The Walker Victory: Reform Is Good Policy and Good Politics

by Veronique de Rugy

I have written a few times in the past about the growing evidence that, contrary to common belief, a political party that implements ambitious reforms or spending cuts won’t be punished by voters in the next election. In fact, it may even be rewarded.

Among other studies, there is a Goldman Sachs Global Economics study by Ben Broadbent called “Fiscal tightening need not be electorally costly, but it will test government unity.” It shows that spending cuts can actually be a good thing politically. “It is commonly assumed that cuts in government spending will be both economically painful and electorally costly,” he writes. And:

Neither is borne out in the data. We’ve written before about the limited (and sometimes positive) effects of spending cuts on economic growth, at least in open economies. Here we add some simple analysis on the electoral consequences and, like others, find no evidence that spending cuts reduce support for the incumbent government. If anything the opposite tends to be true.

Among other evidence, the paper cites the three governments that executed the most high-profile expenditure-based deficit reductions in recent history and yet were reelected: Ireland in 1987, Sweden in 1994, and Canada in 1994. 

#more#Broadbent’s empirical study complements a 1998 Brookings Institute study by the economists Alberto Alesina, Roberto Perotti, and Jose Tavares. The trio found “no evidence that looser fiscal policy implies longer political tenure.” They also show that “cuts in the government wage bill do not increase the probability that the government will collapse . . . nor does the popularity of the government fall in the immediate aftermath of fiscal adjustments.” The whole thing is here.

I had also mentioned Chipping Away at Our Debt, a book by edited by IMF’s Paulo Mauro, which looks at 66 instances of fiscal adjustments in Canada, France, the United States, Japan, Germany, and Italy. Among other findings, a recurring element in the book seems to be that ambitious plans aren’t associated with more frequent changes in government (in other words, ambitious fiscal adjustment plans aren’t penalized by voters).

In the case of the Walker victory, it could be that recall elections are very different and this particular election doesn’t speak to this issue. However, that would be surprising. For one thing, it is not unreasonable to assume that the governor may have been rewarded by voters for the reforms he implemented. As Reihan Salam mentioned in this piece and during his CNN interview with Erin Burnett last night,  the reforms implemented by the Governor have actually produced positive results, including the ability of different jurisdictions to cut spending by renegotiating labor contracts, rather than firing public employee

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