Research Report Bush Administration Tax Policy: Starving the Beast
William G. Gale, Peter Orszag
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This paper examines links between the Bush Administration's tax cuts and the goal of "starving the beast"--that is, holding down government spending. It is at best unclear whether tax cuts are effective in restraining spending. The data appear more consistent with the view that once fiscal discipline erodes on one side of the budget, it tends to erode on the other side, too. Moreover, aiming to reduce spending does not justify regressive tax cuts, since most spending cuts would be regressive. Even if "starving the beast" justified the original 2001 tax cuts, the strategy does not justify making the tax cuts permanent because the government will face future budget deficits even without extending the tax cuts.
Research Areas Taxes and budgets
Tags Federal budget and economy