Monday, June 16, 2008

Starve the Beast

Mankiw notes an interesting thing culled from Krugman's article. The tax cuts of the Bush administration have essentially hampered Obama's ability to grow government services. He calls this the Starve the Beast theory.

The first time I heard that this was the effect of the Reagan administration was in a debate between Robert Barro and Paul Krugman. Barro, I think, made the argument in this debate (maybe not, though - I'm too lazy to check, and since this is a blog, I feel no need to ever edit a word I say or factcheck a thing I write). Reagan's tax cuts create lagged constraints on growing government, which if you believe lower taxes and more private investment are key instruments of economic growth and prosperity, is a good thing.

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