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Pastimes : Discussion Thread
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From: TimF6/19/2008 2:23:43 PM
   of 3816
 
Starve the Beast
In today's NY Times, Paul Krugman suggests that the Starve the Beast theory--tax cuts lead to smaller government--is true, albeit with a lag:

"The Obama plan is also far more progressive, sharply reducing after-tax incomes for the richest 1 percent of Americans while raising incomes for the bottom 80 percent. But while $700 billion may sound like a lot of money, it’s probably not enough to pay for universal health care, which was supposed to be the overriding progressive priority in this election.

Why doesn’t Mr. Obama propose raising more money? Blame the Bush poison pill....

looking at the tax proposals of the two presidential candidates, it’s remarkable and disheartening to see how effective President Bush’s fiscal poison pill has been in restricting the terms of debate."

In other words, according to Krugman, the Bush tax cuts may well cause government under President Obama to grow less than it otherwise would.

Roughly the same story was told in Robert Reich's highly entertaining memior of the Clinton years, Locked in the Cabinet. Reich suggests that the Reagan tax cuts and resulting deficits constrained the Clinton administration from pursuing all the spending programs that Reich wanted.

Krugman and Reich view this situation as entirely negative, for they favor increased government spending. But for those classical liberals who prefer smaller government, their storyline supports the well-known and often maligned Starve the Beast theory.

gregmankiw.blogspot.com
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