In 1965 Galbraith spoke before the Joint Economic Committee of Congress and his words are amazing in retrospect:
“I was never as enthusiastic as many of my fellow economists over the tax reduction of last year. The case for it as an isolated action was undoubtedly good. But there was danger that conservatives, once introduced to the delights of tax reduction, would like it too much. Tax reduction would then become a substitute for increased outlays on urgent social needs.”
In 1981 Ronald Reagan reduced Kennedy’s tax cuts further, reducing the highest personal rate for the very wealthy from 70% to 50% and in 1986 he reduced it even further to a very low 28% so that in only six years personal income tax rates for the very wealthy plummeted from 70% to 28%. Reagan gave the head’s up about his strategy in the 1980 Presidential Debate: “John Anderson tells us that first we’ve got to reduce spending before we can reduce taxes. Well, if you’ve got a kid that’s extravagant, you can lecture him all you want to about his extravagance. Or you can cut his allowance and achieve the same end much quicker.”
Reagan was brilliant at reducing complicated issues into irrelevant analogies and false equivalencies. Americans love this kind of brainless nonsense; we scarf up rhetorical inanities like salted fries at McDonalds. Clearly, Reagan’s analogy was junk food for the lazy mind; it was also condescending and paternalistic. Americans are not wayward, irresponsible teenagers and the national budget it not an allowance meted out to reward for good behavior.
Reagan’s analogy eventually became a more cogently developed theory when a Reagan staffer described “starving the beast” to a Wall Street Journal reporter and by 1985 Republicans were publicly embracing starve-the-beast theory as brilliant economic policy. George W. Bush supported it; under him there were three major tax cuts. The 2001 tax cut created a new 10% individual tax rate and phased in the lowering of individual tax rates. It also phased in an increase in the child tax credit, marriage penalty relief provisions, an increase of the estate tax exemption, an increase in the IRA contribution limit, and the repeal of limits on itemized deductions and personal exemptions. The 2002 tax cut was chiefly aimed at business, creating 30% expensing for certain capital asset purchases, extending the exception under Subpart F for active financing income, and increasing the carryback of net operating losses to 5 years. Finally, the 2003 tax cut lowered the top individual income tax rate on dividends and capital gains and accelerated most of the phased-in provisions of the 2001 tax cut.
George W. Bush boasted that Republicans created a “…a new kind [of] fiscal straightjacket for Congress.” Since then many other Republicans, including one of the greatest ninnies of our time, Sarah Palin, have openly embraced starve-the-beast theory. Palin said “please [Congress], starve the beast, don’t perpetuate the problem, don’t fund the largesse, we need to cut taxes.”
People like Palin are totally ignorant about how the current tax rates are the lowest in our history; but it doesn’t matter because their greed and self-aggrandizement are so pathological that they will not be happy until they can live in a country (which they profess to love so much) where they and the corporations they hold so dear have a free ride.
The truth is that people who actually know what the hell they’re talking about have a vastly different opinion about starve-the-beast theory. Economist Bruce Bartlett called “starve the-beast” theory “the most pernicious fiscal doctrine in history.” Nobel Laureate Paul Krugman has also criticized starve-the-beast theory and he has said the “…beast is starving, as planned…”
Remember: you and I and millions of other Americans are the beast.
Next week let’s look at how the states, including Maine, have embraced starve-the-beast theory and how Paul Ryan’s proposed Congressional budget brings this theory to full fruition. While we’re at it, I might throw in a few words about Hitler’s infamous phrase “useless eaters” because once you really understand starve-the-beast theory you’re going to start asking some hard questions about what’s going to happen to the “beasts” that some people seem so willing to starve.
Published in my OpEd column at the Journal Tribune May 2nd: