Catherine De Vries: Much Ado About Debt – Understanding How People Reason About Debt (Un-)Sustainability (Keynote Speech)

To mitigate the economic consequences of the COVID-19 pandemic, governments have spent and borrowed on a scale not seen since the Second World War. With sovereign debt soaring, the issues of ‘how much debt is too much debt’ and ‘what to do about debt’ are likely to move once again from the technocratic realm of quiet politics into the electoral realm of loud politics. This raises the question of how ordinary people reason about the debt. This present study contributes to our understanding of the demand side of fiscal policy by providing novel evidence on overlooked issues in existing research. First, how do concerns over high debt levels compare with concerns over other salient issues such as climate change or illegal immigration? Second, are people concerned about high debt more likely to belong to a specific party, ideological family, or socio-economic group? Third, how malleable are these concerns, and with what consequences for policy preferences? Fourth, do rising government debt levels lead households to anticipate events such as higher inflation, lower growth rate, or a higher risk of future fiscal adjustment (i.e. tax increases or benefit cuts)? We answer these questions using observational and experimental survey data collected in Great Britain in the fall of 2021.