“It’s the economy, stupid.”. This phrase, which became famous when it was used in the campaign for the 1992 presidential election in the United States, has also been applied to Portugal.
The annual variation of GDP per capita has made it possible to know who will win the elections. The ruling party wins with 2.16% and loses with 2.03%. This has always happened since 1980 (except in one case, as we will see later), which serves as a warning and guidance to the government and opposition parties.
As can be seen in the previous graph, since the end of the turbulent era of the 1970s, whenever the variation in GDP per capita is greater than or equal to 2.16%, the ruling party wins the legislative elections. (the periods of government of the PS and the PSD – affiliated in some cases – are indicated in pink and orange).
On the contrary, with a variation in GDP per capita less than or equal to 2.03%, the opposition party wins the legislative elections, with a single exception in 2009. In this case, with a fall of 3.21% in GDP per capita, there was a combination of factors that helps explain the result, among them the PS government distributing money to its clientele as if there were no tomorrow (in 2009 alone, public debt increased by 18.5 billion euros, which was enough to build 15.1 Vasco da Gama bridges(1) or give about 1,850 euros to each resident in Portugal) and the PSD insisted on the need for austerity when people already felt a strong reduction in their purchasing power.
It is curious to see that, above 3.15%, in addition to the party winning the government, it has an absolute majority (1980, 1987, 1991, 2022) or an equal majority (PS in 1999).
It is important to highlight that there is a very strong correlation between the variation in GDP per capita and the winner of the legislative elections, but not a cause-effect relationship between these variables.
This correlation is even stronger (100%) in the case of the European elections (see graph 2 in the annex). With a change in GDP per capita greater than or equal to 2.49%, the ruling party always wins European elections, but always loses if it is below 1.55%.
From the above analyzes we can conclude that election results are strongly influenced by the state of the economy in the election year, although the 2009 elections illustrate that the combination of cunning on the part of some and excessive zeal on the part of others can dictate different elections. . results, confirming the maxim “Past performance does not guarantee future results.”
So what can government parties do to maintain power? They can increase GDP per capita above 2.16% in the election year.
It seems difficult, but it is not. It is enough to drastically reduce the presence of the State in economic activities and dispense with megalomaniacal projects.
This is what can be concluded by analyzing the relationship between growth, tax rates and public debt in different European countries. There is an inversely proportional relationship between taxes and growth (see attached graph 3), that is, the lower the taxes, the greater the growth. Naturally, it is more difficult to grow when the country is already rich, but Ireland shows that it is possible.
It is embarrassing to see that Portugal was the fourth European country that grew the least between 2000 and 2021 (Italy, Greece and Spain were even worse), despite the fact that it had a GDP per capita much lower than that of several Western European countries.
However, Portugal has a similar average tax rate to countries subjugated by the Soviet Union (which are growing well), which means it misapplies the money extracted from Portuguese taxpayers. For example, analyzing the budget execution data published by the DGO, it seems that in 2021 alone Portugal paid 6.4 billion euros (4.7 Vasco da Gama bridges) in interest on public debt, which was contracted in the past to execute projects megalomaniacs Not having this annual charge would mean that each person residing in Portugal could receive around 640 euros more per year.
It is not surprising that there is also an inversely proportional relationship between public debt and growth, that is, the lower the public debt, the greater the growth (see graph 4 in the annex). The public debt burden is much lower in the countries subjugated by the Soviet Union than in Portugal, which is why these countries use taxpayers’ money better.
From the combination of the two previous observations, it is clear that there is a direct relationship between public debt and tax burden, that is, the greater the public debt, the more taxes are charged to taxpayers (see graph 5 in the annex).
In short, for Portugal to grow, the government must reduce taxes and public debt, drastically reducing the weight of the State in the economy. That is, instead of the “enormous tax increase” made after the last bankruptcy caused by the socialist Government, make a “enormous tax reduction.”
And what can opposition parties do to gain power?
They can do many things, but I would like to highlight four: (i) explain that all people pay taxes even if they do not pay the IRS, (ii) explain that corruption of government officials results in increased taxes, (iii) explain that bad decisions The government’s economic changes also result in increased taxes and (iv) increased demands from voters regarding increased wealth.
To explain that everyone pays taxes, even if they do not pay the IRS because they belong to a very low income group, the opposition can show that it is impossible to completely escape some indirect taxes such as VAT and ISP. For example, for most goods, paying 123 euros for purchases corresponds to delivering 23 euros to the State because the VAT rate is 23%. Even a child pays VAT when he buys a chocolate in a supermarket with his weekly allowance. The opposition can explain that, with high growth, without megalomaniac projects and without corruption, instead of paying 23% VAT, people could only pay 16% VAT, as happened from 1992 to 1994, or even less .
To explain that corruption of government officials results in increased taxes, the opposition can demonstrate that the cunning of these corrupt people forces the state to spend more money than would be necessary without corruption. For example, a 100 million euro project with 20% corruption is equivalent to an 80 million euro project without corruption. The difference of 20 million euros is paid with higher taxes on taxpayers, which end up in the pockets of corrupt governments. The aggregate effect of corruption is enormous, according to a study by the European Parliament it was 21 billion euros in 2015, that is, it would be enough to build 15.9 Vasco da Gama bridges or for each person residing in Portugal to have around 2,100 euros . of additional income per year.
To explain that the government’s poor economic decisions result in tax increases, the opposition can use synthetic messages instead of economic jargon. Taking the case of TAP as an example, the PS government decided to nationalize TAP and now wants to privatize it again. Meanwhile, he injected the company with 3.2 billion euros, an unrecoverable sum equivalent to building 2.3 Vasco da Gama bridges. Voters have a hard time understanding how colossal this expense is, but it is easy for them to understand that 2.3 of those bridges is outrageous. There is only one way to pay for this expense, and that is to extort taxpayers. In this case it was equivalent to each person residing in Portugal paying about 320 euros to the State without realizing it.
To increase voters’ demands for greater wealth, the opposition can demonstrate how to sustainably increase people’s incomes – beyond those earned in the election year – using other countries with higher growth as a comparison. If the opposition is effective in communication, it is possible that voters will raise the bar for the continuity or change of the party in government depending on the change in wealth, for example by demanding GDP per capita growth greater than 2.16 % for the country. ruling party to win the elections.
Regardless of what the government and the opposition do, it is also possible that, if European economic support for Portugal continues for several decades, voters’ wealth will increase enough that they will begin to value other aspects when voting.
In short, it is possible for voters to mature and change their voting behavior without this being linked solely to economic well-being.
It is possible, but unlikely, considering that:
- Government propaganda has been infantilizing: in the PS government it is so overwhelming that a friend recently told me that Goebbels, a former German National Socialist propaganda minister, would look like a choir boy next to the current prime minister.
- Many families believe that they do not pay taxes: according to the Tax Authority, around 42% of families do not pay the IRS, because they do not declare sufficient income, so these families tend to favor parties that promise more weight from the State . in the economy, to have more public services (which they believe are) free and more subsidies.
- There is a fiscal and bureaucratic suffocation on people and companies: according to Eurostat, Portugal is the 18th least productive country of the 20 countries in the eurozone.
- We are witnessing the exodus of young graduates: according to the INE, between the 2nd quarter of 2022 and the 2nd quarter of 2023, 128 thousand young people with higher education emigrated.
- The Portuguese have been progressively reducing their level of demand regarding the poor services provided by the State: there are so many examples in all sectors (health, education, social security, transport, housing, justice, agriculture, etc.) that a friend suggested put an end to the appointment of public officials, because it does not work.
- The current Prime Minister’s indifference to poverty in Portugal is blatant: it became even more evident in April 2023, when he stated that the opposition was jealous of DNA because it only cared about the greater growth of other poorer European countries, when it is It is obvious that growth makes it possible to reduce poverty.
- There is a lack of exemption and presumption in many media: it is seen every day on television and in the newspapers, it has been like this for many years and it got even worse after the subsidy provided by the socialist government during the pandemic. .
- There are many other dysfunctions, but it would be too long to describe them here.
Therefore, as long as voter behavior does not change, there is an easy way to know who will win the elections, just look at the change in GDP per capita.
(1) 18.5 billion euros in 2009 correspond to 15.1 Vasco da Gama bridges applying the inflation rate over the years to the cost of the bridge in 1998, which was 897 million euros. In addition to the colossal increase in public debt in 2009, the PS government increased it by another 26 billion euros in 2010 (21.3 Vasco da Gama bridges), leading the country to bankruptcy in 2011.