Starving The Beast
The large tax cuts promoted by the right-wing are intentionally designed to force government to cut back severely on social spending.
For decades, a key part of the anti-government agenda of conservatives has been to cut spending on social programs. Their targeted programs have included: health care for the elderly and poor, welfare and food stamps, military retirement, drug abuse centers, unemployment compensation, aid to education, college student loans, nursing homes, employment training, childcare centers, housing subsidies for the elderly and disabled, and school nutrition. They believe that these programs have grown too large and cost taxpayers to much money.
But attacking social spending has not been easy. Most Americans think that these programs do a lot of good and do not want to see them cut. Indeed, as another article on this site points out, most of us want the government to actually spend more on education, retirement, and health care – not less.
So Republicans have developed a tactic for attacking social spending that they hope will not trigger the ire of the public – an indirect attack on these programs. The tactic? Tax cuts. The idea is simple: if we keep cutting taxes, eventually there won’t be enough money to spend on these social programs and they will have to be reduced. They call this tactic “starving the beast.” Taxes are what nourish government, and so if that source of nourishment is taken way, government must inevitably shrink. For anti-tax advocates like Grover Norquist, this is the ultimate purpose of tax cuts: “The goal is reducing the size and scope of government by draining its lifeblood.”1
Milton Friedman, the arch-conservative economist, speaking of ways to limit or reduce the size of government, offered this prescription: “How can we ever cut government down to size? I believe there is only one way: the way parents control spendthrift children, cutting their allowance. For the government, that means cutting taxes. Resulting deficits will be an effective – I would go as far as to say, the only effective – restraint on the spending propensities of the executive branch and the legislature.”2
So underneath all the Republican rhetoric about cutting taxes – all the talk about stimulating the economy and giving money back to hardworking Americans, there is another, deeper political goal: to strangle government social programs. But this is rarely discussed publicly. Conservatives focus the public’s attention on what they will gain from the tax cuts, not what they will lose by reducing social programs.
This strategy was first tried in the Reagan administration. He came into office in 1980 promising to balance the federal budget. But he quickly cut taxes and raised military spending, creating huge budget deficits. (Sound familiar?) This made little sense to many people at the time and was not understood until Reagan’s budget advisor, David Stockman, later revealed that this was a conscious effort to “starve the beast” – a phrase he is reputed to have coined.3 The idea was to put increasing financial pressure on social programs in order to make it easier to cut them. And indeed, it had some effect, with domestic discretionary spending falling from 4.5% of the economy in 1981 to 3.3% in 1988.3
A series of massive tax cuts during the George W. Bush administration revived this strategy and implemented it in a much more extensive way. These tax cuts cost the federal government over two trillion dollars ($2,000,000,000,000) in lost revenue from 2001 to 2010 alone.5 As economist Paul Krugman observed at the time, “‘starving the beast’ is no longer a hypothetical scenario. It’s happening as we speak. For decades, conservatives have sought tax cuts, not because they’re affordable, but because they aren’t.”6
The Goal: Massive Cuts in Social Programs
So what kinds of drastic cuts in government social programs are conservatives really after? To see, we need only look at the 2007 budget proposal made by President Bush. His proposal covered budget goals for the five years from 2007 to 2011. Bush targeted programs such as education, housing, job training, environmental protection, community development, and children’s services for $221 billion in cuts. These would have been severe and unprecedented reductions in these programs. But it is important to see that these kinds of cuts in discretionary spending, whether they were in education or environmental protection, were only part of the starving-the-beast strategy. Anti-government activists were also out for much bigger game: cuts in mandatory spending for the large entitlement programs like Social Security, Medicare, and Medicaid. These programs form the bulk of federal spending and they were the ultimate targets. The President’s 2007 proposal also hacked away at this kind of mandatory spending – detailing $65 billion in cuts for these programs. This included $36 billion to be taken from Medicare programs and $14 billion for Medicaid. Over $650 million would also have been cut from Food Stamps, thus denying them to over 300,000 people in working families.7
But as draconian as these proposed cuts were, they paled in comparison to the budget reductions being demanded that same year by some Republicans in Congress. The Republican Study Committee, a group of conservatives members of the House of Representatives, proposed to establish an “entitlement cap” that would have limited the total federal expenditures for entitlement programs other than Social Security. This cap would have required that projected entitlement spending be slashed by $1.8 trillion over the next ten years. That translates into $766 billion cut from Medicare, $405 billion from Medicaid, $114 billion from federal civilian retirement and disability, $66 billion from military retirement and disability, $63 billion from unemployment compensation, and $50 billion from food stamps.8 The Committee argued that these program cuts were necessary for the “restoration of the American dream.” They were obviously not taking into account the dreams of the elderly, the sick, the disabled, the jobless, and the poor who would have to pay the price for these truly staggering reductions in federal programs.
Ironically, despite having advocated such deep cuts in spending, these conservative budget plans would have done little or nothing to reduce the deficit because they included a new round of large tax cuts – $1.7 trillion in new tax reductions in the case of the President’s budget.
The Deficit Trap
There is an obvious problem with this starving the beast strategy. On the federal level, cutting taxes does not necessarily require spending cuts: the government may simply borrow money and increase its debt to continue spending. And this is exactly what happened during the Bush administration. Along with his tax cuts, Bush also oversaw some large increases in government spending – mostly in the area of defense. The wars in Iraq and Afghanistan cost an estimated 900 billion dollars between 2001 and 2009. This combination of increased spending and huge tax cuts caused budget deficits to soar during the Bush years. This led some conservatives to complain that Bush had abandoned the idea of limited government. David Brooks concluded in one of his New York Times columns that all this spending and the growing deficits heralded “the death of small government conservatism.”9
But these accusations were misplaced. They ignored one key fact: growing deficits were entirely consistent with the long-term plan to reduce government. The hope was that soaring deficits and a rapidly growing national debt would eventually force policymakers to reduce government spending – whether they liked it or not. From its very first days, the Bush administration embraced deficits as a good way to reign in government. In August of 2001, as the federal budget surpluses began to disappear and new deficits began to loom, the president had an unusual fit of candor and described these developments as "incredibly positive news," arguing that this would now put Congress in a "fiscal straitjacket." Ten Republicans in Congress also came around to this point of view. As conservative Rick Santorum explained it, he first hated deficits, but then came to like them because they made it harder to pass any new spending bills. “I came to the House as a real deficit hawk but I am no longer a deficit hawk. I’ll tell you why. …Deficits make it easier to say no.”11
Clearly if the Republicans had remained in power in Washington and their program of massive tax cuts had continued, deeper reductions in spending for mandatory programs, even including Social Security, would eventually have become inevitable. Deficits and public debt simply cannot continue to grow forever. At some point, the federal government eventually has to start paying its bills. As Paul Krugman has explained, the crunch would most like come when baby boomers begin to retire and start making increasing demands on the Social Security and Medicare systems. At that point, the gap between the government’s income and its outlays would become alarmingly large. The government would have no choice but to either rapidly raise taxes or drastically cut spending. Given the difficulty of raising taxes, the most likely scenario – and the one anti-government conservatives would favor – would be for government to dramatically slash spending. "We're not talking about minor policy adjustments,” says Krugman. “If taxes stay as low as they are now, government as we know it cannot be maintained."12 He predicts that we could experience cuts of up to 40% on some of the largest government programs: "Social Security will have to become far less generous; Medicare will no longer be able to guarantee comprehensive medical care to older Americans; Medicaid will no longer provide basic medical care to the poor."13
When the Democrats took control of the White House and Congress in 2008, it seemed that finally the tax cuts and the attacks on social spending would stop – which did in fact occur. But the huge deficits and growing national debt of the Bush era continue to act as a “fiscal straightjacket” for the Democrats and have been preventing them from increasing funding for badly needed programs. The Center for Budget and Policy Priorities has estimated that the Bush-era tax cuts and the costs of his wars in Iraq and Afghanistan will contribute more the $500 billion to the fiscal 2012 budget deficit alone -- making up over 50% of that shortfall. Those wars and tax cuts will eventually contribute a whopping $7 trillion to federal deficits by 2019. To make matters worse, the severe recession that started in 2008 greatly reduced federal revenue and required a surge in spending for an economic stimulus package – all of which contributed even more to already large yearly deficits.
The Republicans, who seemed totally unconcerned about racking up huge deficits during the Bush administration, are now screaming that reducing spending and the deficits must be our number one priority. And they have been successful in convincing many moderate Democrats in Congress to go along with them.
In reaction to the deficits, President Obama first proposed a three year freeze on most domestic spending. Then he requested that all federal agencies lower their fiscal 2012 budget requests by at least 5% from their 2011 funding – an idea that pleased many Republicans. While 5% may seem like a small reduction, keep in mind that many of these regulatory agencies have already been suffering for years from inadequate funding and staff cuts imposed during the Bush administration.
Unless Democrats are willing to raise taxes – and many are reluctant to do so – there is a good chance that the “starving the beast” strategy of the anti-government movement will succeed. It will strangle any efforts to create new programs and to increase funding for needed social programs and important regulatory agencies. Eventually it may even create a fiscal crisis that will require large cuts in crucial safety net programs like Medicaid and Medicare. A very worrying situation to say the least.
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