Tuesday, February 28, 2006

Another stake through the already shriveled heart of "starve the beast"

Budget expert Stan Collender explains the following in his "Budget Battles" column (all text here is his, not mine):

The "starve the beast" theory of budgeting they have been using assumed that big deficits would pressure Congress to reduce spending.

It now looks as though the theory is really nothing more than a scary fiscal fairy tale.

If it were true, it would be happening now. The federal budget deficit could be close to or exceed $400 billion for several consecutive years and the five-year moving average deficit has never been higher than it is today.

But instead of making members of Congress consider spending changes, more representatives and senators of both political parties appear less willing to cut spending than ever before.

For example, many of the spending cuts in the Bush fiscal 2007 budget have already been rejected in one way or another. Some were literally dismissed out of hand when many of the most influential and powerful Republicans indicated they would not accept the president's proposals. Other Bush spending changes were rejected one or more times in previous years and have little or no chance of being enacted this year…

How did this happen?

As previous " Budget Battles " columns have pointed out, the beast has gotten so big that the spending cuts needed to reduce it are not politically palatable. The spending changes that are possible won't make enough of a difference for senators and representatives to support them.

The starve-the-beast strategists also seem to have not thought about the possibility that spending increases would be enacted at the same time as tax cuts. The Medicare prescription drug plan, activities in Iraq and Afghanistan, Katrina relief and homeland security together increased the deficit by more than $1 trillion over 10 years at the same time that a series of tax cuts were reducing revenues. Tax cuts alone might have left the deficit manageable; tax cuts plus spending increases did not.

At the same time this was happening, the White House was telling people that the deficit was not a problem so that any interest in moderating the policies that were feeding the beast were swatted away.

This makes the starve-the-beast strategy the latest example of a Washington myth, something that sounds plausible but turns out to be nothing more than fiction.

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