Beliefs about Government Debt Valuation and Sustainability

Ricardo Delao and Wenhao Li

No 35612, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What ultimately supports the market value of U.S. government debt? We measure valuation frameworks: the perceived channels that back debt value. We survey bond investors, registered voters, and economics or finance graduate-degree holders, asking them to allocate debt value across six sources derived from open-ended answers and the literature. Global safe-asset demand and permanent rollover together account for almost half of perceived value in every group, so debt value heavily relies on investor absorption rather than on government resources. Future primary surpluses, the textbook debt backing, receive about 16% even among the graduate-trained; roughly one-third say they provide little or no support. Allocations concentrate within respondents but disperse across them, forming belief archetypes that vary little with fiscal knowledge. A model shows why belief elicitation matters: identical debt quantities and price schedules can conceal differences in saleable public backing and stress-resilient demand, and therefore in debt sustainability. Concern about debt sustainability is widespread, and all three groups put the ten-year crisis odds near 50%. However, among respondents expressing concern, 90% of voters report that it is not decisive in their voting decisions, and 72% of investors report no concrete portfolio change.

JEL-codes: E62 G01 G12 G40 H63 (search for similar items in EconPapers)
Date: 2026-08
Note: AP EFG ME PE POL
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