Sebastian Mallaby has questions; I have answers.
In today’s Washington Post, Mallaby points to two foundational rightie myths: (1) Tax cuts pay for themselves; and (2) Cutting taxes forces the government to cut spending. Of the first, he says, “It’s been a long time since honest believers argued that tax cuts pay for themselves.” I’m glad Mallaby added that qualifier honest, as it saves me the trouble of ranting about what planet he lives on.
Of the second, Mallaby cites a study conducted by William Niskanen, an economist who worked in the Reagan White House and now chairs the Cato Institute.
Niskanen has crunched the numbers between 1981 and 2005, testing for a relationship between tax cuts and government spending, and controlling for levels of unemployment, since these affect spending and taxes independently. Niskanen’s result punctures his own party’s dogma. Tax cuts are associated with increases in government spending. The best strategy for forcing cuts in government is actually to raise taxes.
(Mallaby doesn’t say if the study breaks down taxing and spending behavior by party. I wandered over to the Cato Institute but couldn’t find the Niskanen study online. I did, however, find a cool “white paper” called “Power Surge: The Constitutional Record of George W. Bush” that looks like a good read, but off topic for this post. You can read more about the Niskanen study in the June issue of Atlantic Monthly. Or, rather, I can read more since I’m a subscriber. Sometimes there are subscription firewalls at Atlantic Monthly, so good luck reading the article.)
Mallaby has two questions. His first question is, why would this be true? Niskanen and Mallaby speculate that cutting taxes makes legislators feel that they’ve done something to make government cheaper, so buying stuff with government money seems like a bargain. It’s like finding tube socks on sale; tube socks may not have been on your shopping list but you are compelled to toss a few into the cart because they’re such a good buy. But if you don’t exercise some restraint you might end up with a garage full of tube socks and not enough money to pay the mortgage.
Is he saying that legislators are stupid? Because that seems like, y’know, a real stupid way to run a government. Stupidity would explain a lot about Congress, certainly. But it also seems like self-deception. It’s like ordering a diet soft drink with the super-size burger and fries, or sticking to the meal plan all day long and then rewarding yourself with a big piece of cheesecake. You’re not being honest with yourself about how many calories you’re really consuming. (This is an example I can relate to, and I don’t think I am stupid. Righties will, of course, disagree.) Or maybe it’s like the alcoholic who persuades himself that just one little drink won’t matter. Or a shop-a-holic with a new credit card.
An editorial in today’s New York Times provides an example of self-deceptive spending pathology, and not just in Congress.
President Bush is trying to score unearned points for fiscal rectitude by railing against the Senate’s outsize $109 billion supplemental spending package, which includes money for the wars in Iraq and Afghanistan as well as hurricane relief. But the real scandal is Mr. Bush’s own preference for financing much of the cost of the Iraq war outside the normal budget process. That is convenient for the administration, which does not have to count the money when it is pretending to balance the budget. But Iraq is not some kind of unexpected emergency, like Hurricane Katrina. It is a highly predictable cost, now amounting to about $100 billion a year, or just under 20 percent of total military spending.
Moving the war’s financing off budget is no mere technical distinction. For one thing, it subjects the military’s spending requests to less careful Congressional committee scrutiny than they would receive during the usual budget process. More important, this fiscal sleight of hand makes it that much easier for the Pentagon to duck the hard choices it desperately needs to be making between optional and costly futuristic weapons and pressing real-world needs.
Entire libraries could be filled by the commentaries on Bush v. reality. I’m not going to add any more to that volume of literature today. I’m just saying that we seem to be electing people to Congress who exhibit dissociative thinking patterns. Maybe we should screen candidates with personality tests.
Back to Mallaby and the second question:
But the really interesting question isn’t why the starve-the-beast theory is 180 degrees wrong. It’s how Republicans will react to this finding.
Oh, that’s easy. They’ll ignore it. And if forced to acknowledge it, righties will just trot out their universal, sure-fire, one-size-fits-all rebuttal to challenges — Niskanen must be a liberal. Therefore, what Niskanen says is self-evidently false.