June 11, 2006


Your silence is deafening, conservatives: Research shows tax cuts produce more government spending. Why won't right-wingers respond? (Jonathan Chait, June 11, 2006, LA Times)

A FEW WEEKS ago, I wrote a column about a paper that decimated the conservative worldview. The study, by William Niskanen of the Cato Institute, found that the conservative "starve the beast" strategy does not work. Indeed, since 1981, he found that tax cuts tend to produce more spending, while tax hikes produce less.

I wrote that it would be interesting to see how conservatives reacted to having the factual basis for their entire domestic strategy exposed as a fraud. And it is interesting because "starve the beast" is so central to the GOP approach to governing and because the reaction is a case study in how the conservative movement reacts when its views are disproved.

According to Cato's own numbers, George Bush spent less than 2% more of GDP in 2004 than Bill Clinton did in 2000, but that entire increase is more than accounted for by the cost of the WoT, which it seems impossible to blame on the Bush tax cuts. Meanwhile, we have indeed cut our taxes to levels almost unprecedented in the developed world, OECD Releases New Data on Taxes as Percentage of GDP (Tax Prof, November 3, 2004)
The OECD has released new data on tax revenues as a percentage of gross domestic product among the 30 OECD countries. [...]

Here are the 5 lowest tax countries:

Country..........Tax Revenue as % of GDP
1. Mexico............19.5%
2. U.S.................25.4%
3. Korea.............25.5%
4. Switzerland...29.8%
5. Ireland...........30.0%

and we have a GDP growth rate over 5%, which likewise leads the developed world. That tax cuts don't automatically reduce government spending is obviously a truism, though it's easy enough to at least argue they've restrained the growth of such spending. On the basis of the past twenty-five years though, one thing we can say with some certainty is that the ethos of tax-cutting, which the last four presidents have all been elected on, has produced almost a quarter-century of uninterrupted economic growth. That's good enough for most of us.

Posted by Orrin Judd at June 11, 2006 10:19 PM

I wrote that it would be interesting to see how conservatives reacted to having the factual basis for their entire domestic strategy exposed as a fraud.

Tax cuts for "starving the beast" is the conservative basis for tax cuts? As in: More important than all the others? Disprove that and the conservative case collapses?

There aren't too many writers other than Jonathan "Bush-Hatred Is Good For You!" Chait who could write something that collosally misguided and apparently not think twice about it.

Posted by: Matt Murphy at June 11, 2006 11:00 PM

Well, it seems to me that I've heard conservatives argue that lower tax rates would mean greater tax revenues, but I'm more interested in what reason Chait will now give for his steadfast opposition to tax cuts. Is the left now going to admit that tax cuts are not about taking food out of the mouths of poor black children so that plutocrats can afford an extra shoe shine? Will they come clean, once and for all, that all they care about is sticking it to the upper middle class and that there whole political agenda is ill-concealed class envy?

Posted by: David Cohen at June 11, 2006 11:22 PM

I vote for anyone who cuts my taxes. Yeah, even Hillary.

Posted by: ic at June 12, 2006 2:19 AM

Could Mexico benefit by raising taxes and spending more on infrastructure?

Posted by: Ali Choudhury at June 12, 2006 6:30 AM

Ali, why would Mexiso be the exception to the rule that low taxes stimulate economic activity?

Posted by: erp at June 12, 2006 7:20 AM

Mexico would benefit from not having any oil revenues so it had to tax folks normally for the corrupt government it provides.

Posted by: oj at June 12, 2006 7:38 AM

Why don't we step in and take Mexico's oil off their hands. After all, fair's fair. It's small payment for removing all their potential trouble makers who, if they couldn't pursue happiness here, might look around and find something to get their attention, like a revolt against their uber-corrupt government.

Posted by: erp at June 12, 2006 9:16 AM

That's what we should have done in the peso crisis, just bought their oil--lock, stock, and barrels.

Posted by: oj at June 12, 2006 9:22 AM

Has any one crunched the numbers adding state and local taxation in all nations.

Most nations are more "federalized" and have lower state and local taxation, while the US varies.

Add state and local taxes, and the US is up around 45-7% of GDP, most of which goes to so-called "education."

Regional taxation in most other countries is lower than that of the US.

Posted by: Bruno at June 12, 2006 10:30 AM


Steve Sailer explains here

Posted by: Ali Choudhury at June 12, 2006 12:55 PM

Ali, thanks. Now I understand your question.

Posted by: erp at June 12, 2006 1:52 PM