Are Future Taxes Discounted?

IN THIS PAPER, I examine empirically the question of whether or not the public recognizes the future taxes implied by current deficitfinanced expenditures, as discussed by Barro [1]. It seems that such recognition does not occur but that, by a new hypothesis presented here, the aggregate economy behaves much as if it did. This alternative hypothesis relies on the widely accepted efficient markets and permanent income hypotheses, and it requires considerably less sophistication and information on the part of the average economic agent than does Barro's hypothesis.