Coping with debt: Loans, but not taxes, elicit maladaptive cardiovascular stress responses

Introduction: The global financial crisis has left governments struggling to reduce their budget deficits. Loans and taxes are two important financial instruments for governments to close their budget gaps. According to models of temporal discounting and expected utility individuals should experience loans as a greater loss than taxes, depleting psychological resources and reducing individuals’ capacity to cope with stressors. The present research examined patterns of cardiovascular (CV) reactivity associated with exposure to loans or taxes. Methods: We randomised 73 students to one of three groups: loans, taxes, control (baseline). Participants in the experimental groups imagined finishing university with debts and having to repay the sums outstanding as a proportion of their salaried income over the next 30 years either via a loan repayment, or via taxes. Participants in the control group imagined finishing university, and then working in salaried employment over the next 30 years. All participants then performed a variant of the Trier Social Stress Test (TSST), whilst CV responses were monitored [BP (blood pressure), ECG (electrocardiogram), ICG (impedance cardiogram)]. Results: Compared to the control group, participants in the loan group exhibited maladaptive CV responses during the stress task (higher BP and higher total peripheral resistance [TPR]). Conversely, participants in the taxes group exhibited more adaptive CV responses and did not differ from the control group. Conclusions: Economic considerations have dominated debates surrounding macro-financial performance. The present research highlights the need to consider the psychological costs and benefits of tax-based and loan-based financial instruments.