Starve the beast theory could play out if Trump’s tax plan passes

starve the beast theory

It is still very early in the process of the Trump administration’s attempt to lower taxes. However, for the sake of this article, I am going to assume that Trump is able to pass tax cuts very similar to what was laid out in the press conference held by Secretary of State Mnuchin and Trump economic advisor Steve Cohn.

This will be a two-article series in this article I will cover the first of two scenarios that will play out should these enormous tax cuts pass.

Starve the beast theory

There has long been a theory in conservative circles that believes the best way to shrink government is to take away its funding.

The first and most obvious evidence that this could be Trump’s plan is his choice of Cabinet picks. For instance, he named Rick Perry the Secretary of the Department of Energy. A department that Perry openly stated as part of his Presidential platform would be eliminated under his potential presidency. So it is not a stretch that Trump put Perry in that position not be bolster the influence of the Department of Energy but to slowly weaken and perhaps dismantle it.

The second Cabinet pick that signals a shrinking of government spending is the appointment of Betsy Devos, who I wrote about in depth last week.

Devos has long been an opponent of the failing public school system and has been seeking to expand the school voucher program. The school voucher program is largely state-run and if it was to proven to be successful, it would allow for at the very least a large cut in spending on the Department of Education and potentially working towards its death.

The future of Obamacare under drastic tax cuts

In the press conference last week Secretary of Treasury Mnuchin specifically pointed out the the top capital gains tax would be brought back down to  20% after Obama had raised it to 23.8% saying that the extra 3.8% would go towards funding Obamacare.

Congress is much more likely to pass this tax plan than the healthcare plan. And that is largely due to the support from the Freedom Caucus members in both the House and Senate for the tax reform package.

After the tax cuts would go into place, the Trump administration could say, “Oops, we don’t have the money for Obamacare and its subsidies, looks like we will have to switch to healthcare savings accounts.”