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Wednesday, January 3, 2007

Starve the Beast a different phenomenon than Gorge the Beast?

In response to Mike Moffatt at about.com's "Will Higher Taxes on Gasoline Lead to Higher Government Spending?"

One of the arguments in favor of a gas tax hike is that it will produce additional government revenues, and that there is little evidence that more taxation leads to more government spending. In other words, to proponents, a tax increase can essentially be deficit reducing.

Others argue that the "starve the beast" philosophy (popular under Reagan and to a lesser extent, Bush Jr.) means that lower taxes would cause lower government spending. The corrolary to that being that higher taxes cause higher government spending (gorge the beast). But do both concepts or none have to be true at the same time?

It seems to me, especially in today's climate that starving the beast (especially given evidence), does not hold for precisely the same reason that gorging the beast does. That is, in times of high 'demand' for government services (be they military or other discretionary spending), a reduction in taxes has no effect on government spending. Why? well it makes sense that if an event is ongoing that requires a substantial outlay (like, oh i dunno, a "war") any reduction in taxes is unlikely to stop the need for government spending.

However, this does not hold true (IMOP) in cases of a tax increase concurrent with high demand for government spending. Why? Well, under the assumption that more money is being demanded to be spent at time X than currently is politically available, at time Y after the tax increase, more money to feed that demand is now available than was at time X. It is also now more politically feasable to increase government spending since the increase in taxes can hold the debt neutral. In essence, the beast is hungry and the tax increase quenches more of that hunger.

So, if one notes a difference between starving the beast and gorging the beast, particularly attimes where large government spending (to pay for troop armor, to pay for increased security, national borders...) is in great 'demand', then it becomes easy to see how one could conclude that a gas tax really might just be the beast's icing on the cake.

92 comments:

Mike Moffatt said...

Although we're on different sides of this issue, I'd just like to say how honored I am that you chose me *ahead* of Mankiw for the topic of your first ever blog post. I suspect it's the first, and likely the last, time that will happen anywhere for anything. :)

Half Sigma said...

Since government spending isn't going down to 0 anytime soon, intelligent people who want a better economy should be discussing which taxes are good ways to raise revenue and which taxes are bad.

A gas tax is good if you believe that using gas creates all sorts of externalities, but I think the externalities have been exaggerated quite a bit. Neveretheless, a gas tax is a better way to discourage gas consumption that giving tax credits to people who buy alternative energy vehicles, or by creating arbitrary fuel efficiency standards.

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Anonymous said...

モールトスカーナ
ファクトリーアウトレットに
ついての最も印象
的なことはそれは
買い物天国緑トスカーナの
丘翼パームビーチのワースアベ
ニューに設定
されているそれはグッチグル
ープの多くを収容する
ためだけでなくグッチスーパー
アウトレットとし
て知られるかもしれないというこ
とですラベル


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Anonymous said...

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Anonymous said...

ミックスに向けて
私たちの政府の
追加、実際に1 thing.
Tiffanyジュエリー安いコーチハンドバッグをしない人々
は、私たち自身のロジックにを持って参
加しますその見落とす期
待し続ける一部検出
できない意味また
は多分場所エレ
ガンスをTwilighting、あなたの攻撃を追加支援
する最後の第二の
承認:円を得る。私は戻って6数週間
に関連する素
晴らしい修得し、私は​​以前は最も確かに多くの情報
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Anonymous said...

彼らが着用してもダイヤモンドやジ
ュエリーはどちら貸与
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