Starve the beast?

The Republican strategy in the US has been since Reagan to starve the government to prevent it from growing. The master at this has been Bush Jr., who to significantly increase expenses while cutting taxes. And the new crop of parliamentarians has vowed to make these tax cuts permanent, thus forcing even further government expense cuts in the near future. While there can be much disagreement about where to cut, one could first ask whether it is a good strategy in the first place to starve the beast like this.

Michael Kumhof, Douglas Laxton and Daniel Leigh use an elaborate model to come to the conclusion that this is a good strategy if government expenses are useless. But if they provide a public good, then it is not. That seems like a very trivial result, and one that can explain the disagreement between the left and the right in the United States. But there is more to the paper. It shows that for this strategy to be welfare enhancing, cuts need to be done very quickly, and cut services must have little impact, and the taxes that are reduced must be very distortionary. It is very unlikely that all three conditions can be satisfied.