Democracies have long been associated with a tendency to increase public debt, no matter who governs. Yet as Lea Elsässer and Leonce Röth explain, radical right parties are often thought to be particularly likely to run higher deficits while in office. Drawing on a new study, they provide new evidence for this claim.

After Donald Trump’s first years in office, liberal-leaning newspapers were quick to point out rising deficits associated with government tax cuts, which included both a more regressive income tax and a reduction in corporate taxes. However, these tax reforms were not unique to the Trump administration. They can be seen as typical reform proposals of populist radical right parties.

Populist radical right parties not only promise to cut taxes, which is arguably common among right-wing parties in general, but also typically claim they will maintain or even expand certain parts of the welfare state, most notably pensions. The recent dispute over the retirement age in France between President Emmanuel Macron and Marine Le Pen’s Rassemblement National is just another example of this pattern. In theory, this combination is doomed to inflate future public liabilities – a claim often voiced by pundits and academics alike.

Policy preferences of populist radical right parties

While existing evidence has linked populist governments to poor long-term macroeconomic performance, including fiscal outcomes, these studies have typically been based on left-wing populism in Latin America or looked at left and right-wing populism combined. But against the background of the recent rise of the populist radical right, it is necessary to better understand what radical right-wing public finance looks like.

In a new study, we start by looking at the policy preferences of these parties. We argue that the combination of lower taxes and costly social spending in specific areas is not simply a populist strategy aimed at “giving everyone as much as possible for electoral gain”. Instead, the tax and welfare policy agenda they envisage can be derived from a principle we call “native producerist deservingness”.

At the heart of this principle is the notion that only those belonging to “the native people” and those who are contributing to a nation’s wealth are deserving of welfare. In contrast, populist radical right parties demand welfare cuts for those they define as “takers”, most notably immigrants and the long-term unemployed.

In line with these conceptions, we observe a striking similarity in socio-economic policy proposals in the party manifestos of populist radical right parties across countries. On the one hand, pledges to flatten and cut income tax and cuts in corporation taxes – above all for small and medium enterprises, which are depicted as the “backbone” of national economies.

On the other hand, a defence of pension entitlements, particularly for long-term contributors, but harsh cuts in unemployment benefits and a tightening of eligibility criteria. In short, populist radical right parties aim to channel welfare away from immigrants and the unemployed to working families, the elderly and (small) native businesses.

The record in government

Extending the costliest welfare domain in almost every democracy (pensions) and decreasing or flattening income and corporate tax rates – the first being the dominant public revenue stream in almost all democracies – makes high deficits very likely. But do these preferences result in higher deficits in practice?

Based on data from 35 countries covering the period from 1980 to 2019, we analysed whether governments with populist radical right party participation systematically run higher deficits and to what extent these are driven by the spending or the revenue side of the budget. As expected, we found the public deficits of governments featuring radical right parties were substantially higher than governments without the radical right (by around 1% of GDP per year) under similar socio-economic starting conditions, at least in western democracies.

There are prominent exceptions to these patterns, which interestingly involve parties that share the same ideological tenets of “native producerist deservingness”, but deliver significant reductions in public deficits. These exceptions are typically found in eastern Europe, with the most prominent example being the governments led by Viktor Orbán in Hungary.

The Fidesz government between 2010 and 2014, which governed without coalition constraints due to a supermajority in parliament, managed to offset its deficit-increasing policies with additional special sectoral taxes on foreign-owned large companies and one-off revenues (through the nationalisation of pensions). These policies point to a new role for politicising the origin and location of capital in the radical right’s agenda, at least when parties are not “constrained” by coalitions with the centre-right.

We should not overestimate the durable ability of these policies on balanced budgets, however. The Trump administration’s substantial (and successful) redirection of international capital flows failed to produce balanced budgets and Orbán recently failed to prevent Hungary from returning to a high deficit path. However, and more fundamentally, the ideological perspective of “native producerist deservingness” provides a blueprint for a typical set of deficit-prone policies.

For more information, see the authors’ accompanying paper at the Journal of European Public Policy

Note: This article gives the views of the authors, not the position of EUROPP – European Politics and Policy or the London School of Economics. Featured image credit: Marian Weyo / Shutterstock.com