We live in an atmosphere of deception among economists, the Conservatives want to avoid taxes, yet have big central government. The liberals want big central government with high taxes.
The Conservatives have it right, the only way the Sean Hannitys can get the massive government they want is by tax reduction:
Can the Beast Be Starved?
Milton Friedman was wrong: “Starve the beast” doesn’t work. So says researcher Michael New in the latest issue of Cato Journal.
The real burden of government, of course, is not how much it taxes, but how much it spends. However, proponents of the “starve the beast” strategy have long held that tax cuts can help limit the fiscal burden of government: If politicians have less tax revenue, they will spend less, so the theory goes. But what sounds right in theory isn’t necessarily true. In 2006, Cato scholar William Niskanen performed a regression analysis that found statistically significant evidence that revenue reductions actually stimulate the growth of federal spending.
New has now expanded on Niskanen’s analysis to determine if “starve the beast” can be an effective strategy for that part of the federal budget that would likely be most sensitive to revenue limits: non-defense discretionary spending. In six different regression models, however, New found a statistically significant negative correlation between revenues as a percentage of gross domestic product and changes in federal spending. In other words, revenue reductions appear to promote more spending.
A better link
HT to RW onDelong's site.
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