Athough I don’t detect that much interest in the expansionary fiscal contraction hypothesis, I think it is important we don’t try to reinvent the wheel. The determinants of successful fiscal consolidations was the subject of a large research effort in the 1990s. The following passages from a paper by Alesina, Perotti, and Tavares give a flavour of the findings:
“Empirical work on the effects and sustainability of fiscal adjustments has consistently reached two conclusions. First, long-lasting adjustments rely mostly (or exclusively) on spending cuts, in particular, in government wages and social security and welfare; by constrast, short-lived adjustments rely mostly on revenue increases. Second, fiscal adjustments are not always associated with reduced growth, or with a deterioration in the macroeconomic environment in general.” (p. 200)
“Fiscal adjustments that rely on cuts in government transfers and wages and are implemented in periods of fiscal stress are long lasting and not contractionary. On the demand side, the expansionary aspect of such fiscal adjustments works through an expectation effect, which is stronger the worse are initial fiscal conditions. On the supply side, the interaction of certain types of adjustment — those without tax increases but with cuts in government employment and wages — lead to wage moderation, reduced unit labor costs, and increases in profitability, business investment, and production.” (p. 214)
The Minister for Finance might be interested in this:
“Furthermore, governments do not seem to be systematically punished at the ballot box for engaging in fiscal adjustments, nor do they lose popularity, as measured by opinion polls. In principle, one can think of two explanations for this result. One is that voters do not like fiscal profligacy. The other is that governments are particularly skillful at choosing the appropriate moments to implement unpopular policies While it is difficult to decide definitively, we conclude in favor of the first interpretation.” (p. 241)
Alesina, Alberto, Roberto Perotti, and Jose Tavares. (1998). “The Political Economy of Fiscal Adjustments,” Brookings Papers on Economic Activity, 1998.1, pp. 197-266.