CATO: TAX CUTS? NOT SO MUCH

Thanx to Jonanthan Chait's The Big Con, p. 108, I found a study by William Niskanen, the chairman of the Cato Institute, that demonstrates that tax cuts DO NOT "starve the beast," as Grover Norquist and other dingbats keep on telling us. The paper can be found here and below are the main conclusions.

Problems with Starve the Beast

There are three major problems with the starve-the-beast argument: (1) it is not a plausible economic theory; (2) it is inconsistentwith the facts; and (3) it has diverted attention away from the politicalreforms needed to limit government growth.

Sebastian Mallaby of the WaPo summarizes Niskanen this way:

Niskanen has crunched the numbers between 1981 and 2005, testing for a relationship between tax cuts and government spending, and controlling for levels of unemployment, since these affect spending and taxes independently. Niskanen's result punctures his own party's dogma. Tax cuts are associated with increases in government spending. The best strategy for forcing cuts in government is actually to raise taxes.