Are governments paying a price for austerity? Fiscal consolidations reduce government approval

Jacques, Olivier; Haffert, Lukas

doi:10.1017/s1755773921000035

Cited by 21 publications

(18 citation statements)

References 48 publications

(24 reference statements)

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“…By refraining from increasing top income taxes, they shied away from popular policies. This mismatch helps to make sense of some of the political turmoil that we observed in Europe in the wake of the Great Recession (Bremer et al, 2020): As mainstream parties adopted austerity, voters turned to alternatives on the far left and far right of the political spectrum (Bojar et al, 2022;Fetzer, 2019;Hübscher et al, 2021;Jacques & Haffert, 2021;Talving, 2017).…”

Section: Introductionmentioning

confidence: 99%

Do citizens care about government debt? Evidence from survey experiments on budgetary priorities

Bremer

Bürgisser

2022

European J Political Res

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Ever since the Great Recession, public debt has become politicized. Some research suggests that citizens are fiscally conservative, while other research shows that they punish governments for implementing fiscal consolidation. This begs the question of whether and how much citizens care about debt. We argue that debt is not a priority for citizens because reducing it involves spending and tax trade-offs. Using a split-sample experiment and a conjoint experiment in four European countries, we show that fiscal consolidation at the cost of spending cuts or taxes hikes is less popular than commonly assumed. Revenue-based consolidation is especially unpopular, but expenditure-based consolidation is also contested. Moreover, the public has clear fiscal policy priorities: People do not favor lower debt and taxes, but they support higher progressive taxes to pay for more government spending. The paper furthers our understanding of public opinion on fiscal policies and the likely political consequences of austerity.

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Section: Introductionmentioning

confidence: 99%

Do citizens care about government debt? Evidence from survey experiments on budgetary priorities

Bremer

Bürgisser

2022

European J Political Res

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“…In a footnote, Johnston (1999: 505, n10) reports inconclusive results associated with budget balance, while Happy's (1992) vote function model reveals a negative impact of income taxation on aggregate-level incumbency voting from 1953 to 1988. In contrast, several international studies have included fiscal policies, such as taxation, transfers and budget deficits, in their popularity functions (Geys and Vermeir, 2008; Bojar et al, 2021; Jacques and Haffert, 2021). Much remains to be investigated when it comes to the impact of fiscal policy on federal executive approval in Canada.…”

Section: Fiscal Policy Regimes and Public Opinionmentioning

confidence: 99%

“…As such, vote-seeking politicians have a structural incentive to engage in budget deficits, especially as elections approach (Calmfors and Wren-Lewis, 2010). Several studies in comparative political economy confirm that citizens punish governments for aggressive deficit reduction policies (Talving, 2017; Bojar et al, 2021; Jacques and Haffert, 2021).…”

Section: Introductionmentioning

confidence: 99%

Deficit or Austerity Bias? The Changing Nature of Canadians’ Opinion of Fiscal Policies

Jacques

Bélanger

2022

Can J Pol Sci

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Public choice theory suggests that citizens have a deficit bias: they approve governments for running large deficits that increase spending or reduce taxes. In contrast, others contend that citizens reward governments for balanced budgets. We contribute to this debate by modelling a popularity function for the Canadian federal government and show that the impact of fiscal policies on the executive's popularity changes over time. Until the early 1990s, Canadians preferred budget deficits. As deficits became unsustainable during the economic crisis of the early 1990s, the government shifted its fiscal policy paradigm, as balancing the budget became its primary fiscal objective and citizens were actively concerned about the deficits. Since 1993, citizens’ deficit bias morphed into an austerity bias: executive approval increases when deficits are reduced. These findings contribute to comparative political economy research by assessing how policy regimes and public preferences reinforce each other.

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“…1 Thus, faltering growth has two opposite effects: higher risks raise demand for greater spending, while falling income reduce support for the welfare state. If the effect of income stagnation dominates, at least for 1 We focus separately on spending and tax preferences because voters react differently to them and are primarily opposed to spending cuts rather than tax increases (Hübscher et al 2020;Jacques and Haffert 2021). politically powerful groups in the electorate, then we can expect support for retrenchment to go up rather than down during economic crises.…”

Section: Introductionmentioning

confidence: 99%

Income Stagnation and the Politics of Welfare State Retrenchment in Advanced Economies

Vlandas¹,

Weisstanner²

2022

Preprint

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What are the political effects of income stagnation on the welfare state? To answer this question, we develop a simple political economy model linking stagnation to greater political support for welfare state retrenchment via three distinct mechanisms: (1) an altruistic mechanism where stagnation reduces altruistic motives for welfare state redistribution; (2) an insurance as ‘luxury good‘ mechanism where stagnation decreases the relative perceived gains from insurance; and (3) a subjective cost of taxation mechanism where stagnation heightens the relative costs of taxation. To test our argument, we combine novel data on the evolution of income stagnation to three existing datasets on individual preferences for the welfare state, on electoral behaviour of individuals, and on welfare state retrenchment. Our micro-level empirical analyses are consistent with our expectations. First, individuals facing stagnant or lower incomes support spending cuts to a greater extent. Second, individuals penalise the incumbent at the ballot box for retrenchment policies when their incomes are growing, but reward them if their income are stagnating. Thus, governments have electoral incentives to implement spending cuts when incomes stagnate. In turn, at the macro level, retrenchment is more pronounced in times when countries experience lower income growth. Taken together, our findings link the literature on income stagnation to comparative political economy studies of changing welfare states. In contrast to accounts focusing on the level of income and risk, this article helps us make sense of why governments find it politically attractive to retrench their welfare states, not despite but because of difficult economic times. Income stagnation does not only undermine the fiscal sustainability of welfare states, it also saps its political foundation.

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Are governments paying a price for austerity? Fiscal consolidations reduce government approval

Cited by 21 publications

References 48 publications

Do citizens care about government debt? Evidence from survey experiments on budgetary priorities

Do citizens care about government debt? Evidence from survey experiments on budgetary priorities

Deficit or Austerity Bias? The Changing Nature of Canadians’ Opinion of Fiscal Policies

Income Stagnation and the Politics of Welfare State Retrenchment in Advanced Economies

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