There's a fascinating article in The Atlantic, June issue, called "Stoking the Beast" (not online at The Atlantic online but can be found here with a lively discussion). It covers the ideas and research of conservative economist William A. Niskanen, chairman of the Cato Institute.

Niskanen, a Nixon and Reagan administration veteran, reckons tax cuts can, when not matched by spending cuts, reduce the apparent cost of government and stimulate rather than starve government spending. They reduce the apparent cost of government only and what happens when you make pork cheaper? You got it - you sell more pork.

He can find no sign that deficits ever constrained government spending, as Reagan and Bush jnr argued. On the contrary, he reckons a tax cut of 1 per cent of GDP will stimulate spending growth by .15 per cent a year. Increasing taxes has a converse effect.

Now, Niskanen has his critics, as you would expect. This one thinks the entire analysis is bogus. And while Niskanen's use of market value theories looks okay it's hard to see how these mechanisms work in the context of government.

As New Zealand no longer deficit finances government, this may all be moot to us, though it would be interesting to find our own stasis point (the point where tax has no negative or positive influence on government spending which Niskanen puts at 19 per cent of GDP in the US).