We got to starve the beast and not increase taxes (includes editorial cartoon)

Does Government Have a Revenue or Spending Problem?

People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too much spending, or too little tax revenue? Economics professor Antony Davies examines the data and concludes that the root cause of the debt is too much government spending.

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We got to starve the beast and not increase taxes.

The statist agenda of ever-growing government requires more money going to Washington, which is why I think that proponents of limited government should do everything they can to block tax increases.

This is the “starve the beast” theory, and I’ve previously explained why I think it is a necessary part of any long-run strategy to restrain the burden of government spending.

He would never admit it, but Obama seems to agree, which is why he is dogmatically fixated on doing everything he can to seduce Republicans into supporting higher taxes.

Obama Sequester Boomerang CartoonBut he miscalculated in thinking that the fiscal cliff tax hike somehow meant that he had permanently neutered the GOP, and he definitely goofed when he tried to use the sequester as a weapon to bully Republicans into another tax hike.

Ignoring the President’s hyperbole about the supposed catastrophic effects of a very modest reduction in the growth of the federal budget, Republicans have held firm.

And the President has suffered a painful political and policy defeat.

Here’s some of what was reported in The Hill about the President’s attitude.

The first months of President Obama’s second term are being built around a simple premise: No caving. …Obama is in an ultra-assertive mood, practically daring Republicans to defy his wishes. …Obama’s attitude is more akin to that of a general leading his forces into battle, confident that he can decimate the enemy. …On the sequester, for instance, Obama did little more than pay lip-service to the idea of a last-minute compromise to avert the package of cuts.

Well, Republicans did “defy his wishes” and it’s the worst possible outcome for the President. The growth of spending is being slowed and taxes are not going up.

Democrats on Capitol Hill also thought that the fiscal cliff tax hike would be a precedent for lots of future tax hikes. As reported by Politico, their analysis was misguided.

Democrats toasted the New Year’s fiscal cliff deal with the belief that they had set a crucial new precedent: Tax hikes would be part of any future deficit reduction package. Two months later, the champagne buzz is wearing off. …the exuberance expressed by many Democrats at the beginning of the year was misplaced. Efforts to avert the sequester never achieved liftoff, and Democrats are realizing that new tax revenues are off the table for the immediate future. …“We’ve tried everything we can,” Senate Majority Leader Harry Reid (D-Nev.) told reporters Thursday. “They will not budge on anything dealing with revenue.”

Byron York has the best analysis, explaining in his Washington Examiner column that Obama gambled and (at least so far) lost.

Nine months ago, Barack Obama likened his Republican opposition to an illness. If he could just defeat Mitt Romney, Obama said, then the illness might subside. “I believe that if we’re successful in this election — when we’re successful in this election — that the fever may break,” Obama told a fundraiser in Minneapolis last June. After Obama won re-election, there was extensive discussion among his supporters about whether the Republican “fever” would, in fact, break.

But this strategy appears to have boomeranged. Byron thinks that the White House is now in a weak position.

There was little speculation about whether something quite different might happen: Would determined GOP opposition break Obama’s fever?  That is, could Republicans weaken the president’s resolve to defeat the GOP and further raise taxes? That appears to be what has occurred, at least for the moment. …Friday morning, Obama seemed resigned to the possibility that he cannot win the further tax increases he seeks, and that after enlisting his entire administration in a campaign to frighten Americans about sequestration, the cuts have become a reality that he has to acknowledge.

While I’m glad the President goofed, I’m not under any illusion that winning a battle is the same thing as winning a war.

It’s quite possible that the modest sequester savings will be undone as part of the “continuing resolution” legislation to fund the federal government between March 27 and the rest of the fiscal year.

There will also be a debt limit fight later in the Spring, which will give proponents of bigger government another bite at the apple (though it’s a double-edged sword since advocates of limited government also can use the debt limit as a vehicle for reform).

And the President obviously won’t give up on his campaign for higher taxes. I worry that he’ll trick gullible GOPers into a tax hike at some point, either as part of a Trojan Horse tax reform or as part of a budget summit that produces something like Bowles-Simposon, a package of real tax hikes and illusory entitlement reforms.

But we can fight those battles down the road. Today, let’s enjoy the sweet smell of victory.

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