Budget in black, polls in the red
Prime Minister Thorning-Schmidt has been unable to convince the electorate that 'In the Black'- style fiscal policies are necessary, and this has left her political capital in the red
Social Democratic Prime Minister Helle Thorning-Schmidt has bet the house and her government's life on 'In the Black'- style fiscal policies.
Instead of responding to the economic crisis with the traditional Keynesian focus on fiscal stimulus to, Thorning-Schmidt has put herself firmly in the German camp in the great European debate on post-crisis policies.
Last week an extremely tight budget proposal for 2013 was revealed, and the first year of Thorning-Schmidt’s government has resulted in the largest round of lay-offs in the State administration since the 1920s.
In one sense this is working. A recent poll rated Social Democratic Finance Minister Bjarne Corydon, who defended the public sector cuts, as the most credible politician in the country. The government's economic policies is widely seen as economically responsible, and if the point was conquering the centre and pushing the opposition to neoliberal rants about tax cuts, then the goal has surely been achieved.
There's only one slight problem: The electorate left the centre along with the opposition. Were elections held today, former Liberal Prime Minister Lars Loekke Rasmussen would cruise back in office, and last elections historically bad result for the Social Democrats – 24.9% - would become a nostalgic memory of a glorious past. The Social Democrats currently poll around 19% and 53% prefers Loekke Rasmussen as Prime Minister, while only 33% want Thorning-Schmidt.
Thorning-Schmidt has been unable to convince the electorate, that the tight fiscal policy is really necessary. But perhaps more importantly, she has been unable to connect her thrifty economics to a political vision for a post-crisis welfare state. The government, critics claim, is simply confusing ends and means. The beauty of graphs and reports coming out of the Ministry of Finance has become and end in itself instead of a means to secure funds to improve education, stimulate growth and create jobs. The government seems so obsessed with convincing the public, that their policies will add up in 2020, that they don't really have a credible plan for 2013.
Part of the reason for the government's inability to conduct effective short-run policies, is that it remains deeply divided on what course it should take. The Social Liberals push for even harsher economic reforms, whilst the Socialist People's Party want to soften the blow from reforms already implemented, with the Social Democrats stuck in the middle trying to broker deals issue-by-issue.
The result is a well-know trap for coalition governments: Instead of pursuing policies that work, or even policies that are popular, policy tends to pursue whatever low common denominator, they can agree on.
So far 'In the Black' policies, might have kept the budget in the black. But it has left Mrs. Thorning-Schmidts polling numbers and political capital firmly in the red.
A contribution to State of the Left - Policy Network's monthly insight bulletin that reports from across the world of social democratic politics
Kristian Madsen is editor of Politiken
State of the Left
Lars Loekke Rasmussen