Barro-Ricardo Equivalence

Barro-Ricardo Equivalence - “Are Government Bonds
Net Wealth?”

Basic Idea behind the Barro-Ricardian Equivalence:

An economic theory that suggests that a debt-financed tax cut
(government budget deficits) aimed at stimulating demand do
not affect the total level of demand in the country even in the
short run.

Traditional view on Government Debt:
Traditionally it is believed that a debt-financed tax cut will
stimulate consumption as the reduction in tax raises disposable
income. (unless the economy is already operating at full
employment).