is (as [Mark] Thoma suggests) premature for anyone (like [Jonathan] Chait) to conclude that Niskanen has the last, or even the most persuasive, word on the topic...
without recalling his stint in the White House in 2003, when the Bush administration's second round of tax cuts and Medicare drug benefit rolled forward without ever making any kind of contact with each other.s