Take money away from the government now, by tax resistance or tax evasion or
tax cuts, and eventually they’ll have to start borrowing, and then start
spending less, and the government will get a little bit smaller and hopefully
a little less bothersome as a result.
That’s the dream of the tax resister, and the “starve the beast” fantasy of
the conservative tax-cut advocate.
Thus, if the government were to give me $1 billion which I immediately handed
back, simplistic idiots would say: “There’s just been a billion dollars of
taxes and spending!” I would say that really nothing has happened.
No idle hypothetical — Social Security, for example, has aspects of this,
although there is a greater time lag and the cash you get back may not equal,
in time-adjusted value, the cash you put back. But this means it’s the
aspects of non-equivalence, not the gross cash flows each way, that determine
how significant the whole thing is.
The size of government, I’d say, is a concept that, in the budgetary realm,
involves trying to quantify the effects of government policy, relative to
some baseline that has to be specified, on allocation and distribution — on
what we have and who has it. (I limit this to the budgetary realm because
issues such as civil liberties operate in different dimensions.)
Once you take this perspective, the utter inadequacy of discerning how much
the government is doing from the number of dollars associated with discrete
and often offsetting cash flows becomes pretty clear.
Against this background, what does “starve the beast” accomplish even if
there are large spending cuts in future years? (Note: there will almost
certainly be large tax increases as well.) Point 1: It definitely increases
redistribution, by handing vast sums of extra money to older generations at
the expense of younger generations. (Older generations were huge net winners
even before the whole exercise started.) Point 2: It probably increases
government-induced economic distortion, what with the heightened disparity
between tax rates in different periods, the instability and risk of fiscal
crisis throughout the adjustment process (which may become chronic rather
than coming to an end), etc.