Fiscal implications of the populist radical right in power

Abstract

Fiscal preferences of populist radical right parties (PRRPs) typically entail a combination of lower tax rates and the maintenance of costly social spending categories, such as pension spending. Theoretically, this combination is doomed to inflate future public liabilities. In our mixed method study, we assess whether PRRPs in government indeed systematically cause higher deficits and to what extent the combination of tax and social policy explains their public finance. We theoretically discuss the evolution of tax policy and welfare preferences of PRRPs and contend that radical right fiscal preferences are driven by PRRPs’ ideological core claim of ‘native producerist deservingness’. Based on mixed effects models with entropy balanced weights, we show that PRRPs in government have significantly and substantially higher public deficits than governments without PRRPs and similar socio-economic starting conditions. This effect, however, is different in Eastern Europe, where PRRPs in government produce comparatively lower deficits, albeit signalling and implementing the same policy-mix as Western PRRPs. We trace the causes of the differences in outcome with an in-depth case study of the Fidesz government in Hungary from 2010 to 2014.