What Do Citizens in Europe and the United States Think About Fiscal Austerity?
There is currently no national government in the European Union (EU) that is not indebted to a certain extent. The same holds true for the United States, Switzerland, and the other member countries of the Organization for Economic Cooperation and Development (OECD). Moreover, many sub-national jurisdictions (e.g., states, cities) in these countries are also more-or-less heavily indebted. From time to time, whole countries or single sub-national jurisdictions even find themselves in danger of becoming insolvent because of not being able to finance past debts and take out new ones—or, indeed, become insolvent. To prevent fiscal disasters or to try to recover after one, there is a simple prescription: cutting public expenditures and/or increasing taxes. Apart from the issue that this fiscal medicine may have some adverse effects on the economy (e.g., on economic growth and on the labor market), there may also be adverse effects for those policymakers who have decided to implement austerity measures. The conventional wisdom says that a policy of fiscal austerity will most likely be “punished” by voters at the ballot box. It is expected that citizens do not like public spending cuts—at least, those citizens who are receivers of certain public expenditures. And citizens are expected to not like tax increases—at least, those citizens who are paying taxes. Using public opinion data for the U.S. and Europe, the purpose of this article is to find out what citizens on both sides of the Atlantic think about fiscal austerity. Is a policy of fiscal austerity really so unpopular among the electorates in this part of the world? Or are there countries in which re-election-oriented governments could dare such policy?
High Degree of Public Concern about Public Debt
In a 2012 Eurobarometer poll published by the European Commission, representative samples of citizens in twenty-seven EU member states were confronted with the statement “measures to reduce the public deficit and debt in [your country] cannot be delayed.” The polling results show that in all EU countries a clear majority of citizens is very concerned about the public debt issue: in fifteen countries more than 80 percent of the respondents agreed to the aforementioned statement. In eight countries approval ratings of above 70 percent can be observed. And in the remaining countries we see approval ratings of above 60 percent. A survey conducted by the Washington-based Pew Research Center in the same year shows a similar high degree of public concern among the U.S. population: there, 71 percent of respondents answered “yes” to the following question: “Do you think that the size of the national debt poses a major threat to the economic well-being of the U.S.”
Another interesting observation in this context is some kind of “debt panic” or “debt hysteria.” More specifically, even in countries with relatively moderate levels of public debt such as Estonia (debt-to-GDP ratio 9.6 percent), Luxembourg (20.9), Sweden (37.4), Denmark (47.5), or Finland (51.1), citizens’ subjective concerns about the public debt issue as expressed in the Eurobarometer survey are high: Luxembourg (86 percent), Sweden (86), Denmark (77), or Finland (87). There is the slogan “Never waste a good crisis.” If policymakers really want to tackle the public debt issue, then now seems to be a good time given the high levels of public concern on both sides of the Atlantic. Digging deeper into the available public opinion data, however, it turns out that things are more complicated.
Are There Only Anti-Austerians?
In June 2012, representative samples of citizens in the U.S. and twelve EU member states were confronted with the following statement: “These days, some governments are cutting spending to reduce their debt. Other governments are maintaining or increasing their spending to stimulate economic growth. What is your view? Should the government [in your country] increase spending, keep current levels of spending, or decrease spending?” If only the percentage of respondents answering “Government should decrease spending” is considered, it turns out that there are indeed a number of countries in which a considerable number of citizens shows a pro-austerity attitude. There are two interesting country groups.
First, there are countries in which a majority of citizens supports spending cuts: Portugal (70 percent), Italy (65), France (65), U.S. (58), Spain (55), Slovakia (55), and Romania (53). Here re-election-oriented governments could dare a policy of fiscal austerity—at least if this specific poll is taken as a guideline. Because the data suggest that in these countries austerity-averse citizens seem to be in the minority. These citizens may “punish” expenditure cuts but the majority of voters is still in favor of cuts, which would suffice for re-election. Clearly, such simple popularity calculations might be too simple, as the recent government changes and public protests in some southern European countries illustrate. Sitting at home and anonymously responding to a general survey question (for/against austerity) is one thing; being personally affected by real spending cuts and/or tax increases, or seeing political parties campaigning for painful austerity measures is another.
Second, there are countries in which spending cuts in fact are not popular among the electorate: Sweden (21 percent), United Kingdom (26), Netherlands (39), Poland (40), Bulgaria (42), and Germany (47). Here re-election-oriented governments should abstain from implementing austerity programs—again, at least if this poll is taken as a guide for policymaking.
Actually, there is a third group of countries which is interesting: namely, those countries located relatively closely around the 50 percent threshold, where the current majority situation is not so clear: Germany (47 percent), Romania (53), Slovakia (55), Spain (55), and the U.S. (58). Especially in these countries, political persuasion could be an attractive option. That is, politicians and policy advisors from the Austerian camp could try to convince more citizens in, for example, Germany (currently 47 percent in support of spending cuts) that a policy of fiscal austerity is the “right” way. On the other hand, experts and policymakers from the Keynesian camp could focus their “preaching” efforts on Romania (currently 53 percent support spending cuts), Slovakia (55), Spain (55), or the U.S. (58) and try to convince more citizens in these countries that spending cuts are “evil.” In any case, the presented data question the conventional wisdom that spending cuts are always and everywhere unpopular.
Unfortunately, there is not much cross-country data regarding the issue of whether citizens dislike tax increases, which is also part of the conventional wisdom discussed above. The 2010 BBC World Service Global Poll conducted by the polling firm GlobeScan together with the Program on International Policy Attitudes (PIPA) at the University of Maryland confronted samples of citizens in a number of countries with the following question: “Which approach to reducing [your country’s] deficit and debt would you prefer to see the government focus on more? Increasing taxes; cutting spending on government services, including ones you use; or both?” It turns out that most people in the U.S. and the considered EU countries prefer cutting services over increasing taxes: UK (36 percent increasing taxes vs. 49 percent cutting expenditures), U.S. (23 vs. 64), Germany (19 vs. 71), Spain (9 vs. 75), and France (8 vs. 81).
Libertarians or economic liberals might take these figures as statistical evidence that “big government” is perceived to be a problem by many people. Many, one could further interpret, seem to be aware that they are a part of the problem (i.e., they are indeed willing to accept spending cuts) but are not willing to throw more money at “inefficient government.” However, this is only one possible interpretation. But the message of the cross-country data is clear: if directly confronted with the necessity of fiscal consolidation, then most people would tackle this painful route rather via the expenditure side than via the revenue side of the public budget.
Fiscal Austerity as a NIMBY Good
Taking recent cross-country data as an indicator, running a policy of fiscal austerity seems to be not necessarily political suicide in the sense that governments using this policy instrument inevitably lose their jobs after the next election. However, the picture depicted above on the basis of rather general polling questions (i.e., “Are you against or in favor of fiscal austerity?”) changes when citizens are confronted with more detailed options. This can be illustrated by the U.S. case. In February 2013, the Pew Research Center asked a sample of U.S. citizens the following question: “If you were making up the budget for the federal government this year, would you increase spending, decrease spending or keep spending the same [in the following budget areas]?” People were asked to reveal their preferences in nineteen budget areas (health care, education, unemployment benefits, etc.). In no area a majority of people was in favor of decreasing spending, which stands in stark contrast to the general support levels for the policy measure spending cuts reported above. Unfortunately, there is no current cross-country data to put the U.S. figures into a comparative perspective. However, there is some comparable pre-crisis data which also shows this kind of austerity paradox.
In the 2006 report by the International Social Survey Program (ISSP), in the U.S. and most of the included EU countries, majorities of citizens generally support fiscal austerity: see, for example, the values for France (88.4 percent “strongly in favor of” or “in favor of cuts in government spending”), Portugal (84.0), Germany (75.7), Netherlands (66.6), U.S. (63.3), Spain (56.0), or Sweden (55.8). The only EU countries in which Austerians constituted the minority were Finland (29.6), Great Britain (38.1), Ireland (42.7), and Denmark (45.1). Yet, as in the 2013 Pew survey for the U.S. mentioned above, when ISSP asked citizens regarding a number of specific budget areas (education, unemployment benefits, health care, etc.), then spending cuts were rather unpopular (i.e., not supported by a majority of citizens). Military/defense was the only budget area in which majorities of respondents in some EU countries (i.e., Denmark, Germany, Netherlands, Slovenia) in 2006 preferred “less government spending.”
The public opinion data available for the U.S. and some European countries suggest that fiscal austerity is some kind of NIMBY good: many people perceive that the poor budgetary situation in which their country is situated in requires budget cuts and/or tax increases—but please “Not In My Back Yard.” While there are numerous social science studies investigating the NIMBY phenomenon (e.g., local opposition to the construction of nuclear power plants, highways, or other infrastructure projects), there seems to be no academic study explicitly considering fiscal austerity as a NIMBY good. However, this possible area of application is briefly mentioned in the respective WIKIPEDIA entry: “The NIMBY concept may also apply more generally to people who advocate some proposal (for example, austerity measures like budget cuts, tax increases, or layoffs), but oppose implementing it in a way that would require sacrifice on their part.”
Given the high mountains of public debt accumulated in the U.S. and many European countries, it is not surprising to see that many people on both sides of the Atlantic in public opinion polls express their (strong) concerns about the public debt issue. What is surprising, however, is that fiscal austerity currently seems to be generally supported by majorities of citizens in a number of countries—at least in public opinion polls. This questions the conventional wisdom whereby citizens do not like such policy. But, as we have seen, public support decreases considerably when citizens are asked regarding spending cuts in specific budget areas that may decrease their current standard of living. Behavioral scientists may interpret this opinion shift as a symptom of loss aversion. Against this background, there finally arises an obvious question: How can policymakers and their advisors cope with the striking paradox of “Austerity yes, but not in my backyard”?
If political decision-makers in a jurisdiction really want to run a policy of fiscal austerity, then one possible strategy could be to (better) explain to their citizens why spending cuts and/or tax increases in specific areas are necessary. In other words, one would have to present convincing arguments (e.g., burden for future generations; current debt-interest burden) why we cannot simply continue the easy way of deficit spending. And to not undermine such communication strategy, it would be wise to not exempt certain interest groups (e.g., business companies and other recipients of subsidies and tax breaks; members of the “political class”) from a painful consolidation program.
While it is the subject of an ongoing public, political, and academic debate whether the mountains of debt in Europe and the U.S. are “too high” or “alarming” at all, political economists working with the unromantic assumption that all actors involved in the political game primarily pursue their own self-interest would certainly classify the sketched strategy of moral suasion as naïve. From their perspective, the only instrument that really constraints politicians’ and citizens’ spending behavior is capital-market discipline. As the examples of Cyprus, Greece, Ireland, Portugal, or Spain illustrate, at a certain point in time it gets difficult or even impossible to convince capital-market participants why they should give a highly indebted jurisdiction further credit—regardless of whether an irresponsible fiscal policy and/or the bailout of banks has caused the jurisdiction’s liquidity problems. As long as this hard debt/deficit limit is not reached, from a pessimistic politico-economic viewpoint it is rather unlikely that jurisdictions (i.e., self-interested politicians and citizens) will voluntarily change their spending and debt behavior.
Karsten Mause was a DAAD/AICGS Research Fellow in February-March 2013.
 See Carmen M. Reinhart & Kenneth S. Rogoff (2009): This Time is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press.
 European Commission, Standard Eurobarometer 78, Public Opinion in the European Union (2012); Fieldwork, November 2012, Brussels.
 Pew Research Center, Pew Global Attitudes Project, Spring 2012 Survey (2012)..
 The debt-to-GDP ratios are based on “general government gross debt” as reported for the 3rd quarter 2012 by Eurostat. In this definition, the general government sector includes central government, state government, local government, and social security funds.
 The German Marshall Fund of the United States, Transatlantic Trends 2012; Fieldwork, June 2012, Washington DC.
 GlobeScan/PIPA, BBC World Service Global Poll (2010); Fieldwork, Summer 2010, Washington DC.
 See Pew Research Center, “As Sequester Deadline Looms, Little Support for Cutting Most Programs,” 22 February 2013.
 International Social Survey Programme (ISSP), Role of Government Database, Survey IV (2006).
 See e.g., Bruno S. Frey, Felix Oberholzer-Gee & Reiner Eichenberger, “The Old Lady Visits Your Backyard: A Tale of Morals and Markets,” in Journal of Political Economy, Vol. 104, No. 6 (1996), pp. 1297-1313.
 For a brief overview of this approach, see James M. Buchanan, “Public Choice: Politics Without Romance,” in Policy – Quarterly Review of The Centre for Independent Studies, Vol. 19, No. 3 (2003), pp. 13-18.
 See e.g., Timothy D. Lane, “Market Discipline,” in IMF Staff Papers, Vol. 40, No. 1 (1993), pp. 53-88.