Milton Friedman’s theory of Starve the Beast said that there was a “politically acceptable deficit,” so a one-time ex nihilo cut in taxes would have to cause a spending cut to keep the deficit stable. My commenters have revised (or maybe just clarified) this theory, drawing partly on academic work. The revised version of Starve the Beast (STB) says that ex nihilo tax cuts cause spending cuts not because of deficits, but because of the large debt that the deficits eventually build up: STB kicks in someday. That’s an improvement in the Starve The Beast story.
Still, I offer three critiques of STB:
1. As this author notes
, if a history of deficits increase tolerance for deficits then the politically acceptable deficit expands, and the door opens for extra spending. Starve the Beast ironically grows the appetite and so makes future spending easier. We should worry about electing tax-cutting Grasshoppers for that reason.
2 STB still ignores the fact that tax cutters are typically across-the-board Grasshoppers: Tax cutters are spending exploders. Tax cuts are not exogenous: The kind of politicians who cut taxes are usually the kind of politicians who boost spending.
3. If #2 is true, then any simple STB story runs into a tension: Is the spending created by the tax-cutting Grasshopper a bigger problem than the spending you’re hoping to prevent with your beast-starving deficits? The Grasshopper’s extra spending now is a fact, while the feared extra spending of the future is still just a theory…supporters of limited government should be wary of a politician who says “I’m going to spend like crazy but I’ll prevent the next politician from spending even more.”
This blurring of “deficits” with “tax cuts” is an important part of the failure of any simple version of Starve the Beast. If we focus on actually existing politicians rather than hypotheticals, I think we’ll see that the “deficits” created by the alleged Beast Starvers involve a lot of movement on the spending side of the ledger.