Who remembers former President Ronald Reagan’s “starve the beast” and Grover Norquist’s “drown the government” strategies to shrink government spending?
Starving the beast was a time-honored political strategy used by budget hawks to limit government spending by cutting taxes. It assumed that tax cuts weren't an end in themselves, but merely a precursor to cutting spending.
During the 1980 presidential debates, candidate Reagan said of his independent opponent: "John Anderson tells us that first we've got to reduce spending before we can reduce taxes. Well, if you've got a kid that's extravagant, you can lecture him all you want to about his extravagance. Or you can cut his allowance and achieve the same end much quicker."
In 2001 Republican activist Norquist wasn’t content with starving the beast; he mused about dragging it into the bathroom and drowning it in a bathtub.
Norquist was the primary promoter of the "Taxpayer Protection Pledge" signed by lawmakers who agreed to oppose all increases in tax rates and, likewise, to oppose any effort to reduce deductions or credits unless they were accompanied by a lower tax rate. By the November 2012 election, more than 95 percent of Republican members of Congress — 238 of 242 House Republicans and 41 of 47 Senate Republicans — had signed the pledge. Jon Huntsman was the only candidate running for the 2012 Republican presidential nomination who declined to sign the pledge.
The tide swiftly turned after the November 2012 election. Some new members of the House and Senate refused to sign the pledge, perhaps because of election losses by Norquist supporters and the looming fiscal cliff.
Retired Republican deficit hawks like Alan Simpson came to believe that Norquist himself was an obstacle to deficit reduction. Meanwhile, Bruce Bartlett, a domestic policy adviser to Presidents Reagan and George H.W. Bush, not only argued that massive tax cuts don’t lead to cuts in spending but also argued they achieve the very opposite.
Why is any of this important now?
Quite simply, because of the success of the Tax Cuts and Jobs Act. According to Martin Sullivan, the upswing in the economy “undoubtedly increases the popularity and therefore the durability of the TCJA.”
In the midst of the good economic news, however, Sullivan is deeply troubled by the projected national budget deficits and inevitable debt, concerns shared by Ben Willis. Both men suspect that no one in Washington really cares about the deficit — or even seems to be aware that they should care. Despite lawmakers’ nonchalance, we should all be uneasy about the payments future generations will owe to foreign bondholders.
In 2002 Vice President Dick Cheney famously said to Treasury Secretary Paul O’Neill: “Reagan proved that deficits don’t matter.” Lee Sheppard and modern monetary theory agree. These days no one wins elections by calling attention to the deficit.
I’m not confident that suffering inevitably occurs if the debt rises above a certain percentage of GDP, but I also question whether governments should print unlimited amounts of fiat currency to finance public expenditures. Keeping interest payments on government debt from outpacing growth may be the best middle-road strategy. It would be good for leaders in both parties to publicly acknowledge that proposition, if it reflects their intent.