Budget Surpluses, Conservative Parties, and the Trilemma of Fiscal Policy

This paper analyzes the fiscal strategies of conservative parties in countries running sustained budget surpluses. It argues that conservatives can employ a hard balanced budget norm to skirt resistance against public spending cuts and to further their goal of restricting the size of the state. Whereas the "starving the beast" approach to shrinking the state failed to enforce spending cuts, budget surpluses did create the fiscal and political conditions for tax cuts. This argument is theoretically explored with the concept of a trilemma of fiscal policy. Afterwards, two case studies of Sweden and Australia analyze the partisan politics of ongoing retrenchment in surplus times.