With the prospect of a government shutdown only weeks away, emotions are mixed. Some people are terrified that pieces of the government may not operate, while others are jubilant over the prospect. At Cato Institute, Jeffrey Miron explains that Americans should instead focus on a different view of government shutdowns. Shutdowns, Miron explains, won’t be a catastrophe, nor will they shrink government by starving the beast. “The only way to shrink government, significantly and sustainably,” Miron concludes, “is to convince more people that smaller government is better.” He writes:
What should libertarians think about government shutdowns due to Congressional failure to approve new spending bills? Libertarians oppose most spending affected by shutdowns, so one might assume they are on board.
That is not my view. While shutdowns suspend some government expenditures, the effect is temporary. Furloughed employees, for example, get back pay when the shutdown ends.
No evidence shows that shutdowns have slowed the path of government growth after reopening. Even the temporary reduction is small, since many discretionary programs continue, as does entitlement spending (which is more than half of federal expenditure).
The same caution applies to using tax cuts to shrink government. Milton Friedman famously argued that all tax cuts are good because they “starve the beast.” Even if Congress cuts taxes now, however, it can raise them later, which is what seems to happen in practice.
More broadly, process or institutional “fixes” to big government are unlikely to succeed. State balanced budget amendments do not seem to restrain spending, and requiring fiscal scoring from external agencies like the CBO leads to gimmicks that circumvent accountability. If the electorate wants more spending, politicians will find a way.
Action Line: America’s government debt levels are soaring. With no restraint on spending, who knows how high it could get? Investors must be wary. There is no room for mistakes. Click here to download my free special report, Top 10 Investing Mistakes to Avoid.
