Navigating fiscal fog: Household expectations in an uncertain fiscal environment

Using a novel survey of U.S. households with randomized information treatments, we examine how fiscal policy uncertainty affects household macroeconomic expectations and consumption decisions. We find that news about a 3 percentage point increase in government spending growth crowds out household consumption by approximately 1 - 1.5 percentage points. However, this effect is attenuated by 0.27 - 0.6 percentage points when fiscal uncertainty is introduced, primarily due to weakened government spending growth expectations. These average responses mask substantial partisan heterogeneity, as respondents from the party opposing the sitting administration show stronger initial crowd-out responses but significantly smaller reactions under uncertainty. A structural model calibrated to our survey data further reveals that fiscal uncertainty reduces the government spending multiplier primarily through weakened investment responses. Our results highlight the importance of fiscal communication in managing macroeconomic outcomes in uncertain environments.