Starve the Beast: A Further Examination

Abstract

In recent years, some fiscal conservatives have argued that reducing tax revenues and increasing budget deficits is an effective strategy for limiting federal spending. This strategy is commonly known as “starve the beast.” Niskanen (2006) convincingly demonstrates that reductions in federal revenue do not limit the growth of federal expenditures. Instead, he finds statistically significant evidence that revenue reductions actually stimulate the growth of federal spending. However, proponents of starve the beast argue that low federal revenues might be able to limit the growth of certain components of the budget, such as nondefense discretionary spending. Similarly, others argue that federal revenue reductions might be more effective at limiting expenditure growth during times of peace. However, my analysis strengthens Niskanen’s original research by finding that his results are consistent across time. Furthermore, I find that reductions in federal revenues constrain neither the growth of peacetime federal spending nor the growth of nondefense discretionary spending.

Keywords: U.S. tax policy, governmental budgeting, neoconservatism, Leo Strauss, political accountability, Starve the Beast

JEL Classification: M49, H20, H50, H60