Perceptions of Public Debt and Policy Expectations: Evidence from Cross Country Surveys

Utilizing large-scale surveys of over 27,000 respondents across 13 advanced and emerging market economies conducted between April and May 2024, we examine how knowledge, beliefs, and preferences regarding government debt shape expectations about tax and spending policies. Our findings reveal significant gaps in public understanding of fiscal policy. Individuals consistently underestimate debt levels, particularly in high-debt countries, and tend to believe that fiscal adjustments will disproportionately affect them. We further show that greater lifetime exposure to fiscal consolidation is associated with increased pessimism about future economic prospects, reduced trust in government, and heightened expectations of rising debt, future tax increases, spending cuts, and inflation. Through randomized controlled experiments, we assess the causal impact of providing information about actual debt levels on household expectations. Informing respondents about their country’s debt levels lowers expectations of tax increases in contexts of stable debt and raises expectations of spending cuts in countries with rising debt. The effect of this information is moderated by individuals’ past experiences with fiscal consolidation, underscoring the interplay between historical context and current perceptions of fiscal policy.