Debt

Atomic Dawn has no loans to take out and no bonds to issue. A country has one treasury figure, and when it is negative, that is the country's debt. Deficits deepen it, surpluses pay it down and interest adds to it each month. No purchase, action or payment ever requires money in the bank: paying from an empty treasury just adds to the debt.

What limits spending is therefore not the balance but its consequences: interest, the political cost of the taxes needed to cover it, and the cuts the budget makes on its own when it runs short.

Postwar debts

The campaign opens with the war debts of 1946. Each country starts with a debt set as a share of its opening GDP. The United Kingdom carries the heaviest, two and a half years of GDP; the United States starts at about 1.2 years. Countries without a war debt start at zero.

The Budget screen shows the debt's share of GDP beside a negative treasury.

Interest

Debt costs 1% a year in interest, paid monthly and booked as the Debt Service line. The rate is low because the game has no inflation: historically, inflation rather than repayment wore the war debts down through the 1950s, so the game's rate sits near what lenders earned above it.

The Debt Interest Rate modifier adds to that rate, down to -5% a year. Below zero the debt shrinks on its own, booked as income under Debt Service.

Financial repression

From 1946 the United States, the United Kingdom and France hold Postwar Financial Repression, which lowers their interest by 3 points to -2% a year: interest held below inflation, so their war debts erode. Savers pay for it with a little unrest. It ends with each country's return to market interest rates: in the United States with the Treasury-Federal Reserve accord of March 1951, in Britain with the end of cheap money in November 1951, and in France with its stabilization loan in May 1952.

A positive treasury earns nothing.

The political cost of debt

Voters do not punish deficits as such, and debt itself adds no tax pressure. They notice the interest. Once debt service takes more than 15% of tax revenue, each further 10% of revenue costs half a point of government support a month, up to two points. At the normal 1% rate even the United Kingdom's postwar debt stays under that threshold; it takes much larger debts, or a higher rate, to reach it.

Deficits and surpluses: fiscal flex

Laws change through slow reforms, so a country's balance cannot be fixed in a month. Instead, each month the budget absorbs part of the gap between income and spending by adjusting how fully each budget law is funded.

1. The gap. The month's recurring balance at authorized rates, as a share of GDP. One-off movements, such as a single purchase or treaty payment, are left out so they do not swing every programme.
2. How much is absorbed.
   • 70% of a deficit.
   • 50% of a surplus while the country is in debt, so the other half pays the debt down.
   • 90% of a surplus once the country has no debt, so savings do not pile up.
3. Who absorbs it. The absorbed amount is shared among budget laws by their size and their funding elasticity. In a deficit, spending laws are funded below 100% and tax laws above it; in a surplus, the reverse, with tax cuts taking half the weight of extra spending.
4. Limits. Funding stays between 50% and 150%, and moves a quarter of the way to its target each month.

Whatever is not absorbed moves the treasury.

Elasticity

Each budget law has an elasticity that decides how much it flexes:

A funded law's whole effect scales with its funding, not just its money: a healthcare law funded at 118% gives 118% of its public health benefit, and a tax funded above 100% brings more of its growth penalty and unrest.

The consequence is that a country with an ambitious, mostly mandatory spending agenda cannot cut its way out of a deficit. Its taxes rise instead, with their costs in support and Unrest, and anything its tax ceiling stops is borrowed.

Where to see it

A funded law shows "funded 118%" wherever its effects are listed. The Policies screen shows the funding and the authorized values beside the funded ones, and the Budget screen and the treasury tooltip summarize the month's flex.

Paying debt down

A country lowers its debt by running a surplus, through tax reforms, spending cuts, law changes, growth, or negative real interest. Fiscal flex helps in both directions: a surplus is partly spent, but half of it pays down debt; a deficit is mostly absorbed, so debt grows more slowly than the raw gap.

Fiscal flex is built and in play; its absorption shares are still being calibrated across long-run test games, so the exact percentages may change.

Related articles

• Money & the Budget: the budget as a whole.
• Taxation: how revenue is raised.
• Stability: what lost government support leads to.