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Andrew Ferguson | Tax cuts didn’t starve big government

A dedicated libertarian, William Niskanen was also a dedicated pot-stirrer. For him the two vocations—pressing the case for small government and, at least intellectually, making trouble—were inseparable. He was best known as an original member of Ronald Reagan’s Council of Economic Advisers, one of a principled band of Reaganites who followed their man into the White House and then drifted away as Reagan succumbed to political compromise and ideological deviationism. For the rest of his professional life (he died last year) he worked as chairman of the Cato Institute, the country’s sanest libertarian institution.

Beginning in 2002, Niskanen published a series of papers and op-eds about tax cuts and spending increases that turned conventional conservative wisdom on its head. Since both taxes and spending are much in the news, his critique is worth another visit.

If we wanted a smaller government, he said, we would have to raise taxes.

Most people who work in politics and government in Washington have heard the phrase “starve the beast”; many normal people are familiar with it too. According to the historian Bruce Bartlett, a former Republican aide and now a bestselling author, the phrase was first publicly applied to tax and spending matters in 1985.


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  • CBDenver

    Interesting article.  William Niskanen claimed that raising taxes would cause people to have to pay for the benefits they consume.  However, the flaw in the argument is due to this (also said by Niskanen)

    "When you cut the price of something, demand for it will increase. Lowering taxes without lowering benefits meant that tax- payers were getting the benefits at a discount. The government made up the true cost with borrowed dollars that future taxpayers would have to repay. There was a big difference, Niskanen said, between a kid on an allowance and the federal government: The government has a credit card with no debt limit."

    So even if taxes are raised, that doesn’t mean government spending will decrease because people will balk at the cost.  As long as government can borrow-and-spend, the spending will continue.  The only thing that will stop that is government’s inability to continue to borrow.   Since we have reached debt saturation, and government has no one else to borrow from, we have finally reached the moment when the burden of spending will become so great that it will stop

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