A recent IMF paper, "Perception of Public Debt and Policy: Evidence from Cross Country Surveys," examines the responses of 27,000 participants to assess their knowledge and beliefs about how government debt influences expectations of tax and expenditure policy changes. Individuals often underestimate their debt levels, especially in countries with high debt, and the burden of fiscal adjustments will disproportionately affect them. People expect that tax increases will outweigh spending cuts when considering how debt levels can be reduced.
The most interesting part of the survey is that respondents do not understand the relationship between government expenditures and budget deficits, tax revenues and budget deficits, and budget deficits and government debt. The analysts find that only about 50% of the respondents correctly identify the relationships. There is significant government budget illiteracy.
Most people do not have accurate perceptions of their debt levels. The average person does not understand government budget dynamics, nor do they appreciate the current levels of debt.
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