The Beast Has A Credit Card

Ken AshfordEconomy & Jobs & DeficitLeave a Comment

Naar611_budget_20080728183631Thank you, David Stockman.

For those of you who don’t remember, Stockman was director of the Office of Management and Budget under President Reagan.  He was among the most enthusiastic converts to what came to be called the “starve the beast” theory of taxation.

The Republican theory is that big government — well, government in general  — is baaad.  There’s no empirical basis for this belief, except to say that government often stands in the way of big business by regulating big business.  It is government, after all, that wouldn’t allow businesses to engage in child labor, pollute our waters, and so on.  So there is a natural friction between government and business.  And Republicans, in the pocket of big business, naturally take anti-government stances.

The "starve the beast" theory of taxation, developed in the early Reagan administration is quite simple: if the government doesn’t get any money, it can’t do things which stand in the way of business.  Therefore, if you lower income taxes, government can’t afford to govern.  It was a cynical way to prevent Democrats from actually improving this country.

it was a nice theory, but it doesn’t work.  Because the government doesn’t need money to govern.  It just simply borrows the money, and runs up huge deficits.

And now we’ve got a record:

President Bush will leave his successor with a record-high budget deficit of $482 billion, according to an administration estimate released Monday.

White House officials blamed the slowing economy and a $150-billion bipartisan stimulus package for the worsening picture for the 2009 fiscal year, but Democrats cited the president’s tax cuts and fiscal management over his eight years in office.

The cynic would say — perhaps correctly — that this is intentional.  Assuming Obama gets to be president, he’s going to have to spend the next several years cleaning up this fiscal nightmare, and won’t be able to get certain things done (like national health insurance, etc.)