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Trade Deficit and General Economics

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ConservativeUK
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Post: #1
Trade Deficit and General Economics

HI everyone.
need to correct my trade deficit it has gone from at least a 20 billion euro surplus to a 7 billion deficit and this is preelection. im trying to secure new trade agreements bt im not sure how long i can last doing this.
i currently have a 56 billion surplus and have cut debt interest already to around 102 billion from 110 billion, I gave a pretty loose budget last time and didnt please voters, my popularity fell. However im just wondering how much i can give away is this budget and cut my debt interest below 80 billion in the next 4 years.
thanks,

11.12.2010 18:17
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Hemothep
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Post: #2
RE: Trade Deficit and General Economics

If you want to increase your trade surplus (I'm seeing 42 billion in Q87) you definitly need to increase your money supply, it's smaller than your GDP.
It would also help to decrease labour costs, i.e. cuting income tax (while increasing sales tax) and make decisions that favor employers.

For your overall economy I would suggest to start enacting reforms (negative income tax could skyrocket your economy) and stop saving on the wrong corners. Your low spending in education and infrastructure will come back to hunt you.

12.12.2010 18:53
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ConservativeUK
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Post: #3
RE: Trade Deficit and General Economics

spending on infrastructure has been protected from cuts bt i acknowledge it has not seen any spending increases ill raises VAT in order to increase spending in that area.
education i have been cutting in order to cut my national debt and i will now increase spending, i increased it by 2% in the last budget, in following budgets it will rise from 2 to 5% increases for the next parliament.
however what does negative income tax do?

12.12.2010 19:24
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RichardAWilson
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Post: #4
RE: Trade Deficit and General Economics

I'd say go with the Flat-Income Tax and Labor Market Reform.

12.12.2010 22:04
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Hemothep
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Post: #5
RE: Trade Deficit and General Economics

negative income tax decreases administration spending a little with almost no effect on infrastructure, decreases unemployment enorm and as a result of that stimulates economic growth. As a result net income rises which gives you more income tax revenue for virtually no costs.

12.12.2010 22:13
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Kickass Q.
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Post: #6
RE: Trade Deficit and General Economics

ConservativeUK Wrote:
however what does negative income tax do?


the description explains it well. It simplifies the income tax code significantly, so cuts back on administration costs as well as benefits business flexibility, and provides a relatively unbureaucratic minimum employee income. In game it amounts to a reduction in bureaucracy, increase in income tax revenue, decrease in GINI coefficient, and a nice boost to the economy, with the only downside being an increase in inflation. Flat income tax is pretty explanatory and has most of the benefits of a negative income tax, except there's no GINI reduction (it may well increase in fact) and inflation doesn't increase, while your stock value rises more than with a negative income tax. If you're looking for a highly efficient approach to equitable wages I strongly recommend the negative income tax (my preference), or if you're looking for raw economic growth and capital accumulation then a flat tax is what you want. Either way it's a good move.

OH also, the negative income tax will increase domestic demand a fair amount and so if you're concerned about a establishing a strong trade surplus you should do something to offset that. I would personally recommend increasing your VAT (or shifting some of your income taxes to VAT with a disproportionate VAT increase, since this will boost productivity while suppressing domestic demand) and money supply, and one quarter before or after implementing the negative income tax. The negative income tax gains to growth will most likely offset the losses from the increased taxes, plus then you can expand investment into infrastructure and education with the new revenue, which (especially early on in the game) tends to be a profitable venture when investment isn't TOO extreme even just from government budget perspective alone, and it also does wonders for the private sector. After that you're all set-up and you can repeal the tax increases as your economy grows, or you know whatever is in line with your views.

OH (yes yet another edit lol). Definitely implement administration reform if you survive long enough. It does wonders for your budget and bureaucracy index.

This post was last modified: 13.12.2010 03:39 by Kickass Q..

13.12.2010 03:29
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ConservativeUK
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Post: #7
RE: Trade Deficit and General Economics

Economic stagnation, my economy is not growing as fast as i would like my popularity and influence is not high enough to initiate reforms which could strengthen my economy, im trying to get my alliance to vote for negative income tax.
I aim to bring debt down to 1 trillion euros over the next 8 years. if i survive that long, someone please help me.

15.12.2010 20:45
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