Bending the Third Rail
Because We Should, We Can, We Do
Thursday, May 04, 2006
Fire Sale
Kevin Drum makes a really interesting, and salient, observation about taxes and government:
What happens if you lower the cost of something? People buy more of it. What if you raise the cost? People buy less of it.

So: what happens if the federal government reduces taxes and runs a deficit — thus lowering the "cost" of government? People will "buy" more government.

This actually makes a strange kind of sense — if there are no additional taxes to cause you pain, why shouldn't you support big government?
Wow, what and interesting thought? It's yet another reason why the whole "starve the beast" philosophy of government is flawed.

Drum then goes on to quote from a study showing this exact point:
Niskanen recently analyzed data from 1981 to 2005 and found....“no sign that deficits have ever acted as a constraint on spending.” To the contrary: judging by the last twenty-five years (plenty of time for a fair test), a tax cut of 1 percent of the GDP increases the rate of spending growth by about 0.15 percent of the GDP a year. A comparable tax hike reduces spending growth by the same amount.

....“I would like to be proven wrong,” says Niskanen. No wonder: for the modern conservative coalition, the implications of his findings are discomfiting, and in a sense tragic.
Ahhh. The law of unintended consequences strikes again!!
Written at 2:24 PM by Greyhair.
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