From Starve the Beast to Record Debt by Henry Mantel
This past February, the national debt topped $22 trillion for the first time in history, greater than the nation's GDP. (If you want to see how that number breaks down, check out the National Debt Clock.) This comes to about $67,000 per American citizen. The simple explanation for this is that, year after year, the federal government has run a deficit and spent more money on federal programs than it took in from taxes, borrowing money to make up the difference. This debt is a serious problem and threatens the economic future of every American. So, how did it get so massive?
Back in 1978, the national debt was around $772 billion, about 34% of the nation's GDP. Conservatives at the time were concerned about getting federal spending under control. The Republican Party's economic gurus, such as Alan Greenspan and Herb Stein, were not comfortable with cutting taxes before reducing spending for fear of increasing the deficit too quickly. The problem with cutting spending was the same problem the GOP has today: the most expensive federal programs are Social Security, Medicare/Medicaid, and the military, and all of them are generally popular.
Therefore, that same year, the thinking about tax and spending cuts reversed. As Greenspan testified to the Senate Finance Committee: "The basic purpose of any tax cut program... is to reduce the momentum of expenditure growth by restraining the amount of revenue available and trust that there is a political limit to deficit spending." Basically, if taxes are cut, then federal spending will fall by necessity.
This theory came to be known as "Starve the Beast," with "the beast" being the federal government. Conservative economists and pundits quickly got on board. Milton Friedman and George Will whole-heartedly endorsed STB. By 1981, STB had become a principle plank in the Republican Party's platform. In his first major address on the economy as president, Ronald Reagan told a nationwide audience: "Over the past decades we've talked of curtailing spending so that we can then lower the tax burden... But there were always those who told us that taxes couldn't be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance."
In order to starve the federal government, Reagan passed a massive tax cut in 1981, believing it would lower government spending and reduce the deficit. It did neither. In fact, the opposite happened. Spending increased and the deficit rose. Reagan acquiesced to tax increases almost every year afterward in order to reduce the rising deficit. Spending eventually returned to where it had been when Reagan took office. President H.W. Bush, to his credit, learned from Reagan's mistake and supported tax increases during his administration, even though one of his most famous campaign lines was: "Read my lips: no new taxes."
President Clinton, being a Democrat, was not terrified of big government or taxes. Clinton pushed through several tax increases during his tenure. According to STB, this should have lead to an increase in federal spending, but it didn't. Federal outlays fell from 22.1% of GDP in 1992 to 18.2% of GDP by the time Clinton left office. The federal government was actually running a substantial surplus when George W. Bush took office.
The past failure of STB to curb government spending did not stop President Bush and the GOP from trying again. Instead of using the inherited surplus to pay down the debt, Republicans passed massive tax cuts. Even after 9/11, when military spending dramatically increased, Republicans refused to raise taxes. Grover Norquist, a hugely influential lobbyist, got almost every Republican in the legislature to sign a "Taxpayer Protection Pledge" that they would not raise taxes a single dollar on anyone. After the Bush tax cut package was passed in 2001, Norquist stated: "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub."
Predictably, after cutting taxes and starting two wars, the deficit spiked. In 2002, when the Bush administration was considering a second tax cut, in response to a warning about the $158 billion deficit, Vice President Dick Cheney reportedly replied: "deficits don't matter." Instead of raising taxes in order to finance the wars and domestic programs, the GOP hid the true cost of the war and spent on credit. After the Great Recession happened and the Bush administration pushed for a $700 billion bailout, the deficit hit $1.4 trillion in 2009 and did not dip below a trillion until 2013.
The second President Obama took office, Republicans suddenly cared about the national debt again. More than once, Republicans threatened to let the country default on its debts unless Obama gave in to their demands, which consisted of deep cuts to Medicare and Social Security. Sticking to Norquist's tax pledge, the GOP obstructed any attempt to increase taxes. Even with the unprecedented obstruction, Obama still managed to get the deficit trending down by the time he left office.
Now that a Republican is back in the Oval Office, the GOP has forgotten about debt. During the first two years of the Trump administration, the debt has increased by more than $2 trillion, in part because of the $1.5 trillion tax cut and large spending increases that were passed by the GOP and signed into law by the president. The deficit ballooned in the first four months of this fiscal year, a 77% increase from last year.
It is clear that Starve the Beast has failed. That failure has put America so deep in the red that it will take years to make up for it. But we can be sure that that's not going to stop the Republican Party from trying again.
Back in 1978, the national debt was around $772 billion, about 34% of the nation's GDP. Conservatives at the time were concerned about getting federal spending under control. The Republican Party's economic gurus, such as Alan Greenspan and Herb Stein, were not comfortable with cutting taxes before reducing spending for fear of increasing the deficit too quickly. The problem with cutting spending was the same problem the GOP has today: the most expensive federal programs are Social Security, Medicare/Medicaid, and the military, and all of them are generally popular.
Therefore, that same year, the thinking about tax and spending cuts reversed. As Greenspan testified to the Senate Finance Committee: "The basic purpose of any tax cut program... is to reduce the momentum of expenditure growth by restraining the amount of revenue available and trust that there is a political limit to deficit spending." Basically, if taxes are cut, then federal spending will fall by necessity.
This theory came to be known as "Starve the Beast," with "the beast" being the federal government. Conservative economists and pundits quickly got on board. Milton Friedman and George Will whole-heartedly endorsed STB. By 1981, STB had become a principle plank in the Republican Party's platform. In his first major address on the economy as president, Ronald Reagan told a nationwide audience: "Over the past decades we've talked of curtailing spending so that we can then lower the tax burden... But there were always those who told us that taxes couldn't be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance."
In order to starve the federal government, Reagan passed a massive tax cut in 1981, believing it would lower government spending and reduce the deficit. It did neither. In fact, the opposite happened. Spending increased and the deficit rose. Reagan acquiesced to tax increases almost every year afterward in order to reduce the rising deficit. Spending eventually returned to where it had been when Reagan took office. President H.W. Bush, to his credit, learned from Reagan's mistake and supported tax increases during his administration, even though one of his most famous campaign lines was: "Read my lips: no new taxes."
President Clinton, being a Democrat, was not terrified of big government or taxes. Clinton pushed through several tax increases during his tenure. According to STB, this should have lead to an increase in federal spending, but it didn't. Federal outlays fell from 22.1% of GDP in 1992 to 18.2% of GDP by the time Clinton left office. The federal government was actually running a substantial surplus when George W. Bush took office.
The past failure of STB to curb government spending did not stop President Bush and the GOP from trying again. Instead of using the inherited surplus to pay down the debt, Republicans passed massive tax cuts. Even after 9/11, when military spending dramatically increased, Republicans refused to raise taxes. Grover Norquist, a hugely influential lobbyist, got almost every Republican in the legislature to sign a "Taxpayer Protection Pledge" that they would not raise taxes a single dollar on anyone. After the Bush tax cut package was passed in 2001, Norquist stated: "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub."
Predictably, after cutting taxes and starting two wars, the deficit spiked. In 2002, when the Bush administration was considering a second tax cut, in response to a warning about the $158 billion deficit, Vice President Dick Cheney reportedly replied: "deficits don't matter." Instead of raising taxes in order to finance the wars and domestic programs, the GOP hid the true cost of the war and spent on credit. After the Great Recession happened and the Bush administration pushed for a $700 billion bailout, the deficit hit $1.4 trillion in 2009 and did not dip below a trillion until 2013.
The second President Obama took office, Republicans suddenly cared about the national debt again. More than once, Republicans threatened to let the country default on its debts unless Obama gave in to their demands, which consisted of deep cuts to Medicare and Social Security. Sticking to Norquist's tax pledge, the GOP obstructed any attempt to increase taxes. Even with the unprecedented obstruction, Obama still managed to get the deficit trending down by the time he left office.
Now that a Republican is back in the Oval Office, the GOP has forgotten about debt. During the first two years of the Trump administration, the debt has increased by more than $2 trillion, in part because of the $1.5 trillion tax cut and large spending increases that were passed by the GOP and signed into law by the president. The deficit ballooned in the first four months of this fiscal year, a 77% increase from last year.
It is clear that Starve the Beast has failed. That failure has put America so deep in the red that it will take years to make up for it. But we can be sure that that's not going to stop the Republican Party from trying again.
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