The Beginning:

Any simulation is only going to be as good as the starting data and the strength of the model. I had to keep the economic model itself fairly simple or there would have been hundreds of icons and the game would be less understandable. While the model may not include all the subtleties required for a true model of the economy it does take into account many of the broad strokes which I will outline below. The other part of the equation is accurate starting values, which are listed below with sources.

Data	Value	Source
2010 GDP	$14.439T	August CBO Table 1-2
2010 Outlays (not including interest)	$3.448T	August CBO Table 1-2
2010 Revenues	$2.264T (15.7% of GDP)	August CBO Table 1-2
2009 Debt	$8.868T	August CBO Table 1-6
2010 Interest	$0.196T (2.2% on Debt)	August CBO Table 1-6
Base Economic Growth	~4.5% Annually	August CBO Table 1-2
U6 Unemployment	16.4%	November BLS Table A-12
Labor Force Size	154M	November BLS Table A
Energy Breakdown and Cost		EIA AEOs

Rough Spread Sheet:

Basic Spread Sheet that lead to the concerns (sources sited in the spread sheet) to create the game. It shows the "Bankruptcy" date of the US going from 2086 (CBO Projections carried forward) to 2035 (after adding in a better interest rate model, recessions, and Medicare Liability costs).

Cloud Overview:

Below is a basic outline of how the economic model works. Green lines indicate a positive association, i.e. when consumers spending is growing the economy is growing. A red line indicates a negative association, i.e. when taxes are raising consumer spending is falling. Blue lines indicate points where you have an input into the economic model. The relative size of the line/arrow indicates the strength of the linkage. There are lots of smaller factors and cross links, but adding in everything would make the chart unreadable.

Government:

As the player you have almost total control over the government segment of the economy. The actions that you take, or do not take, will directly affect government expenses. Since the game starts in 2010 it would be unfair to leave in the stimulus and TARP spending as part of the government Outlays. Starting in 2011 the game will automatically start pulling these programs out, but the spending does not fully wind down unto 2013. In addition the game also simulates the Bush tax cuts expiring in 2010 and the effective tax rate does rise slightly without any further action. Medicare unfunded liabilities, promises to pay for services without the revenue to back them, starts to come due in 2017 and totals $89T over the next 75 years (Source SSA). The full brunt of these unfunded liabilities does will not hit until 2025-2030 just as the simulation is ending. All current Government spending expands at the rate of inflation.

Consumer Spending:

Consumers make up about 70% of the economy and the biggest factors affecting their economic behavior are: Taxes, Unemployment, Wages, Energy Costs, and Interest Rates. Taxes outweigh employment as the single largest factor as everyone has to pay taxes and one percent more taken by the government means one percent less that the consumer has left to spend. Unemployment does have a slight physiological component in the model as the further it deviates from the long term normal the more harmful or helpful it is to economic growth. While a full population projection would be outside the scope of this economic model the importance of senior spending does increase as the game progresses.

Business Activity:

Business make up the remaining 30% of the economy and the biggest factors effect their economic behavior are: Interest Rates, Taxes, Energy Costs, Wages and Unemployment. Interest rates have the most profound effect on businesses because if it is prohibitively expensive to finance a business they will not expand or be formed. Conversely if it cheap to finance business activity they will be more likely to take risks. The business model also takes into account current economic conditions and expectations of future conditions. If businesses feel the prospects are going to be worse in the future they will expand more slowly than the raw economic figures may otherwise indicate.

Taxes:

The tax rate on GDP for 2010 is artificially low at 15.6% because of the weak economic conditions and Government expenses are artificially high because of the high unemployment. It would be unfair to assume that the current level of tax revenue, as a percentage of GDP, would remain at these levels should the economy improve. Thankfully the CBO does offer some insight into this tax modeling. The revenue, as a percentage of GPD for years 2017-2019 are 20.0% which is the baseline tax rate that the model uses. As unemployment and the economy grows the effective tax rate will automatically adjust from the suppressed level of 15.6% to the more expected rate of 20%. Of course you can change this baseline of 20% through raising or lowering taxes.

Energy Prices:

I choose Energy to be part of the economic model because it represents a volatile measure of inflation and it is also part of the economy the government could have a profound effect on. For the starting usage percentages and costs I pulled the 2010 information for the Energy Information Administration site. However, all the energy prices and supply/demand charts are in different measures. In order to place this into the economic model I needed to convert everything into a unifying cost measure. I used cost per kilowatt hour for this and had to convert barrels of oil, short ton of coal, cubic feet of natural gas, all into a relative cost per kilowatt hour. Note: Converting from Joules to KW/h is an easy conversion.

Random Events:

There are four random events that can take place two with positive effects, two with negative effects. The Major Gulf Hurricane is the minor negative effect that costs the government $50B over one year and causes a slight rise in oil and energy prices. The Solar Energy Breakthrough is the minor positive effect; it costs the government nothing but increases the use of solar energy and reduces energy costs slightly. The Major World event is the major negative effect and can only happen once. It costs the government $600B over three years and causes a major rise in oil and energy prices. The Nuclear Fusion Breakthrough is the major positive effect and it can only happen once. It costs the government nothing but increases the use of nuclear power and reduces energy cost dramatically.