Starve the Beast?

[Toro]

In the last two major changes to the tax code - an increase in 1993 and a decrease in the early 00s - it had no affect on the level of spending.

... following the 1993 tax increase, which he and every other Republican in Congress opposed, federal spending fell from 21.4 percent of GDP to 18.3 percent in 2000. And, contrary to starve-the-beast theory, when Republicans slashed taxes during the George W. Bush administration, it did not put any downward pressure whatsoever on spending, which rose to 20.7 percent of GDP in Bush’s last year.

Tea Party to Orrin Hatch: Play It Our Way or You're Out | Capital Gains and Games

IOW, when taxes went up, spending as a percentage of GDP went down. When taxes went down, it had no affect on spending.

 

[skeptic]

Toro, isn't that because the drivers of federal spending and taxation are entirely independent of one another? Meanwhile the deficit accounts for the differential?

In a balanced budget world this might be meaningful.......?

 

[xsited1]

Bruce Bartlett has been hanging around Washington for too long. He forgets that the economy grew modestly after Clinton raised taxes in 1993, but the economy grew even more after Clinton signed the tax cuts that were passed by the Republican-controlled Congress in 1997. I agree with him about GWB being an imposter, but now he's for a Value-Added Tax. What has this guy been smoking?

 

[Midnight Marauder]

There was a time in the 90s when we had a balanced budget or something very close to it. What changed?

It was the law of the land, then, for there to be a balanced budget. It was required. And we will never have one again until we pass versions of Gramm-Rudmann and line-item veto which will pass SCOTUS muster.

In fact, both laws would be upheld today, with the current SCOTUS makeup.

 

[Toro]

Bruce Bartlett has been hanging around Washington for too long. He forgets that the economy grew modestly after Clinton raised taxes in 1993, but the economy grew even more after Clinton signed the tax cuts that were passed by the Republican-controlled Congress in 1997. I agree with him about GWB being an imposter, but now he's for a Value-Added Tax. What has this guy been smoking?

How's that?

Having said that, even if you are correct, that's not the point.

The point is that some on the right argue that raising taxes to close the deficit is self-defeating because the government will just spend it. Conversely, if you cut taxes, that will restrain spending. But that hasn't been the case over the past 20 years. Taxes went up, spending to GDP went down. Taxes went down, spending to GDP was flat.

edit - BTW, here's the Fed funds rate during that time.

 

[skeptic]

The point is that some on the right argue that raising taxes to close the deficit is self-defeating because the government will just spend it. Conversely, if you cut taxes, that will restrain spending. But that hasn't been the case over the past 20 years. Taxes went up, spending to GDP went down. Taxes went down, spending to GDP was flat.

While that is true neither the argument you are presenting nor the one you are rejecting is causative.

 

[xsited1]

Bruce Bartlett has been hanging around Washington for too long. He forgets that the economy grew modestly after Clinton raised taxes in 1993, but the economy grew even more after Clinton signed the tax cuts that were passed by the Republican-controlled Congress in 1997. I agree with him about GWB being an imposter, but now he's for a Value-Added Tax. What has this guy been smoking?

How's that?

Having said that, even if you are correct, that's not the point.

The point is that some on the right argue that raising taxes to close the deficit is self-defeating because the government will just spend it. Conversely, if you cut taxes, that will restrain spending. But that hasn't been the case over the past 20 years. Taxes went up, spending to GDP went down. Taxes went down, spending to GDP was flat.

edit - BTW, here's the Fed funds rate during that time.

You've got a percentage change in GDP chart and you say GDP was flat based on that?

I know what you're trying to say. I just find it humorous the lengths you go to attempting to prove your point.

And I agree to a point what Bartlett is trying to say, but I reject how he wants to achieve that. The first step should and must be to cut spending, but I think it's too late.

 

[william the wie]

The argument for a VAT, that is the rebate for exports will ease the trade deficit and aid employment, has some major problems.

The default US strategy that mercantilism in the rest of the world causes opponents to go under worked against the USSR and Japan and appears to be working against China (see the China threads here on USMB).

Even if the VAT leads to massive relocation of manufacture to the US in the modern era that does translate into massive employment increase.

I don't see how this solution makes political sense.

 

[Toro]

You've got a percentage change in GDP chart and you say GDP was flat based on that?

I didn't say GDP was flat.

 

[editec]

EVery wasted government dollar is an affront to our economy.

Nobody denies that fact.

Naturally if the additional tax dollars that are collected are wasted then raising taxes is no solution.

I think nobody would disagree with that, either, right?

So ti seems to me that we have two avenues to explore.

1. Cutting waste in government

2. Finding the right mix of tax policies that pay for what spend.

I suspect that all out debates are mostly (even if seldom noted as such) about WHAT TO CUT AND WHO TO TAX.

And in my opinion, reasonable people can disagree about the right formula for balancing spending with taxation.

 

[Polk]

There was a time in the 90s when we had a balanced budget or something very close to it. What changed?

It was the law of the land, then, for there to be a balanced budget. It was required. And we will never have one again until we pass versions of Gramm-Rudmann and line-item veto which will pass SCOTUS muster.

In fact, both laws would be upheld today, with the current SCOTUS makeup.

Gramm-Rudman-Billings never brought about a balanced budget.

 

[Sheldon]

I think the beast starving idea plays well with some of the electorate because 1) it involves tax cuts and those are always popular, and 2) it makes a base level of logical sense that less revenue means less to spend. I mean that's how my bank account works. But I'm pretty sure government finance works differently than the family checkbook.

Plus, it's some easy ass to chase. It doesn't take a disciplined pol to call for lower taxes; it does take a disciplined pol to seriously and coherently address the DoD, HHS, etc.

 

[Sallow]

"Starve the Beast" also works well on false logicals. Starve the government of money and it can't properly fund it's agencies. Without proper funding, the agencies fail to do their jobs effectively. If they fail to do their jobs effectively...advocates for this idea point to the fact that government in general is a failure.

It's a win-win.

 

[skeptic]

or a self fulfilling prophecy.