I got my deficit down to like 1.7 billion, and then my credit rating decreased to AA for some reason
This caused my deficit to get to something like 150 billion, due to increased tax rates, so I had to take more drastic measures to decrease it again, and my popularity fell. Credit rating seriously shouldn’t be decreased when your deficit continues going down, which it was
Was your deficit shrinking as a result of a growing economy, or due to tax increases/spending decreases? When determining the credit worthiness of a country, credit rating agencies take into consideration both cyclical (short-term, determined by the economic cycle) and structural (long-term, determined by policy changes) budgetary factors.
For example, a country’s deficit might be shrinking over time, but mostly as a result of a growing economy. In this case, this is merely a cyclical improvement in the deficit. If tax rates were decreased and spending was increased during this period, this might reduce fiscal capacity in the long-term, thus leading to a structural weakening in the deficit. If the economy is doing well, this weakening might be masked in the short-term by improved tax income. However, if the economy weakens, those decreased tax rates or increased spending would likely increase your deficit substantially.
I’m not sure to what extent the simulation takes this into account, but I think there is definitely a consideration of short-term vs long-term budgetary trends, which is why your credit rating doesn’t necessarily correlate with your deficit/surplus.
The credit rating stuff only happens every 6 months, not every turn, so it might be responding to an earlier change. It takes into account the deficit, but also more heavily the debt/GDP ratio.
You can cut the deficit, but if your GDP drops a lot, your debt/gd ratio may have risen a fair bit, and that makes the ratings agencies nervous.
Also any money printing policies (Quantitative Easing or Helicopter money) will also upset the credit ratings agencies.