Political Factors behind Cuts and Surges in Government Spending
We tried to explain surges and cuts in governmental spending 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.
The paper is just published in the Problems of economic Transition, (Tailor and Francis) vol. 59, no. 4, 2017, pp. 294-320 2017, doi: 10.1080/10611991.2017.1321418
Early and unedited version of the article you could find at SSRN site.
