Friday, May 28, 2004

Taxes and Spending

Damn! A policy report by the Cato Institute argues that there's a negative correlation between spending and taxes, in other words, taxes can go down, but spending can still rise! This means the "starve the beast" strategy endorsed by Milton Friedman and Gary Becker doesn't work. It doesn't say how this can happen, but my guess is that it has to do with public choice economics. It's politically easier to advocate cutting taxes than it is to cut spending.