Starve the Beast Theory - Part One

Have you heard the expression “starve the beast” and, if so, do you know what it means? Originally, “starve-the-beast” was an economic theory reserved for arcane discussions in academia; however, over the last 30-plus years this theory morphed into a political fiscal strategy to create or increase budget deficits by drastically cutting taxes in order to justify a radical evisceration of American social programs that are anathema to social and fiscal conservatives.

Starve-the-beast theory zealots have made the “beast” their euphemistic word for the terrifying image of a ravenous out-of-control “big” government -- but the reality is that the “beast” is you, your parents, grandparents, kids and neighbors. (Yeah: you’re the beast and you’ve been pigging out at the American chow line. Shame on you.)

How do you starve something or someone? You cut off the food chain. In starve-the-beast theory the food chain contains all those social services funded by government tax revenues, such as the Supplemental Nutrition Assistance Program (SNAP - “food stamps”) that Gingrich so shamefully demonized. Social Security, Medicare and even public education are also programs that feed the beast and need to be discontinued.

Starve-the-beast theory is an article of faith among Republican lawmakers. Congressman Paul Ryan’s budget is an excellent example of starve-the-beast policy at the federal level. It’s also prevalent across the country. Wisconsin’s Republican Governor Walker engineered a budget deficit by slashing taxes in order to justify his attack on labor and social programs. Many other Republican governors, such as Kasich (Ohio), Daniels (Indiana), Scott (Florida) and our own LePage, have embraced scorched-earth fiscal policies.

The extremely wealthy are immune from starve-the-beast policies because they’re not dependent on the social services the middle-class and poor desperately need. Their immunity is all the more secure because deep tax cuts for the very wealthy and an unfair Tax Code benefit them and their corporations in greatest measure and Republicans have vowed to do nothing that would alter their privileged tax status. Starve-the-beast adherents also fight cuts in the military budget or prison spending. 

As a metaphor “starving the beast” has been around for a long time but it was the economist John Kenneth Galbraith who unwittingly inserted this theory into political discourse during the Kennedy Administration. Kennedy and the nation wanted to reduce taxes but Galbraith warned policy wonks there might be a permanent downside to the belief tax reductions for the rich would benefit the economy.

Galbraith warned that tax cuts could become a heady habit that could create a “permanent ceiling on spending.” This wasn’t popular thinking in the early 1960′s because by the time Kennedy became president the Internal Revenue Code’s tax rates for the wealthiest Americans had been driven to exorbitant levels. Taxes had been rising for two decades in order to pay for WWII, the Korean War, and war recovery efforts.

When JFK took office in January 1961 the wealthy were being battered by a tax code that taxed personal income at a rate of 94% under some circumstances. Yep: 94%.

Clearly, a tax rate that could soar as high as 94% was outrageous and required adjustment. Further, the middle-to-upper middle class were also taxed at an onerous rate that was sometimes as high as 50%. Yep: 50%.

In a televised national address two months before his assassination, Kennedy said:

“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

Kennedy was looking for a reasonable adjustment across the boards -- not just tax reduction for the wealthiest and most privileged Americans – but a reasonable adjustment for everyone.

So when you hear Kennedy argued for one of the largest tax reductions in U.S. history you now know why. JFK knew that a rate that could soar as high as 94% for the wealthy and hovered at 50% for the middle-class was contrary to the best interests of the nation. Republicans and Kennedy-haters love to look back on the Kennedy era tax cuts and claim Kennedy was taking care of his own and no friend of the poor – which is an excellent example of how one can parrot the facts but be ignorant of the larger truths behind the facts. Congress passed Kennedy’s tax bill after his assassination and this lowered the highest tax rate to 70%.

That’s right: 70%. And do you know what? Americans were delighted. 

Next week we’ll look at Ronald Reagan’s tax record. 

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Published in my OpEd column at the Journal Tribune April 24th: http://www.journaltribune.com/articles/2012/04/26/columnist/doc4f98165499f71776767446.txt