Much ado about debt?

With sovereign debt soaring, the issues of "how much debt is too much debt" and "what to do about it'' are likely to move once again from the technocratic realm of "quiet politics" into the electoral realm of "loud politics." This study extends our understanding of the demand side of fiscal policy by mapping the constraints (if any) that voters impose on policymakers in this policy realm. We have in mind three types of constraints: 1) the existence of an issue public, 2) persistent –-as opposed to malleable–- concerns over debt (un)sustainability, 3) a shared mental model regarding the consequences of unsustainable debt levels for inflation, growth, taxation and social spending.  Specifically, deficit and debt-friendly policy makers are more constrained (and fiscal conservatives less so) if they face an issue public (a plurality who strongly cares about low deficits and debt), cannot easily manipulate people’s beliefs about debt (un)sustainability and are worried about behavioral responses to high debt levels (including inflation or tax expectations).

Using an original data collection effort in Great Britain, we find little evidence to support the existence of such constraints. We discuss implications for future research, including the need to shift to elite-centric research designs.

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• Charlotte Cavaille
• debt
• fiscal policy