Budget Deficits and Demand for Government: How Starve the Beast Policies Feed the Machine

25 Pages Posted: 29 Sep 2010

See all articles by Joseph Daniel Ura

Joseph Daniel Ura

Texas A&M University - Department of Political Science

Erica Socker

affiliation not provided to SSRN

Date Written: September 28, 2010

Abstract

The notion of "starving the beast"' has been an important justification for fiscal programs emphasizing revenue reductions since the mid-1970s. While the idea of restraining government spending by limiting government revenues has an intuitive appeal, there is convincing evidence the reducing federal tax rates without coordinated reductions in federal spending actually produces long-term growth in spending. This perverse result is explained by a theory of "fiscal illusion.'' By deferring the costs of government services and benefits through deficit financing, starve the beast policies have the effect of lowering the perceived price of government in the minds of many citizens. We assess the principal behavioral prediction of the fiscal illusion strategy. Incorporating estimates of the effects of federal deficits into a standard substantive model of Stimson's mood index, we find strong support for a subjective price-driven theory of demand for government. In particular, we find that the size of the federal budget deficit is significantly associated with greater demand for government services and benefits.

Keywords: Deficits, Fiscal Illusion, Public Opinion, Macro Politics, Starve the Beast

JEL Classification: D72, P16

Suggested Citation

Ura, Joseph Daniel and Socker, Erica, Budget Deficits and Demand for Government: How Starve the Beast Policies Feed the Machine (September 28, 2010). Available at SSRN: https://ssrn.com/abstract=1684162 or http://dx.doi.org/10.2139/ssrn.1684162

Joseph Daniel Ura (Contact Author)

Texas A&M University - Department of Political Science ( email )

4348 TAMU
College Station, TX 77843-4348
United States

HOME PAGE: http://people.tamu.edu/~jura

Erica Socker

affiliation not provided to SSRN ( email )

No Address Available

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