Huckabee, Romney, and the Beast

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Karl Smith says progressives should wake up to the fact that we’re winning the argument, and neither Mike Huckabee nor Mitt Romney seriously disagrees with the idea of universal health care. I would note that the converse is also true—conservatives seem to be winning the argument about taxes, and what Barack Obama’s proposed in this regard won’t raise enough money to cover his program. Via Tyler Cowen, Joseph Daniel Ura and Erica Socker argue (PDF) that these are related phenomena:

The notion of starving the beast has been an important justification for major elements of the fiscal program advocated by many Republicans and conservatives over the last three decades. While the idea of restraining government spending by limiting government revenues has an intuitive appeal, there is convincing evidence the reducing federal tax rates without coordinated reductions in federal spending actually produces long-term growth in spending. This seemingly perverse result is explained by Buchanan’s theory of “fiscal illusion.” By deferring the costs of government services and benefits through deficit financing, starve the beast policies have the effect of lowering the perceived price of government in the minds of many citizens. We assess the principal behavioral prediction of the fiscal illusion strategy. Incorporating estimates of the effects of federal deficits into a standard substantive model of Stimson’s mood index, we find strong support for a subjective price-driven theory of demand for government. In particular, we find that the size of the federal budget deficit is significantly associated greater demand for government services and benefits.

I think these kinds of things are difficult to prove statistically, but it’s a provocative argument. The way I see it, when recent Democratic Presidents (Bill Clinton, Barack Obama) have proposed increased in non-defense spending, they’ve insisted that the increases be “paid for” by offsetting spending cuts and tax hikes. The proposed offsets, however, are politically challenging to pass and the need to secure support for them has restrained Clinton/Obama spending increases. The George W Bush administration, by contrast, both proposed tax cuts with no spending offsets (in 2001 and 2002) and also proposed non-defense spending increases with no offsetting tax hikes (the Medicare bill being the biggest, but also ESEA re-authorization, farm bill reauthorization, and the 2005 energy bill).