The Ricardian Equivalence Theorem asserts that government tax cuts financed by issuing national debt will:

According to the Ricardian Equivalence proposition, associated particularly with Robert Barro's modern formulation, rational and forward-looking households recognise the government's intertemporal budget constraint. Suppose the government reduces taxes today without reducing expenditure. The resulting budget deficit is financed through government borrowing. Households understand that the additional government debt will eventually have to be financed through higher future taxes. Therefore, instead of spending the entire current tax reduction, households increase their saving in anticipation of future tax liabilities. In the strict Ricardian Equivalence case: Increase in Private Saving = Decrease in Government Saving Therefore, national saving remains unchanged. As a result, debt-financed tax reductions do not necessarily increase aggregate consumption or aggregate demand. Under the strong assumptions of Ricardian Equivalence, consumption, national saving and interest rates remain unaffected by the choice between current taxation and debt financing.