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

Utilizing large-scale surveys of more than 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 fiscal policy. Our findings reveal substantial gaps in public understanding of fiscal policy. Individuals consistently underestimate debt levels in high-debt countries and tend to believe that fiscal adjustments will disproportionately affect them. A small group of older individuals holding financial assets demonstrates a significantly better understanding of the fiscal situation and its associated trade-offs. Greater lifetime exposure to fiscal consolidation is linked to 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 find that 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 impact of this information is moderated by individuals’ past experiences with fiscal consolidation, underscoring the interplay between historical context and current perceptions of fiscal policy.