Starve the Beast!

JIM MCNIVEN: THOUGHTLINES
December, 2016

Ronald Reagan's televised address from the Oval Office, outlining a tax reduction plan in 1981. Photo: White House

Ronald Reagan’s televised address from the Oval Office, outlining a tax reduction plan in 1981. Photo: White House

During the Ronald Reagan presidency, the phrase ‘starve the beast’ was shorthand amongst conservatives for the idea that by simply cutting back on expenditures — either through disciplined spending or by giving money away through tax cuts— people would be forced to accept smaller and less expensive government. It didn’t really work, because neither of Reagan’s successors was prepared to keep up the starvation routine.

In Canada, the government of prime minister Stephen Harper  came to power as the beneficiary of a fiscal regime that had created surpluses. It began to starve the beast — not by cutting spending or using continued surpluses to pay down debt — but by providing targeted tax breaks so that the surpluses shriveled. These breaks, such as income-splitting for seniors and deductions for child-care expenses, were politically almost impossible to rescind, locking future governments into a fiscal straitjacket.

And they’re not working; the beast is looking for more red meat. The Liberals, after defeating the  Harper government in 2015,  have moved the eligibility age for public pensions from 67 back to 65, and pension payments will likely be raised, thus requiring more revenue (or debt).

But the idea persists with the American right. The Tea Party Republicans elected to Congress in 2010 pressed the Republican caucus to demand that spending on new initiatives be matched by corresponding cuts somewhere else. This was not really a starvation diet, but a maintenance diet. So far, the new incoming administration — Republican in orientation and name, but less obvious in leadership — has backed serious public infrastructure spending, which hardly constitutes a starvation agenda.

But starving various beasts is not just a right-wing fantasy; the left also likes this approach, but for different goals. It took most of a generation for the “beast” of tobacco-smoking to be reduced in size, if not actually starved.

Even then, raising taxes to get cigarette prices well above U.S. prices just led to wholesale smuggling activity and prices went down a bit. Claiming the practice of smoking was unhealthy fell on largely deaf ears. Telling 25-year-old smokers that they were shortening their lives after 60 was just a worry for tomorrow. Only a kind of public shaming seemed to work, and that only gradually.

In another instance, the rejection in the U.S. of the Keystone XL pipeline might have been a high-minded step towards putting the global-warming beast on a slightly restricted diet, but all that happened was an increase in oil traffic on the railroads, killing or endangering people in the short run without actually halting the flow of food for the beast. Oil trains are way more expensive and dangerous than oil pipelines, and nobody really wants to pay the cost of doing good, let alone die for it.

Reducing fossil-fuel usage to slow global warming has generated another ‘starve the beast’ campaign that has had its ups and downs. Halting the transportation of oil and gas across North America requires that people do without, but in a democracy, telling people to do without is not a winning political tactic. There are alternatives, but they require expensive and lengthy retrofitting of buildings and transportation before they show results. Given that we are still working off electricity-distribution and housing-construction techniques that date back to the 19th century, starving North America of fossil fuels is not going to work well in the short run or the long run without alternatives.

So far, persuading power companies to switch from fossil fuels to solar power, even when it can be demonstrated that solar power is cheaper to generate, has not worked. In part, this is because investment in generating plants has not yet been amortized, and closing them would raise power bills considerably.

For example, in Nova Scotia there is opposition to developing community wind-generation schemes because of their impact on power rates in the Canadian province, and the government says there are enough of them for now. In addition, as the cost of the underwater link to access  hydro power from Labrador begins to have an effect on these rates, politicians are hoping the pressure to provide subsidies will not damage their already-shaky finances. The beast doesn’t care whether the aim is good or bad; it’s hungry.

I’m not arguing in favor of either a fatter beast or a skinnier one. This is a tool wielded by both left and right, and it doesn’t work unless politicians with strong backbones are willing to bear the burden for a very long time. We tend to forget that old habits, like old technology, die slowly, which is why our educational institutions still teach Fortran and C++ programming in the days of mobile computing. There are still old ‘legacy’ machines grinding along in useful niches and they need repairing.

Trying to promote relatively swift change in well-entrenched cultures and countries makes for great headlines, but real progress comes only when people are convinced of the necessity of change.  Trying to move quickly by ‘starving the beast’ may just get you hurt or disappointed; the good future is found on a long and winding road.

 Copyright Jim McNiven 2016

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Jim McNiven

James McNiven has a PhD from the University of Michigan. He has written widely on public policy and economic development issues and is the co-author of three books. His most recent research has been about the relationship of demographic changes to Canadian regional economic development. He also has an interest in American business history and continues to teach at Dalhousie on a part-time basis.

 

 

 

 

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