"In recent years, one of the most common metaphors for using tax cuts to discipline government spending has been "starve the beast." The idea is that if revenues are unilaterally reduced, this reduction will lead to a higher budget deficit, which will force legislators to enact spending cuts. Thus, using tax cuts to bring about spending cuts has been called "starving the beast."
By Bruce Bartlett, staff economist to late Congressman Jack Kemp, "Starve the Beast", Origins and Development of a Budgetary Metaphor; Summer 2007, The Independent Review.
Eerily in the conclusion of his 2007 article, Mr. Bartlett theorized,"Perhaps a future crisis will provide political cover for massive cuts in entitlement programs that would be politically impossible except in such dire circumstances."The following year, the most severe financial sector collapse in 79 years triggered the most severe economic recession in 79 years. As we debate the resulting fiscal crisis, his theory is bordering on testament.
The biggest proponents for this GOP agenda include the Club for Growth, Americans for Tax Reform, and Cato Institute type think tanks with their armies of authors and pundits to fill our consciousness. So why would awareness of this decades old strategy of spending, cut taxes, and borrow governance be so hushed? Would awareness of this strategy risk Americans realizing a connection to their pain? Is that why there are shrill allegations about threats to our liberty and inflammatory labels instead?
So wouldn't it seem worthwhile considering exactly what kind of economy we've had and how we got to have this one? If it's only engineered to trade and inflate tokens of wealth and isn't generating jobs for more people, doesn't it need to be re-engineered?
Since its inception, what fundamental flaw has blinded the "starve the beast" mindset? Through its obsessive dislike for government and other things did it notice that in the same boat along with government were the economy and "The People"? Did "Starve the Beast" advocates realize that by trying to sink government's boat they were also sinking our economy and the fortunes of we people?
If I were to sum up evidence of how a "Starve the Beast" mindset has engineered a smaller economy, I'd include these:
1.) By 2003, at least 30% of corporate profits were earned in the financial sector. If it employed 30% of us, would we be having this discussion?
2.) Beginning in 1998 (a year after the first of two 20% capital gains income tax cuts)manufacturing employment began a seven-year slide. Of 3.5 million manufacturing jobs lost, 2.8 million were lost between 2003-2005 following the second 20% capital gains income tax cut and deregulation of derivatives. What does that say about our priorities? If the multiplier is that each manufacturing job supports 4 other jobs, you can see how at least 14 million jobs supporting middle class America dissolved starting a decade before this recession.
3.) Between 1996 and 2006 total wages and salaries grew by 61% vs a 385% increase in capital gains income. Again, where's the money being made and what does that say about our priorities? Can you see how the replacement of wages and salaries that pay payroll taxes with capital gains income that pays zero payroll taxes has undercut funding for Social Security and Medicare?
4.) In 1999 Congress repealed the Glass-Stegall Act that kept the commercial bank sector out of investment banking. For 66 years before repeal, there were no financial sector collapses. Nine years later? Poof!
5.) Between 2003 and 2008the value of Over the Counter derivatives traded globally grew 300% and 90% of OTC derivatives trades were between financial institutions themselves. The next time you hear someone say regulating derivatives hurts farmers, keep this in mind. If its so easy for banks to make money among themselves, who would be surprised that they aren't lending more to businesses that create jobs for workers or use products and services small businesses provide?
The evidence is undeniable that supply side economics in 30 years has built the kind of economy it sought, with less tax burden and regulation on capital markets like the stock and derivatives markets where wealth has been made. Where is the evidence that supply side economics prioritizes building an economic base for small business and employment? As always, the ball is in OUR court.
