Wednesday, June 24, 2009

Government on Sale?

via Andrew Sullivan yet again

During a book review, Jon Rauch makes an interesting statement about what he considers one of conservatives' myths:
One [myth] is that tax cuts make government smaller. This idea has had the great political merit of uniting supply-siders who never saw a tax cut they didn’t like, libertarians who want to shrink the government, and fiscal traditionalists who oppose deficits. But the past several decades have disproved it. When tax cuts increase deficits (that is, when they are not balanced by spending cuts), they reduce government’s apparent cost. They put government on sale, so to speak. When something goes on sale, people want more of it, and government is no exception. Instead of reducing the supply of government, unbalanced tax-cutting has increased the demand for it.
And, as he argues a few paragraphs later, since nobody really ever wants to cut any programs when presented with trade-offs, and no conservative politician has ever shrunk government... you'll never cut spending significantly. I certainly buy the idea that tax cuts aren't effective in reducing the size of government... but I don't know how true it is that people want more government when you make it seem cheaper. We're a low tax country, but we obviously don't have universal health care nor the range of social safety nets and services other countries enjoy. As a percentage of GDP, it seems you could even argue that federal expenses have gone down a bit since Reagan. It doesn't seem like tax cuts or tax hikes have really done much at all to the size of expenditure, but certainly by the logic above if you don't reduce outlays, a tax cut is the same as a spending increase... and so perhaps it's pyschologically like getting the same government services for less... the more you spend, the more you save! However, it seems unlikely to me that Bush's tax cuts and spending habits are what led to the push for universal healthcare. Though it is true that now a large majority of Americans are willing to pay higher taxes for universal healthcare... something I don't imagine was true in the 90's... and it is certainly at least partially thanks to Bush being a terrible President that Obama is in charge now... so maybe there is more to it than I'm giving credit for.

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