Word: taxed
(lookup in dictionary)
(lookup stats)
Dates: all
Sort By: most recent first
(reverse)
...actually said that deficits are a good thing because they put Congress in a spending "straitjacket." An essay by three conservative economists, including Nobel prizewinner Gary Becker, published in the Wall Street Journal in October, ranked starving the beast ahead of the Laffer Curve as a reason to cut taxes. But there is even less evidence that starving the beast works in real life than there is for supply-side theories. Two rounds of tax cuts and a fast-rising deficit under George W. Bush have not led to serious spending cuts. The federal budget is bigger than ever...
...starving the beast supposed to work? Let's create a simple model, in which every dollar of a tax cut leads to some fraction of a dollar in spending cuts. The trouble is that when you starve the beast by cutting taxes, you also increase the national debt and the bill for interest on that debt. So the first thing that happens is that you increase government spending. From then on, it's a battle between the lingering effects of the tax cut and the ever growing impact of compound interest on the added borrowing...
...spreadsheet. Start with a government budget of 100, no debt and an annual deficit of zero. Call interest rates 4%. And say that in year one we get a 10%, across-the-board tax cut. Let's assume further that there is a starve-the-beast effect of 90%. This means that 90¢ of any dollar in tax cuts is covered by spending cuts that emerge spontaneously from the national subconscious. Assume finally that all the other things that affect government revenue and spending don't exist. What happens...
...size of government. Meanwhile, the deficit has gone from 0 to 2.8--which is the equivalent of about $56 billion--and the accumulated new national debt is about $1 trillion in real money. All in all, not disastrous. But it's a big cost for a small tax cut and an even smaller cut in spending...
...idea that a tax cut will immediately return 90¢ on the dollar is wildly optimistic. Starve the beast, as a philosophy, has nothing to say about what exactly gets cut from the government budget. And there is an implication that this cutting happens painlessly, like the supply-siders' free lunch. But it does not happen painlessly or without a fight. At a somewhat more realistic STB rate of 50¢ worth of budget cuts for every tax-cut dollar, the deficit climbs from 0 to 11 (equivalent to $220 billion). Spending drops to 97 around year eight but is back...