The “Starve the Beast” theory predicted that if you gave politicians more revenue, they would just spend it. However, the last few years in Europe have provided example after example that tax increases are quite compatible with relative spending restraint in the real world. We’ve all heard about the large tax increases–the genuinely bad austerity–but we aren’t seeing the waves of new spending programs that Starve the Beast predicts.
Yes, the automatic safety net programs are spending more, presumably because these economies are weak, but if there’s a binge of bridge-building, school-expanding, and needless ditch-digging going on in the wake of the tax increases
I’d welcome the evidence. Surely there are some Clinton-style small-bore
programs that grab media attention, but instead what we hear from the critics I agree with
is that the spending cuts in Europe are too small–not that spending is exploding.
The alternative story of the Ant and the Grasshopper is a theory of political equilibrium: When politicians get their act together, they run the government on a sound business basis on both the revenue side and the spending side. And when politicians lose self-control, it shows up as more eating and less exercise.
A&G isn’t a unified theory of behavioral political budgeting, but I suspect it explains a lot of what’s been going on in democracies for the last few decades.
Coda: A&G is a theory of political equilibrium–so asking if an exogenous tax hike causes a spending hike is interesting but we don’t elect people who give exogenous tax hikes.