Why starving the beast only makes it hungry

Starving the beast is an expression made popular during the Reagan era. The principal is that if you lower taxes, government has to cut spending. The only problem is that it does not work in real life. Because loans exist. When taxes are cut, government simply loans the money needed to fill the gap. This happened during Reagan. And it happened during Bush Jr.. In the years following 9-11 Bush turned a surplus into a huge deficit due principally to military expenditures. Amidst these deteriorating government finances starving the beast was seen as a possible option. However, it obviously only led to greater loans on behalf of congress. This has put the U.S. in the peculiar situation of not being fully in control anymore. After almost a century of U.S. hegemony power is dispersed between a number of actors.

What can be done, thus, to cut spending? Well, first of all you have to bite the sour apple and take away what has been given to the voters. This obviously is not very popular (why starving the beast came up in the first place). Second, you need to work on tax reforms, not just lowering taxes. The Reagan administration passed tax reforms that took away preferential taxes and lowered regular taxes. This way you can lower taxes – compensating for cuts in government spending – without falls in government inputs.

What relevance does this have for Sweden? There is a lesson to be learned here which very well applies to Sweden also: it is much easier to give than to take away, and it is even harder to take away what was once given. On the one hand, in the good times you have to stay cool so that the money doesn’t start to burn in your pockets. And on the other, in the less good times you can’t solve all issues by increasing government expenditure. Recently a spokesperson for Kommunal asked for more money to the regional governments in Sweden so that they would not have to fire employees. However, you can’t just pour in more money into an organization that doesn’t get more efficient. What Swedish government needs to do is start to cut back and draw back from the many areas where it is present. Government should not run ice hockey rinks, swimming pools, stadiums, etc. You need to bite the sour apple cut these expenditures at the same time as you lower taxes making the hit less felt by the people.