Starving The Beast: Trump, Taxes And The Politics Of Unanticipated Consequences

The year was 1996. Republicans running for the U.S. Congress felt pressure from Ross Perot's impressive campaign for the U.S. Presidency in 1992: an effort that garnered Perot 19% of the presidential vote. Now, instead of running as an independent candidate, Perot was running under the banner of the Reform Party: a third party that Perot hoped to turn into a national competitor. Feeling the competitive heat, Republican congressional candidates attempted to copy elements of the Perot campaign, but from their advantaged position within a major party. Young conservatives took up the chant for immigration constraints, job security for Americans in manufacturing industries, a balanced budget amendment, and the paying down of America's national debt.

Channeling Perot in late 1999, Donald Trump attached himself to similar goals in forming a presidential exploratory committee. Doing things in a signature way, Trump proclaimed a centerpiece economic policy of paying off the national debt. Trump claimed that the debt of $5.7 trillion could be retired by means of a one-time tax of 14.25% on the assets of Americans with a net worth of at least ten million dollars (an idea that if delicately implemented might have saved the country from some of its economic inequality and the financial turmoil of 2008). Trump's calculus was that once the national debt was retired, the $200 billion a year saved on interest payments could provide middle-income tax cuts while shoring up Social Security--a populist notion.

As the year 2000 arrived, some political cynics believed that Trump was trying to buy the U.S. presidency by potentially sacrificing several hundred million of his own wealth to his proposed one-time asset tax. Whether the Trump strategy revealed deep political integrity or shallow political ambition was up for debate. Regardless, Americans did not seem to understand the rationale of Trump's proposed asset tax on the super-wealthy--an idea that stands in stark contrast to Trump's fiscal policy notions today. Paradoxically and ironically, many Americans seemed to think it was a trick of some sort, or a miscalculation that would undermine the favorable effects of trickle-down economics, or perhaps an affront to the American tradition of unfettered economic liberty. Whatever the case, Trump's bid failed to gain traction, resulting in his exploratory committee closing shop after a few months.

Starving or Feeding the Beast?

Backtracking to 1996, many of the Republican Reagan Revolutionaries who won congressional seats in the tidal wave election of November 1994--the election that ended forty years of Democratic control of the U.S. House--were feeling their oats as first-time incumbents. Following the example of Mark Neumann of Wisconsin, they plied their wares of balanced budget proposals, using charts and graphs Perot-style. Still feeling the sting of their near miss on a balanced budget amendment in 1995 (passed by a vote of 300 to 132 in the House but falling one vote shy in the Senate), they hoped to regain momentum on the plan in the 105th Congress. Then, a strange thing happened. Wise guys from conservative think tanks like the Heritage Foundation descended upon Capital Hill to convince Republican legislators to change course. By doing the opposite of balancing the budget--increasing spending in targeted areas while reducing federal taxes--government that had drifted Left could be deprived of revenue, thus "starving the beast" (a partisan play on words that caricatures Thomas Hobbes' Leviathan).

As rumored in the Republican conference, the superiority of the "starve the beast" strategy was the magic of cutting Democratic programs while advancing largess for Republican interests. Why cut pork away from your own supporters? Why not reduce the footprint of federal government at your opponent's expense? If politics is about power, and political right is less about light than the crafty use of might and fright (Machiavellianism), why not load costs on the opposition's ledger while securing benefits for your own? If justice is not about fair opportunity and earned deservedness, then boundaries are non-existent: the public good is a matter of rhetoric and spin. Democrats could appreciate this logic as well as Republicans: it's just that the blue team didn't own Congress at the time.

"Starve the beast" never starved big government as intended. It undermined support for a balanced budget amendment, deflecting the energy to watered-down congressional legislation known as the Balanced Budget Act of 1997. That Act, like many other budgetary shenanigans, did little to impede the growth of the national debt from under $5.7 trillion dollars in 2000 to over $19.3 trillion today (a stunning 150% increase in national debt since 2000 after adjusting for inflation). An academic analysis of starve the beast strategies suggests that these grand schemes grow the beast rather than starve it--evidenced in the fact that six of the ten highest income counties in the U.S. (out of more than 3,000) surround the nation's capital. Strategies of this stripe survive because of their rhetorical appeal and promise of asymmetrical winnings (i.e., exploitation).

Crude Oil and Unintended Consequences

The politics of unintended consequences is not unique to the United States. Consider the trouble OPEC's elites are bringing upon themselves, at least according to some theorists. As one leading argument has it, when the new technology fracking boom made it possible for the U.S. to nearly double its domestic oil production between 2008 and 2015 (thus providing economic lift-off power for the Obama administration), the Saudis feared a sizeable loss of global market share. As the world's largest and best financed low cost oil producer (both cash costs and capital costs) the Saudis believed they would emerge the winners from any protracted oil price war. Hence, they set upon a strategy of jaw-boning about production caps to keep the price of oil in the right price strata: high enough to supply sufficient revenues for the kingdom while low enough to "starve the beast" of new era oil production in North America. Hence, a dollar trading range for crude oil in the forties per barrel. It is here that unanticipated outcomes emerge.

Instead of the U.S. oil production collapsing, U.S. producers have found ways to enhance business efficiency, cut costs and eliminate waste. The huge cost advantage the Saudis enjoyed over the U.S. in the fall of 2014 is now rapidly narrowing. This applies not only to field oil extraction but offshore, too: deepwater and shallow water. Ironically, the longer OPEC and Russia dally around before cutting their production to secure higher global oil prices, the narrower their oil production cost advantage will become. Inadvertently, the Saudi strategy is forcing western producers to improve their game. Now, many American oil field discoveries that appeared only marginally worthwhile will be developed quite fully and profitably. While the Saudis were trying to starve future American oil production, they're busy feeding it instead. By analogy, this is the politics of unanticipated consequences.

The Unmanageable Future of Democracy

Currently, both major political parties in America are shepherding crafty plans to benefit their side at the expense of the other. What neither side sees is that in trying to kill off the blue beast or harpoon the red beast, their protracted and intense internecine warfare is moving the country toward a politically unmanageable condition and away from the shared public good. Each side stoops to whatever political tricks or maneuvers will cloud the reputation or prospects of the other. The unanticipated but growing likelihood is that political legitimacy will be trampled well before 2030. Opinion leaders like capricious children are now confounding oppression with liberty, and conflictual rights with human rights. In the rising political cacophony, almost anything can happen. Can democracy be managed when ideological diversity is on steroids, mutuality is draining out, and trust in leaders is all but gone? What happens when people tire of working together to solve problems?