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26 Cato J. 553 (2006)
Limiting Government: The Failure of Starve the Beast

handle is hein.journals/catoj26 and id is 559 raw text is: LIMITING GOVERNMENT: THE FAILURE OF STARVE THE BEAST William A. Niskanen For nearly 30 years, many Republicans have argued that the most effective way to control federal government spending is to starve the beast by reducing federal tax revenues. Moreover, two Nobel laure- ate economists, Milton Friedman and Gary Becker, have endorsed this argument. Friedman (2003) summarized this perspective as fol- lows: How can we ever cut government down to size? I believe there is one and only one way: the way parents control spendthrift children, cutting their allowance. For governments, this means cutting taxes. Resulting deficits will be an effective-I would go so far as to say, the only effective-restraint on the spending propensities of the executive branch and the legislature. The public reaction will make that restraint effective. Becker and his colleagues Ed Lazear and Kevin Murphy (2003) described this effect as the double benefit of tax cuts. (Lazear is the recently appointed chairman of the Council of Economic Advisers.) This argument has been effective in unifying the Republican Party in favor of reducing federal taxes, but at the cost of undermining the more traditional Republican concern about fiscal responsibility. Problems with Starve the Beast There are three major problems with the starve-the-beast argu- ment: (1) it is not a plausible economic theory; (2) it is inconsistent with the facts; and (3) it has diverted attention away from the political reforms needed to limit government growth. Cato journal, Vol. 26, No. 3 (Fall 2006). Copyright © Cato Institute. All rights reserved. William A. Niskanen is Chairman of the Cato Institute. He was a member of President Reagan's Council of Economic Advisers and Acting Chairman. 553