4036-E-Tighter-Fist-Govt-6ed.pdf

Instructions

This spreadsheet is for use by the Government Team during Exercise Tighter Fist.

It enables you to quickly compute the implications for Government Expenditure, Budgetary Balance, the National Debt and the Unemployment Rate resulting from changes in expenditure on Pensions, Infrastructure, Education, Defense, and Internal Security.

To use the spreadsheet click on “Government” at the bottom of this sheet and enter your decisions with regard to expenditure on Pensions, Infrastructure, Education, Defense and Internal Security for the next fiscal year. Note that you may only change values appearing in the yellow shaded cells. When you enter your choices, the economic and budgetary implications of these choices are immediately computed. Note that the economic policy targets of Unemployment Rate and Public Debt have been highlighted in blue to keep you focused on these important government objectives. These values change as a result of your budgetary expenditure decisions.

The budget for the current year (2008) as well as data on tax revenue, borrowing and certain economic information is provided to assist you in making your budgetary choices.

With the exception of the pension expenditure and public debt servicing, the values for 2009 are initially the same as the expenditure values for 2008. Expenditures for pensions have been increased to allow for an increase in the number of pensioners in 2009.

Pension benefit rates per person have not changed. Public debt charges have increased because the deficit in the previous year has increased the size of the public debt upon which interest has to be paid. With the effective tax rate unchanged, the government’s tax revenue will continue to increase in 2009 because the economy is expected to grow over that year.

Since you are required to come to a decision regarding next year’s defense budget, the 2008 force structure and defense budget are provided on the sheet “Defense Information” to give you some basis for anticipating what the Defense Team will be requesting.

Save your work under a new file name so that you can then run the spreadsheet again to explore and compute different alternatives. Printing out the results of each run will make it easier to assess and compare these alternatives.

EXERCISE TIGHTER FIST GOVERNMENT TEAM

(all money figures in constant 2008 lovas) Economic Planning Data:

Change % Percentage

GDP (millions of lovas) 207500 214763 7262 3.5% Population ('000) 10894 11123 229 2.1% GDP per capita (thousands of lovas) 19.05 19.31 0.26 1.4% Unemployment rate 8.5% 8.5% 0.0 0.0% Interest rate 9% 9% 0.0 0.0% Income Tax Rate 34.00% 34.00% 0.0 0.0%

Government Expenditures:

(millions of lovas)

Total Share Total Share Change % Percentage

Pensions 9900 13.7% 10500 14.0% 600 6.1% Education 12677 17.5% 12677 16.9% 0 0.0% Infrastructure 6900 9.5% 6900 9.2% 0 0.0% Defense 5782 8.0% 5782 7.7% 0 0.0% Internal Security 2088 2.9% 2088 2.8% 0 0.0%

Intelligence Service 650 650 0 0.0% National Police 900 900 0 0.0% Border Guards 538 538 0 0.0%

Public debt charges 31300 43.2% 33242 44.3% 1942 6.2% Other 3840 5.3% 3840 5.1% 0 0.0% Total 72487 100.0% 75029 100.0% 2542 3.5%

Defence as proportion of GDP: 2.8% 2.7%

Government Revenues: 2008 2009 (millions of lovas) Revenue 70550 73019 2469 3.5% Borrowing (deficit) 1937 2009 72 3.7% Total 72487 75029 2542 3.5%

Public Debt: 369350 371359 2009 0.5%

2008 2009

2008 2009

EXERCISE TIGHTER FIST GOVERNMENT TEAM

Defense Information 2008

Existing Force Structure Total Personnel Regular Conscript Reserve Totals

Number of HQs 4 Navy 11900 2800 600 15300 Army 30500 71000 32500 134000

Forces Regular Conscript Reserve Totals Air Force 9500 0 0 9500 Frigates 10 2 0 12 GHQ 2500 0 0 2500 River patrol vessels 8 4 2 14 Total 54400 73800 33100 161300 Infantry battalions 4 16 5 25 Armored battalions 6 6 6 18 Fighter air squadrons 4 0 0 4 Transport squadrons 6 0 0 6

Budget Budget Distribution (thousands of lovas)

Navy Army Air Force GHQ Totals Navy Army Air Force HQ Totals Personnel Costs 529200 2811000 380000 125000 3845200 Personnel Costs 49% 77% 43% 81% 67% O&M Costs 436000 751000 375000 0 1562000 O&M Costs 41% 20% 42% 0% 27% Procurement Costs 80000 75000 100000 0 255000 Procurement Costs 7% 2% 11% 0% 4% HQ Overhead Costs 30000 30000 30000 30000 120000 HQ Overhead Costs 3% 1% 3% 19% 2% Totals 1075200 3667000 885000 155000 5782200 Totals 19% 63% 15% 3% 100%

Annual Pay Rates (thousands of lovas)

Regular Conscript Reserve Navy 40 16 14 Army 40 16 14 Air Force 40 16 14

GHQ 50

Government Expenditure Distribution

14%

17%

10%

8%3%

43%

5%

Pensions Education Infrastructure Defense Internal Security Public debt charges Other

Government Expenditure Distribution

14%

17%

9%

8% 3%

44%

5%

Pensions Education Infrastructure Defense Internal Security Public debt charges Other