Starving The Beast
The large tax cuts promoted by the right-wing are intentionally designed to force government to cut back severely on social spending.
For decades, a key goal of anti-government agenda conservatives has been to substantially cut spending on social and regulatory programs. But they have faced a difficult and tricky obstacle. Most Americans actually like these programs. As seen earlier, most of us would like to increase – not cut – spending on social programs like health care and education. And we greatly appreciate the job being done by regulatory agencies that protect the environment, consumers, and workers. So how can these valued programs be cut without invoking the wrath of the public?
The answer the Republicans found is to attack these programs indirectly. The weapon of choice? Tax cuts. The idea is simple: if we keep cutting taxes, eventually there won’t be enough money to spend on these programs and they will have to be reduced. If there simply is not enough money in the budget, even liberal supporters of these programs will have to reluctantly concede that cuts are necessary. Conservatives call this tactic “starving the beast.” Taxes are what nourish government. Take that source of nourishment away and government must inevitably shrink. For anti-tax advocates like Grover Norquist, this is the ultimate purpose of tax cuts: “The goal is reducing the size and scope of government by draining its lifeblood.”1
Milton Friedman, the arch-conservative economist, speaking of ways to limit or reduce the size of government, offered this prescription: “How can we ever cut government down to size? I believe there is only one way: the way parents control spendthrift children, cutting their allowance. For the government, that means cutting taxes. Resulting deficits will be an effective – I would go as far as to say, the only effective – restraint on the spending propensities of the executive branch and the legislature.”2
So underneath all the Republican rhetoric about cutting taxes – all the talk about stimulating the economy and giving money back to hardworking Americans, there is another, deeper and more disturbing political goal: to strangle government social and regulatory programs. But this is rarely acknowledged publicly. Conservatives focus the public’s attention on what they will gain from the tax cuts, not what they will lose by reducing social programs.
This strategy was first tried in the Reagan administration. He came into office in 1980 promising to balance the federal budget. But he quickly cut taxes and raised military spending, creating huge budget deficits. (Sound familiar?) This made little sense to many people at the time and was not understood until Reagan’s budget advisor, David Stockman, later revealed that this was a conscious effort to “starve the beast” – a phrase he is reputed to have coined.3 The idea was to put increasing financial pressure on the government’s budget in order to make it easier to cut spending on programs. And indeed, it had some effect, with domestic discretionary spending falling from 4.5% of the economy in 1981 to 3.3% in 1988.4
A series of massive tax cuts during the George W. Bush administration revived this strategy and implemented it in a much more extensive way. These tax cuts cost the federal government over two trillion dollars ($2,000,000,000,000) in lost revenue from 2001 to 2010 alone.5 As economist Paul Krugman observed at the time, “‘starving the beast’ is no longer a hypothetical scenario. It’s happening as we speak. For decades, conservatives have sought tax cuts, not because they’re affordable, but because they aren’t.”6
The Deficit Trap
There is an obvious problem with this starving the beast strategy. On the federal level, cutting taxes does not necessarily require spending cuts: the government may simply borrow money and increase its debt to continue spending. And this is exactly what happened during the Bush administration. Along with his tax cuts, Bush also oversaw some large increases in government spending – mostly in the area of defense. The wars in Iraq and Afghanistan cost an estimated 900 billion dollars between 2001 and 2009. This combination of increased spending and huge tax cuts caused budget deficits to soar. This led some conservatives to complain that Bush had abandoned the idea of limited government. David Brooks concluded in one of his New York Times columns that all this spending and the growing deficits heralded “the death of small government conservatism.”7
But these accusations were misplaced. They ignored one key fact: growing deficits were entirely consistent with the long-term plan to reduce government. The hope was that soaring deficits and a rapidly growing national debt would eventually force policymakers to reduce government spending – whether they liked it or not. From its very first days, the Bush administration embraced deficits as a good way to reign in government. In August of 2001, as the federal budget surpluses began to disappear and new deficits began to loom, the president had an unusual fit of candor and described these developments as "incredibly positive news," arguing that this would now put Congress in a "fiscal straitjacket."8 The Republicans in Congress also came around to this point of view. As conservative Rick Santorum explained it, he first hated deficits, but then came to like them because they made it harder to pass any new spending bills. “I came to the House as a real deficit hawk but I am no longer a deficit hawk. I’ll tell you why. …Deficits make it easier to say no.”9
More importantly, the Republicans knew that if the deficits and public debt continued to grow, eventually there would be no choice but to initiate deep cuts in mandatory spending programs like Medicare, Medicaid, and Social Security. As Paul Krugman explained in 2003, if the Bush tax cuts continued and no effort was made to increase revenues, the crunch would eventually come. "We're not talking about minor policy adjustments,” said Krugman. “If taxes stay as low as they are now, government as we know it cannot be maintained."10 He predicted that we could end up with large cuts to many central government programs: "Social Security will have to become far less generous; Medicare will no longer be able to guarantee comprehensive medical care to older Americans; Medicaid will no longer provide basic medical care to the poor."11 In fact, eight years later, the Republicans were to propose radical cuts to Medicare and Medicaid.
The election of Obama in 2008 was the signal for conservatives to spring the deficit trap. They immediately turned from being deficit lovers into being deficit haters. All of a sudden they claimed that deficits were the number one problem facing government and that we needed to begin drastically cutting domestic spending. Matters were made worse when the severe recession started in 2008. It necessitated large bailouts to key financial institutions and billions in stimulus funds to prevent the economy from sinking into a depression. The recession also dramatically lowered federal tax revenues and made the deficits even worse. All of this played right into the hands of conservatives, who blamed these increased deficits on “out of control government spending.” The only question that remained was how far the Republicans would go in their proposals to dramatically reduce government. It turned out they wanted to go farther than most Americans would have imagined.