Tuesday, March 01, 2005

Starving the Beast…

As the current budgetary limitations are being cut to shreds by Congress, pundits are starting to repeat the mantra of "starving the beast".

In terms of shrinking the government, increasing spending without increasing income, so in the future the government is bankrupt and limited, is called “starving the beast”. It is a bad idea. It is a contradictory, foolish, unreliable, destructive idea. It is such a bad idea that it’s not that I need to convince conservative/libertarians that it is a bad idea, but that I need to convince liberal/populists that the conservatives and libertarians don’t even desire it. Small government economists and conservatives from Cato to Milton Friedman to Grover Norquist have abandoned it.

1. First order effects make second order effects look like girly men. The reaction to the change (increasing the government) in order to balance it (decreasing the government) has almost no reason to be greater than the change itself. [ In this aspect only is it different from lowering taxes without lowering spending. That is a first order effect limiting the size of the government.]

2. You’re in charge now - 10 years, not so much. Why would anyone believe that when they could decide what to cut now, they will put the decision to cut something off till much later. Will they still be in power (even if their party is, it’s unlikely to be the same ideology and personal support of programs)? A Republican may find that in 10 years the military will be cut instead, or new taxes raised, so the bloated social welfare program may continue on course. If the party thinks government programs can ever be reduced, why not do it now while they’re in charge. [Of course, they might not actually have the political power to cut things. But no reason to believe anyone will have more willpower in the future.]

3. The deficit itself is a great tool of the government. A Republican becomes a libertarian when they stop thinking of Alexander Hamilton as “the great intellectual who founded our capitalist system and fought that vile Democrat Jefferson”, and instead as “the devil incarnate”. Hamilton was a great believer in building central industries and central government through mercantilism. He explained that by selling government debt to businesses, they would now have an interest (read: dependency) on the government succeeding. Every increase in the debt not only distorts the market, but it also increases government control over industry. [On the plus side, Hamilton did hate France.]

What STB is, however, is a useful rationalization. Pork spending congressmen can tell their ideological supporters that this is a cunning plan. Pundits can sleep at night thinking this will save the nation later on. It’s an argument that is to be thought, but none of us should believe that Reagan or Bush do their actions because they will ultimately shrink the size of the federal government.


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