Political Factors Behind Cuts and Surges in Government Spending: The Effects on Old Market Democracies and Post-Communist Countries
39 Pages Posted: 28 Dec 2015 Last revised: 22 Jun 2017
Date Written: December 26, 2015
Surges and cuts are explained here by some of the political factors affecting governments' abilities to balance the budget broadly discussed in the literature. We focus on territorial separatism, minority government, grand coalition, single party government, and the ruling party's ideology. Special attention is paid to the phenomenon of universal suffrage, which has caused the rise to power of modern left-wing parties and strong special interest groups within the bureaucracy.
Most political factors turn out to be time- and case-sensitive except for universal suffrage. A severe crisis can open the window of opportunity to cut public expenditure, while favorable economic conditions stimulate claims for redistribution and spikes in government spending. The most effective way to curb the instability of public finance is to strengthen pro-reformist political coalitions, claiming defense of national identity and moral values, that encourage austerity and are market-friendly.
Keywords: Separatism, political competition, budget deficit, universal suffrage, window of opportunity
JEL Classification: D72, D78, H11, H62, N40
Suggested Citation: Suggested Citation