Government at a discount

Nice post from Kevin Drum– riffing off Bruce Bartlett– on the idiocy of the Republicans’ “Starve the Beast” Approach to economic policy.  Basic idea behind starve the beast– cut government revenue and the government will be forced to cut spending and government will shrink.  Reality?  The opposite.  Drum does a nice job spinning this out in simple economic terms:

If you raise taxes to pay for government programs, you’re essentially making them expensive. Conversely, if you cut taxes, you’re making government spending cheaper. So what does Econ 101 say happens when you reduce the price of something? Answer: demand for it goes up.

Cutting taxes makes government spending less expensive for taxpayers, which makes them want more of it. And politicians, obliging creatures that they are, are eager to give the people what they want. Result: lots of spending and lots of deficits.

If you want to reduce spending, the best way to do it is to raise taxes so that registered voters actually have to pay for the services they get. I don’t have a cute name for this theory, but it’s true nonetheless. Even for Republicans.

I think I probably got the idea of “government at a discount” from Chait, but I think it sums up Drum’s point quite nicely in a single phrase.  I’m also intrigued by ideas which really seem to make an impact on my students (especially those who have been mislead by the conservative noise machine for years).  When this idea of “government at a discount” gets through to them, they tend to look at our tax policy in a much more realistic manner.  If only more Americans understood this (again, that’s hard when you’ve got a major political party and its attendant media helpers lying to them on a regular basis).

About Steve Greene
Professor of Political Science at NC State

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