Thursday, February 2, 2012

"Texas A&M researchers reject 'starving the beast' theory"

My paper on the behavioral consequences of budget deficits (coauthored with A&M grad student Erica Socker, who is currently working at the Center for Budget and Policy Priorities) got a nice little write-up in The Eagle, which is the local newspaper here in College Station. Here's a highlight:
But despite major tax cuts under the presidencies of Ronald Reagan and George W. Bush, the U.S. is now $15 trillion in debt and political intransigence is preventing even the first steps toward addressing what both parties agree demands urgency.

A pair of Texas A&M researchers now have a theory about the behavioral mechanism that has led the U.S. into its current hole. And the researchers say starving-the-beast policies have not only been unhelpful, but hurtful.

The researchers -- Joseph Daniel Ura, an assistant political science professor, and a doctoral student, Erica Socker -- say the theory seems to make intuitive sense: Cutting taxes naturally has to lead to reduced spending.

But it hasn't worked that way because of deficit spending and the "fiscal illusion" that it creates. This spending, like putting a purchase on a credit card, obscures the true price of government services, making them seem cheaper and, perversely, increases demand for even more government spending, the researchers say.

"The paper doesn't have a dog in the fight about what the right level of government spending is," said Ura, who specializes in mass political behavior. "It just says we will do a better job of making an intelligent choice about what level we want when there's a more clear connection between revenues and outlays."
Reports indicate that my mom and dad are very impressed.

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