Starving The Beast? The Tax Cuts And Jobs Act Seems To Be Feeding It
President Donald Trump hosts an event to celebrate Congress passing the Tax Cuts and Jobs Act with Republican members of the House and Senate on the South Lawn of the White House December 20, 2017 in Washington, DC. (Photo by Chip Somodevilla/Getty Images)
For decades, a guiding principle for many conservatives was that tax cuts not only boost the economy directly but also by shrinking the size of government. The theory, known as “starve the beast,” creates what Nobel Prize winner Gary Becker and colleagues called the “double benefit of tax cuts.”
While attractive to small government conservatives, this theory has been disproved tax cut by tax cut, going back at least to the Reagan Administration. It has resurfaced now that President Trump and congressional Republicans pushed through the Tax Cuts and Jobs Act (TCJA). But, even though Republicans control both houses of Congress and the White House, it increasingly looks like the post-TCJA federal government is growing, not shrinking.
If starve-the-beast works, passing the TCJA and pulling more than $1.5 trillion in revenue from the government’s coffers over the next decade ought to result in significant spending reductions as policymakers respond to those new resource constraints. But the evidence suggests just the opposite.
More spending plans
Indeed, in an effort to reach a budget agreement, Republican and Democratic leaders are talking about boosting discretionary spending by about $300 billion over the next two years–roughly $80 billion for defense and $63 billion for domestic programs each year.
Then there is President Trump’s still-vague infrastructure program that is said to include about $200 billion in new federal money, at least another $100 billion in disaster relief from last fall’s hurricanes, what inevitably will be more money for border security and/or a wall on the Mexican border, and Trump’s paid family leave plan (last year’s version would have cost $19 billion).
Add is all up, and the nonpartisan Committee for a Responsible Federal Budget estimates that the deficit, which was $666 billion in 2017, could top $1.1 trillion in 2019. All this, of course, at a time of full employment and a relatively healthy economy.