IF YOU REMEMBER the 2000 election, you probably remember President Bush's warning about why we needed to cut taxes: If we did not return the surplus to the taxpayers, Washington would spend it. Well, we all know what happened next. Bush returned the surplus to taxpayers -- and Washington spent the money anyway.
Conservatives have a number of analogies to explain why tax cuts will lead to spending restraint: Cut your child's allowance. Starve the beast. But the analogies are all wrong. The child has a credit card. The beast has a private meat locker. Washington can spend whatever it wants, regardless of how much it taxes.
The right has been congenitally unable or unwilling to grasp this lesson. Last week, though, there was a faint glimmer of recognition. William Niskanen, chairman of the fervently anti-government Cato Institute, did a calculation showing that, since 1981, every $1 in tax cuts tends to produce 15 cents of extra spending. Likewise, every $1 of tax hikes tends to reduce spending by 15 cents. The notion that tax cuts cause spending to dry up, or that tax hikes encourage more spending, is not just wrong, it's completely backward.
Now, Niskanen is not the first policy wonk to discover this correlation. Four years ago, Richard Kogan of the liberal Center on Budget and Policy Priorities discovered the same thing. I wrote about it in the New Republic -- and nobody paid any attention.
But Niskanen's finding is getting some attention. Moderate libertarian Jonathan Rauch wrote about it in the Atlantic, and a Washington Post columnist picked it up from there.
You'd think conservatives would pay some attention to a study that empirically demolishes one of the central underpinnings of their domestic policy. Indeed, my fellow columnist, Jonah Goldberg, wrote on National Review's blog last Monday that "conservatives are going to have to respond to Jonathan Rauch's argument in the new Atlantic."
Of course, no response ensued. Indeed, the next day, National Review was on its merry way, editorializing for more tax cuts, as if Niskanen's study didn't exist.
The curious thing is why conservatives persist in supporting a strategy that is demonstrably counterproductive to their stated goal of shrinking government. The answer can be found in the same entry by Goldberg. He proceeded to write: "There are others better qualified to deal with the economic issues. But if tax increases can be demonstrated to shrink government in some significant way, I'm certainly open to them."
