Despite the continual attention by the public, the media and politicians on governmental deficits, surpluses and governmental debt over the past decade, the political science literature in this area is sparse. When political scientists do venture into this area, they are unduly influenced by economic considerations rather than using political-institutional explanations. Happily this volume avoids the usual approaches and instead emphasizes political variables. In particular, the editors and authors highlight the importance of the proximity of elections, the ideology of the incumbent party, and the severity of established anti-deficit policies.
When first confronting the title and subtitle of this volume, the reader might expect the authors to emphasize the characteristics of federated states. But we see that electoral, ideological and budgetary rulemaking are more important factors. Only one chapter meets the possibility of multilevel governmental influences head on.
Dietmar Braun in “Intergovernmental Relationships and Fiscal Policymaking in Federal Countries” looks at governmental capacity to act within multigovernance systems and the likelihood of cooperation between levels and among jurisdictions at the same level. From our Canadian point of view tax competition among subnational jurisdictions is always a possibility. These governments are torn between deficit spending or a race to the bottom in social investments and consumption.
Thus, in this situation the national government tries to smooth out the fiscal extremes despite lower level grumbling about national intervention in areas of subnational constitutional responsibility.
Overall, this book focuses especially on subnational governments in five countries-Belgium, Canada, Germany, Switzerland and the United States. Working from the subnational governments in these states, the various authors in the text analyze budgetary positions and the political explanations for these positions, especially deficits. The authors find that fiscal policymaking in subnational governments are influenced by several political factors. These factors are studied in all five countries and reduced in number by the end of the book.
In the first chapter Louis M. Imbeau lays out the factors that all the contributors were asked to seriously consider, namely party ideology, election proximity, political fragmentation of the subnational government, governmental instability, stringency of budgetary rules and the compulsory approval of a deficit in a referendum. He notes that almost all the literature is based on the American experience. But in this volume the number of subnational jurisdictions totals 105, which not only includes five federated countries but also exceeds by a factor of four the average OECD comparative studies.
Yet our attention constantly comes back to the Canadian cases and the “common sense” view that governments of the left are deficit-prone because they are big spenders. Imbeau and Genevieve Tellier confront these ideas and reinterpret them to fit the real-world systematic data. Once again they show that the “common sense” ideological interpretation is completely wrong confirming what so many other academic studies have shown. Rather it is right-wing governments that are more likely to run deficits that become increasingly larger as they face their likely exit from government.
Governments of the right know that some point they will be replaced by either a moderate liberal or a more left-wing government. To preserve their key goals of weakening the policy capacity of the state and consequently to protect societal inequality, they cut state revenues at an increasing rate so their successors are left with growing deficits that will hamper social investment. They also know that if their successors try to raise taxes, political unpopularity will aid the right's return to office. No matter what happens to the party of the right, society appears to be changed for the long term and the strong are protected from parties supporting the weak.
Genevieve Tellier introduces the concept of average governmental popularity in her chapter, “Political and Electoral Cycles, Government Popularity, and Budget Deficits in Canadian Provinces”. She finds that that party ideology as a guide for fiscal policy is constrained by relative government popularity. If a government is popular, then it feels free to act on its ideology. And also important, deficits do not appear to affect government popularity.
This is a very important volume for Canadian political scientists and political scientists world-wide who are interested in the political economy of public policy. It shows that political institutional variables have important independent effects separate from economic and demographic conditions. Political choices are important. Party ideologies are created and evaluated by voting citizens. Rules about budgetary deficits are political inventions. And political leaders have a great deal of leeway since the public ranks budget deficits of low concern dispute their high place on the media's agenda.
The data in this volume show us something else that is very important. Over the past 20 years the parties of the right have been able to take the initiative away from moderate and left-wing parties despite the large value difference between the majority of citizens and the increasingly militant leaders of the neo-conservative right. These leaders learned that the public really doesn't care about government deficits. In the public's view it is the government's problem not the citizens'.
For that reason fiscally responsible conservatism has disappeared except in the right-wing of moderate liberal parties. Increasingly big deficits by right-wing governments will hobble their moderate and left-wing successors and allow radical conservative tax reductions to protect if not increase wealth inequality in society, the prime objective of conservative forces for hundreds of years.
Left-wing parties have been slower to accept the low salience of deficits to the voters for a number of reasons. Conservatives have kept social democrats on the defensive by the “common sense” charge that left governments are deficit prone. As well left leaders value state institutions and are reluctant to do anything to bring these institutions into disrepute. These concerns thus limit consistently strong infrastructure investment.
Where does this leave middle-of-the-road liberal parties? As the literature shows and this book's analysis reconfirms, these parties often have the most trouble maintaining a consistent fiscal policy. They want to be socially expansive yet they are especially sensitive to attacks by the right as big spenders and by extension, as deficit prone.
Thus, this volume is not only a model of rigorous research but a rich storehouse of confirmed generalizations that help us understand the major thrust of public policy over the last twenty years, namely the swing to conservatism and growing economic inequality. The focus on subnational governments in federated states allows the researchers to overcome the problem of overdetermination seen in the typical OECD-based study. Here we have the best of two worlds, definitive knowledge for academic political scientists and lessons for political leaders.
