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Public Debt and the Demand for Government Spending and Taxation

In this paper we examine whether people’s beliefs about government debt affect their attitudes towards government spending and taxation. We conduct two online experiments in the United States in which we inform half of the participants about the current debt-to-GDP ratio. Thereafter, all of our respondents complete a series of questions measuring their attitudes towards government spending and taxation using self-reports and behavioral measures. We find that most people under-estimate the debt-to-GDP ratio and favor a cut in government spending once they learn about the actual amount of debt, but do not on average alter their attitudes towards taxation. We show that our effects operate through changes in beliefs about fiscal sustainability. Finally, we provide evidence that our treatment effects persist in a four-week follow-up.