Voter Responses to Fiscal Austerity

Abstract

Governments have great difficulties designing politically sustainable responses to rising public debt. These difficulties are grounded in a limited understanding of the popular constraints during periods of fiscal pressure. For instance, an influential view claims that fiscal austerity does not entail significant political risk. But this research potentially underestimates the impact of austerity on votes because of strategic selection bias. This study addresses this challenge by conducting survey experiments in Spain, Portugal, Italy, the UK and Germany. In contrast to previous findings, the results show that a government's re-election chances greatly decrease if it proposes austerity measures. Voters object particularly strongly to spending cuts and, to a lesser extent, to tax increases. While voters also disapprove of fiscal deficits, they weight the costs of austerity policies more than their potential benefits for the fiscal balance. These findings are inconsistent with the policy recommendations of international financial institutions.

Why Austerity? The Mass Politics of a Contested Policy

“…Specifically, our analysis offers an explanation for the empirical finding that governments opting for austerity are not more likely to be hurt electorally (Alesina, Carloni, and Lecce 2011;Passarelli and Tabellini 2017). In contrast to prior explanations that center on political announcements (Genovese, Schneider, and Wassmann 2016), media coverage of deficits (Barnes and Hicks 2018), the timing of austerity (Hübscher and Sattler 2017), or the self-selection of governments that pursue austerity (Hübscher, Sattler, and Wagner 2020), our study highlights ideology, partisan cues, and policy design as key reasons why austerity is not as electorally damaging as is often argued, or as one might expect.…”

“…3 Similarly, the Spanish media coverage that accompanied the austerity program pursued by PM Rajoy also discussed the details of the package, highlighting specific clauses such as pay rate cuts in the civil service sector and the increase of specific types of taxes. 4 If voters exhibit different sensitivities to the various types and rates of spending cuts and tax increases, governments may have significant latitude in designing packages that achieve their fiscal objectives while retaining sufficient public support (Häusermann, Kurer, and Traber 2019;Hübscher, Sattler, and Wagner 2020). Put differently, the precise structure of an austerity package-specifically, the details of the spending cuts and the types and rates of the taxes raised-should have a substantial influence on the level of public support it receives.…”

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

“…Vote intentions have already been used in the literature on the political impact of austerity (Hübscher et al , 2015; Talving, 2017; Bojar, 2018) and have clear advantages over election outcomes. Nevertheless, we argue that government approval is an even better measure.…”

“…Thirdly, governments may react to the unpopularity of austerity measures by introducing other, more popular policies as a compensation. Election outcomes already factor in this government response (Hübscher et al , 2015). Fourthly, whether voters can express their discontent with austerity policies at the ballot box depends on the alternatives that opposition parties offer (Hübscher et al , 2019).…”

Are Policy Analogies Persuasive? The Household Budget Analogy and Public Support for Austerity

“…1 At the mass level too, while they may dislike (and punish) cuts to spending and increases in taxation (e.g. Bremer and Bürgisser 2019;Hübscher, Sattler, and Wagner 2018) there is plenty of evidence that voters are, on average, rather averse to government borrowing (e.g. Peltzman 1992).…”