Dictionary Thesaurus Word Dynamo Quotes Reference Translator Spanish

Economy of the United States

The economy of the United States is the largest national economy in the world. Its gross domestic product (GDP) was estimated as $13.8 trillion in 2007. The U.S. economy maintains a high level of output per person (GDP per capita, $46,000 in 2007, ranked at around number ten in the world). The U.S. economy has maintained a stable overall GDP growth rate, a low unemployment rate, and high levels of research and capital investment funded by both national and, because of decreasing saving rates, increasingly by foreign investors. In 2008, seventy-two percent of the economic activity in the U.S. came from consumers.

Major economic concerns in the U.S. include national debt, external debt, entitlement liabilities for retiring baby boomers who have already begun withdrawing from their Social Security accounts, corporate debt, mortgage debt, a low savings rate, falling house prices, a falling currency, and a large current account deficit. As of June 2008, the gross U.S. external debt was over $13 trillion, the most external debt of all countries in the world. The 2007 estimate of the United States public debt was 65% of GDP. As of October 1, 2008, the total U.S. federal debt exceeded $10 trillion, about $31,700 per capita. Including unfunded Medicaid, Social Security, Medicare, and similar promised obligations, the government liabilities rise to a total of $59.1 trillion, or $516,348 per household.

History

The economic history of the United States has its roots in European settlements in the 16th, 17th, and 18th centuries. The American colonies progressed from marginally successful colonial economies to a small, independent farming economy, which in 1776 became the United States of America. In 230 years the United States grew to a huge, integrated, industrialized economy that makes up over a quarter of the world economy. The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), and an entrepreneurial spirit and commitment to investing in material and human capital. The economy has maintained high wages, attracting immigrants by the millions from all over the world.

After The Great Depression

For many years following the Great Depression of the 1930s, recessions—periods of slow economic growth and high unemployment—were viewed as the greatest of economic threats. When the danger of recession appeared most serious, government sought to strengthen the economy by spending heavily itself or cutting taxes so that consumers would spend more, and by fostering rapid growth in the money supply, which also encouraged more spending. In the 1970s, economic woes brought on by the costs of the Vietnam conflict, major price increases, particularly for energy, created a strong fear of inflation. As a result, government leaders came to concentrate more on controlling inflation than on combating recession by limiting spending, resisting tax cuts, and reining in growth in the money supply.

Ideas about the best tools for stabilizing the economy changed substantially between the 1960s and the 1990s. In the 1960s, government had great faith in fiscal policy—manipulation of government revenues to influence the economy. Since spending and taxes are controlled by the president and the U.S. Congress, these elected officials played a leading role in directing the economy. A period of high inflation, high unemployment, and huge government deficits weakened confidence in fiscal policy as a tool for regulating the overall pace of economic activity. Instead, monetary policy assumed growing prominence.

Since the stagflation of the 1970s, the U.S. economy has been characterized by somewhat slower growth.

The worst recession in recent decades, in terms of lost output, occurred in the 1973-75 period of oil shocks, when GDP fell by 3.1 percent, followed by the 1981-82 recession, when GDP dropped by 2.9 percent.

Since the 1970's the US has sustained trade deficits with other nations.

Output fell by 1.3 percent in the 1990-91 downturn, and a tiny 0.3 percent in the 2001 recession. The 2001 downturn lasted just eight months.

In recent years, the primary economic concerns have centered on: high national debt ($9 trillion), high corporate debt ($9 trillion), high mortgage debt (over $10 trillion as of 2005 year-end), high unfunded Medicare liability ($30 trillion), high unfunded Social Security liability ($12 trillion), high external debt (amount owed to foreign lenders), high trade deficits, and a serious deterioration in the United States net international investment position (NIIP) (-24% of GDP). In 2006, the U.S economy had its lowest saving rate since 1933. These issues have raised concerns among economists and national politicians.

The U.S. economy maintains a relatively high GDP per capita, with the caveat that it may be elevated by borrowing, a low to moderate GDP growth rate, and a low unemployment rate, making it attractive to immigrants worldwide.

Overview

A central feature of the U.S. economy is a reliance on private decision-making ("economic freedom") in economic decision-making. This is enhanced by relatively low levels of regulation, taxation, and government involvement, as well as a court system that generally protects property rights and enforces contracts.

The United States is rich in mineral resources and fertile farm soil, and it is fortunate to have a moderate climate. It also has extensive coastlines on both the Atlantic and Pacific Oceans, as well as on the Gulf of Mexico. Rivers flow from far within the continent, and the Great Lakes—five large, inland lakes along the U.S. border with Canada—provide additional shipping access. These extensive waterways have helped shape the country's economic growth over the years and helped bind America's 50 individual states together in a single economic unit.

The number of available workers and, more importantly, their productivity help determine the health of the U.S. economy. Throughout its history, the United States has experienced steady growth in the labor force, a phenomenon both cause and effect of almost constant economic expansion. Until shortly after World War I, most workers were immigrants from Europe, their immediate descendants, or African Americans who were mostly slaves taken from Africa, or slave descendants. Beginning in the early 20th century, many Latin Americans immigrated; followed by large numbers of Asians following removal of nation-origin based immigration quotas. The promise of high wages brings many highly skilled workers from around the world to the United States.

Labor mobility has also been important to the capacity of the American economy to adapt to changing conditions. When immigrants flooded labor markets on the East Coast, many workers moved inland, often to farmland waiting to be tilled. Similarly, economic opportunities in industrial, northern cities attracted black Americans from southern farms in the first half of the 20th century.

In the United States, the corporation has emerged as an association of owners, known as stockholders, who form a business enterprise governed by a complex set of rules and customs. Brought on by the process of mass production, corporations, such as General Electric, have been instrumental in shaping the United States. Through the stock market, American banks and investors have grown their economy by investing and withdrawing capital from profitable corporations. Today in the era of globalization American investors and corporations have influence all over the world. The American government has also been instrumental in investing in the economy, in areas such as providing cheap electricity (such as from the Hoover Dam), and military contracts in times of war.

While consumers and producers make most decisions that mold the economy, government has a powerful effect on the U.S. economy in at least four areas. Strong government regulation in the U.S. economy started in the early 1900s with the rise of the Progressive Movement; prior to this the government promoted economic growth through protective tariffs and subsidies to industry, built infrastructure, and established banking policies, including the gold standard, to encourage savings and investment in productive enterprises.

Government intervention

Regulation and control

The U.S. federal government regulates private enterprise in numerous ways. Regulation falls into two general categories.

Economic regulation

Some efforts seek, either directly or indirectly, to control prices. Traditionally, the government has sought to prevent monopolies such as electric utilities from raising prices beyond the level that would ensure them extremely large profits. At times, the government has extended economic control to other kinds of industries as well. In the years following the Great Depression, it devised a complex system to stabilize prices for agricultural goods, which tend to fluctuate wildly in response to rapidly changing supply and demand. A number of other industries—trucking and, later, airlines—successfully sought regulation themselves to limit what they considered as harmful price cutting.

Another form of economic regulation, antitrust law, seeks to strengthen market forces so that direct regulation is unnecessary. The government—and, sometimes, private parties—have used antitrust law to prohibit practices or mergers that would unduly limit competition.

Bank regulation in the United States is highly fragmented compared to other G10 countries where most countries have only one bank regulator. In the U.S., banking is regulated at both the federal and state level. The U.S also has one of the most highly regulated banking environments in the world; however, many of the regulations are not safety and soundness related, but are instead focused on privacy, disclosure, fraud prevention, anti-money laundering, anti-terrorism, anti-usury lending, and promoting lending to lower-income segments.

Monetary policy

The federal government attempts to use both monetary policy (control of the money supply through mechanisms such as changes in interest rates) and fiscal policy (taxes and spending) to maintain low inflation, high economic growth, and low unemployment. A relatively independent central bank, known as the Federal Reserve, was formed in 1913 to provide a stable currency and monetary policy. The U.S. dollar has been regarded as one of the most stable currencies in the world and many nations back their own currency with U.S. dollar reserves. During the last few years, the U.S. dollar has gradually depreciated in value and its reserve currency status is no longer as high as previously.

The dollar used gold standard and/or silver standard from 1785 until 1975, when it became a fiat currency.

=Money supply=

The most common measures are named M0 (narrowest), M1, M2, and M3. In the United States they are defined by the Federal Reserve as follows:

M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.
M1: M0 - those portions of M0 held as reserves or vault cash + the amount in demand accounts ("checking" or "current" accounts).
M2: M1 + most savings accounts, money market accounts, and small denomination time deposits (certificates of deposit of under $100,000).
M3: M2 + all other CDs, deposits of eurodollars and repurchase agreements.

The Federal Reserve ceased publishing M3 statistics in March 2006, explaining that it costs a lot to collect the data but does not provide significantly useful information.. They still release all the separate statistics needed to calculate M3 manually and it would cost them basically nothing to release M3 statistics. The other three money supply measures continue to be provided in detail.

Social regulations

Since the 1970s, government has also exercised control over private companies to achieve social goals, such as improving the public's health and safety or maintaining a healthy environment. For example, the Occupational Safety and Health Administration provides and enforces standards for workplace safety, and in the case of the United States Environmental Protection Agency provides standards and regulations to maintain air, water, and land resources. The U.S. Food and Drug Administration regulates what drugs may reach the market, and also provides standards of disclosure for food products.

American attitudes about regulation changed substantially during the final three decades of the 20th century. Beginning in the 1970s, policy makers grew increasingly concerned that economic regulation protected inefficient companies at the expense of consumers in industries such as airlines and trucking. At the same time, technological changes spawned new competitors in some industries, such as telecommunications, that once were considered natural monopolies. Both developments led to a succession of laws easing regulation.

While leaders of America's two most influential political parties generally favored economic deregulation during the 1970s, 1980s, and 1990s, there was less agreement concerning regulations designed to achieve social goals. Social regulation had assumed growing importance in the years following the Depression and World War II, and again in the 1960s and 1970s. During the 1980s, the government relaxed labor, consumer and environmental rules based on the idea that such regulation interfered with free enterprise, increased the costs of doing business, and thus contributed to inflation. The response to such changes is mixed; many Americans continued to voice concerns about specific events or trends, prompting the government to issue new regulations in some areas, including environmental protection.

Where legislative channels have been unresponsive, some citizens have turned to the courts to address social issues more quickly. For instance, in the 1990s, individuals, and eventually the government itself, sued tobacco companies over the health risks of cigarette smoking. The 1998 Tobacco Master Settlement Agreement provided states with long-term payments to cover medical costs to treat smoking-related illnesses.

Direct services

Each level of government provides many direct services. The federal government, for example, is responsible for national defense, backs research that often leads to the development of new products, conducts space exploration, and runs numerous programs designed to help workers develop workplace skills and find jobs (including higher education). Government spending has a significant effect on local and regional economies—and even on the overall pace of economic activity.

State governments, meanwhile, are responsible for the construction and maintenance of most highways. State, county, or city governments play the leading role in financing and operating public schools. Local governments are primarily responsible for police and fire protection.

Overall, federal, state, and local spending accounted for almost 28% of gross domestic product in 1998.

Direct assistance

Government also provides many kinds of help to businesses and individuals. It offers low-interest loans and technical assistance to small businesses, and it provides loans to help students attend college. Government-sponsored enterprises buy home mortgages from lenders and turn them into securities that can be bought and sold by investors, thereby encouraging home lending. Government also actively promotes exports and seeks to prevent foreign countries from maintaining trade barriers that restrict imports.

Government supports individuals who cannot or will not adequately care for themselves. Social Security, which is financed by a tax on employers and employees, accounts for the largest portion of Americans' retirement income. The Medicare program pays for many of the medical costs of the elderly. The Medicaid program finances medical care for low-income families. In many states, government maintains institutions for the mentally ill or people with severe disabilities. The federal government provides food stamps to help poor families obtain food, and the federal and state governments jointly provide welfare grants to support low-income parents with children.

Many of these programs, including Social Security, trace their roots to the New Deal programs of Franklin D. Roosevelt, who served as the U.S. president from 1933 to 1945.

Many other assistance programs for individuals and families, including Medicare and Medicaid, were begun in the 1960s during President Lyndon Johnson's (1963–1969) War on Poverty. Although some of these programs encountered financial difficulties in the 1990s and various reforms were proposed, they continued to have strong support from both of the United States' major political parties. Critics argued, however, that providing welfare to unemployed but healthy individuals actually created dependency rather than solving problems. Welfare reform legislation (the Personal Responsibility and Work Opportunity Act) passed in 1996 under President Bill Clinton (1993–2001) and a Republican Congress requires people to work, job search, enter training, or receive education as a condition of receiving benefits and imposes federal limits on how long individuals may receive payments (states may adopt stronger limits).

National budget

National debt

The national debt, also known as the U.S. public debt (part of which is the gross federal debt), is the overall collective sum of yearly budget deficit owed by all branches of the United States government, plus interest. The economic significance of this debt and its potential ramifications for future generations of Americans are controversial issues in the United States.

As of January 30, 2008, the total U.S. federal debt was approximately $9.20 trillion, or about $79,000 on average for each of the 117 million American taxpayers. The borrowing cap debt ceiling as of 2005 stood at $8.18 trillion. In March 2006, Congress raised that ceiling an additional $0.79 trillion to $8.97 trillion, which is approximately 68% of GDP. Congress has used this method to deal with an encroaching debt ceiling in previous years, as the federal borrowing limit was raised in 2002 and 2003.

While the U.S. national debt is the world's largest in absolute size, a more convenient measure is that of its size relative to the nation's GDP. When the national debt is put into this perspective it appears considerably less today than in past years, particularly during World War II. By this measure, it is also considerably less than those of other industrialized nations such as Japan and roughly equivalent to those of several western European nations.

Sectors

Sectors of the U.S. Economy in 2002 - firms with payroll - All Sector Totals

Sector	Establishments	Sales, receipts, or shipments ($1,000)	Annual payroll ($1,000)	Paid employees
Mining	24,087	182,911,093	21,173,895	477,840
Utilities	17,103	398,907,044	42,417,830	663,044
Construction	710,307	1,196,555,587	254,292,144	7,193,069
Manufacturing	350,828	3,916,136,712	576,170,541	14,699,536
Wholesale trade	435,521	4,634,755,112	259,653,080	5,878,405
Retail trade	1,114,637	3,056,421,997	302,113,581	14,647,675
Transportation & warehousing	199,618	382,152,040	115,988,733	3,650,859
Information	137,678	891,845,956	194,670,163	3,736,061
Finance & insurance	440,268	2,803,854,868	377,790,172	6,578,817
Real estate & rental & leasing	322,815	335,587,706	60,222,584	1,948,657
Professional, scientific, & technical services	771,305	886,801,038	376,090,052	7,243,505
Management of companies & enterprises	49,308	107,064,264	178,996,060	2,605,292
Administrative & support & waste management & remediation service	350,583	432,577,580	206,439,329	8,741,854
Educational services	49,319	30,690,707	10,164,378	430,164
Health care & social assistance	704,526	1,207,299,734	495,845,829	15,052,255
Arts, entertainment, & recreation	110,313	141,904,109	45,169,117	1,848,674
Accommodation & food services	565,590	449,498,718	127,554,483	10,120,951
Other services (except public administration)	537,576	307,049,461	82,954,939	3,475,310
Totals	6,891,382	21,362,013,726	3,727,706,910	108,991,968

Industrial production growth rate: 3.2% (2005 est.)

Electricity:

production: 3.979 trillion kWh (2004)
consumption: 3.717 trillion kWh (2004)
exports: 22.9 billion kWh (2004)
imports: 34.21 billion kWh (2004)

Electricity - production by source:

fossil fuel: 71.6%
hydro: 5.6%
nuclear: 20.6%
other: 2.3% (2001)

Oil:

production: 7.61 million barrel/day (2005 est.)
consumption: 20.03 million barrel/day (2003 est.)
exports: 1.048 million barrel/day (2004 est.)
imports: 13.15 million barrel/day (2004 est.)
net imports: 12.097 million barrel/day (2004 est.)
proved reserves: 22.45 billion barrel (1 January 2002)

Natural gas:

production: 531.1 billion cu m (2004 est.)
consumption: 635.1 billion cu m (2004 est.)
exports: 24.18 billion cu m (2004 est.)
imports: 120.6 billion cu m (2004 est.)
proved reserves: 5.451 trillion cu m (1 January 2005 est.)

Agriculture - products: wheat, corn, other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy products; forest products; fish

Exports - commodities: capital goods, automobiles, industrial supplies and raw materials, consumer goods, agricultural products

Imports - commodities: crude oil and refined petroleum products, machinery, automobiles, consumer goods, industrial raw materials, food and beverages

Agriculture

Agriculture is a major industry in the United States and the country is a net exporter of food.

Manufacturing

USA is a leading manufacturing power in the world with a yearly industrial output 2,696,880 millions of US Dollars (data for January 2008). The US manufacturing is highly diversified and technologically advanced. Main industries are petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining.

Financial

International trade

External debt: Liabilities to foreigners

Gross U.S. liabilities to foreigners are $16.3 trillion as of the end of 2006 (over 100% of GDP). The U.S. Net International Investment Position (NIIP) deteriorated to a negative $2.5 trillion at the end of 2006, or about minus 19% of GDP.

This figure rises as long as the US maintains an imbalance in trade, specifically, when the value of imports substantially outweighs the value of exports. It should be noted that this external debt does not, for the most part, represent lending to Americans or the American government, nor is it consumer debt owed to non-US creditors. Rather, the external debt is an accounting entry that largely represents US domestic assets purchased with trade dollars and owned overseas, largely by US trading partners. However, this is not the whole picture, as foreign holdings of government debt currently amount to about 27% of the total, or some 2 trillion dollars.

For countries like the United States, a large net external debt is created when the value of foreign assets (debt and equity) held by domestic residents is less than the value of domestic assets held by foreigners. In simple terms, as foreigners buy property in the US, this adds to the external debt. When this occurs in greater amounts than Americans buying property overseas, nations like the United States are said to be debtor nations, but this is not conventional debt like a loan obtained from a bank. However, foreigners also purchase U.S. debt instruments, such as government bonds, which are forms of conventional debt.

If the external debt represents foreign ownership of domestic assets, the result is that rental income, stock dividends, capital gains and other investment income is received by foreign investors, rather than by US residents. On the other hand, when US debt is held by overseas investors, they receive interest and principal repayments. As the trade imbalance puts extra dollars in hands outside of the US, these dollars may be used to invest in new assets (foreign direct investment, such as new plants) or be used to buy existing US assets such as stocks, real estate and bonds. With a mounting trade deficit, the income from these assets increasingly transfers overseas.

Of major concern is the fact that the magnitude of the NIIP (or net external debt) is quite a bit larger than most national economies. Fueled by the sizable trade deficit, the external debt is so large that many wonder if the trade situation can be sustained in the long term. Complicating the matter is that many of America's trading partners, such as China, depend for much of their entire economy on exports, and especially exports to America. Many controversies exist about the current trade and external debt situation, and it is arguable whether anyone understands how these dynamics will play out in an historically unprecedented floating exchange rate system. While various aspects of the U.S. economic profile have precedents in the situations of other countries (notably government debt as a percentage of GDP), the sheer size of the US, and the integral role of the US economy in the overall global economic environment, create considerable uncertainty about the future.

This enormous inflow of capital from China is one of the root causes of the financial crisis engulfing the US as of September 2008: China has been buying huge quantities of dollar assets in order to keep its currency undervalued and its export economy humming, which has caused US interest rates and saving rates to stay artificially low for too long. These low interests, in turn, created the housing bubble (when interests are low, people can afford more expensive houses while keeping their monthly mortgage payments the same), whose collapse has caused the recent turmoil in the financial markets worldwide. Leading economists such as Larry Summers (former Treasury Secretary under Clinton) and Paul Krugman had been warning about this pernicious cycle since the mid-2000s.

Trade agreements

The U.S. is a member of several international trade organizations. The purpose of joining these organizations is to come to agreement with other nations on trade issues, although there is some disagreement among U.S. citizens as to whether or not the U.S. government should be making these trade agreements in the first place.

Imports and exports

The United States is the most significant nation in the world when it comes to international trade. For decades, it has led the world in imports while simultaneously remaining as one of the top three exporters of the world.

As the major epicenter of world trade, the United States enjoys leverage that many other nations do not. For one, since it is the world's leading consumer, it is the number one customer of companies all around the world. Many businesses compete for a share of the United States market. In addition, the United States occasionally uses its economic leverage to impose economic sanctions in different regions of the world. USA is the top export market for almost 60 trading nations worldwide.

Since it is the world's leading importer, there are many U.S. dollars in circulation all around the planet. The stable U.S. economy and fairly sound monetary policy has led to faith in the U.S. dollar as the world's most stable currency.

In order to fund the national debt (also known as public debt), the United States relies on selling U.S. treasury bonds to people both inside and outside the country, and in recent times the latter have become increasingly important. Much of the money generated for the treasury bonds came from U.S. dollars which were used to purchase imports in the United States.

US trade by nation

US trade of goods by nation in 2004 (services not included)
Exports				Imports
Nation	Millions of dollars	Percentage	Cumulative Percentage	Nation	Millions of dollars	Percentage	Cumulative Percentage
Canada	189,101	23.12%	23.12%	Canada	255,928	17.41%	17.41%
Mexico	110,775	13.54%	36.66%	China	196,699	13.38%	30.80%
Japan	54,400	6.65%	43.31%	Mexico	155,843	10.60%	41.40%
United Kingdom	35,960	4.40%	47.71%	Japan	129,595	8.82%	50.22%
China	34,721	4.24%	51.95%	Germany	77,236	5.26%	55.48%
Germany	31,381	3.84%	55.79%	United Kingdom	46,402	3.16%	58.63%
South Korea	26,333	3.22%	59.01%	South Korea	46,163	3.14%	61.77%
Netherlands	24,286	2.97%	61.98%	Taiwan, ROC	34,617	2.36%	64.13%
Taiwan	21,731	2.66%	64.64%	France	31,814	2.16%	66.29%
France	21,240	2.60%	67.23%	Malaysia	28,185	1.92%	68.21%
Singapore	19,601	2.40%	69.63%	Italy	28,089	1.91%	70.12%
Belgium	16,877	2.06%	71.69%	Ireland	27,442	1.87%	71.99%
Hong Kong	15,809	1.93%	73.63%	Venezuela	24,962	1.70%	73.69%
Australia	14,271	1.74%	75.37%	Brazil	21,157	1.44%	75.13%
Brazil	13,863	1.69%	77.07%	Saudi Arabia	20,924	1.42%	76.55%
Malaysia	10,897	1.33%	78.40%	Thailand	17,577	1.20%	77.75%
Italy	10,711	1.31%	79.71%	Nigeria	16,246	1.11%	78.85%
Switzerland	9,268	1.13%	80.84%	India	15,562	1.06%	79.91%
Israel	9,198	1.12%	81.96%	Singapore	15,306	1.04%	80.95%
Ireland	8,166	1.00%	82.96%	Israel	14,527	0.99%	81.94%
Philippines	7,072	0.86%	83.83%	Sweden	12,687	0.86%	82.81%
Spain	6,641	0.81%	84.64%	Netherlands	12,605	0.86%	83.66%
Thailand	6,363	0.78%	85.42%	Belgium	12,448	0.85%	84.51%
India	12,095	1.55%	86.16%	Russia	11,847	0.81%	85.32%
Saudi Arabia	5,245	0.64%	86.80%	Switzerland	11,643	0.79%	86.11%
Venezuela	4,782	0.58%	87.39%	Indonesia	10,811	0.74%	86.84%
Colombia	4,504	0.55%	87.94%	Hong Kong	9,314	0.63%	87.48%
Dominican Republic	4,343	0.53%	88.47%	Philippines	9,144	0.62%	88.10%
United Arab Emirates	4,064	0.50%	88.97%	Iraq	8,514	0.58%	88.68%
Chile	3,625	0.44%	89.41%	Australia	7,544	0.51%	89.19%
Argentina	3,386	0.41%	89.82%	Spain	7,476	0.51%	89.70%
Turkey	3,361	0.41%	90.24%	Algeria	7,409	0.50%	90.21%
Costa Rica	3,304	0.40%	90.64%	Colombia	7,290	0.50%	90.70%
Sweden	3,265	0.40%	91.04%
South Africa	3,172	0.39%	91.43%
Egypt	3,105	0.38%	91.81%
Others	67,023	8.19%	100.00%	Others	136,661	9.30%	100.00%
Total Exports:	817,939			Total Imports:	1,469,667

Wealth

Distribution of wealth

Poverty

There is significant disagreement about poverty in the United States, particularly over how poverty ought to be defined. Using radically different definitions, two major groups of advocates have claimed variously that (a) the United States has eliminated poverty over the last century; or (b) it has such a severe poverty crisis that it ought to devote significantly more resources to the problem. The debate includes how poverty should be defined.

Measures of poverty can be either absolute or relative. Absolute poverty is defined in real dollar values, whereas relative poverty is a comparison of the highest to the lowest standard of living at a particular time period.

Private income

Distribution of income

Income inequality

The United Nations Development Programme Report 2006 on income equality ranks the United States as tied for 73rd out of 126 countries, as measured by the Gini coefficient. (See List of countries by income equality.) The Gini coefficient for the U.S. was 45 in 2007, according to the CIA. The richest 10% make 16 times as much as the poorest 10%, and the richest 20% make 8 times as much as the poorest 20%. (See List of countries by income equality.)

International comparison

Unemployment

January of 2008 the unemployment rate for adult men were 4.4%, adult women 4.2%, and 18% for teenagers.

The effect of military expenditure

Most economic models have shown that military spending by the United States Government has diverted resources from productive uses such as consumption and investment, which has ultimately slowed growth and reduced employment. Conservative estimates project that by 2017 the Iraq and Afghan wars will have cost the U.S. budget between $1.7 trillion and $2.7 trillion. Interest on money borrowed to pay those costs could alone add a further $816 billion to that bottom line. Nobel Prize-winning economist Joseph E. Stiglitz even says that estimating all economic and social costs might push the U.S. war bill up toward $5 trillion by 2017. This figure includes the cost to the U.S. economy of global oil prices that have quadrupled since 2003, an increase blamed partly on the Iraq war.

Economic predictions and forecasting

Predictions about the direction of the United States economy in the short term and long term are crucial factors in determining federal government policies, business decisions, and Federal Reserve decisions. Several institutions make economic predictions, including: Global Insight, and the UCLA Anderson Forecast Various state agencies, including the California Department of Finance, also make predictions.

Other statistics

Historic exchange rates:

	Jan 2008	Jan 2007	Jan 2006	Jan 2005	Jan 2004	Jan 2003	Jan 2002	2001*	2000*	1999*	1998	1997
Canadian dollars per U.S. dollar	0.982	1.165	1.164	1.204	1.293	1.576	1.600	1.548	1.485	1.485	1.483	1.384
Japanese yen per U.S. dollar	112.1	119.0	118.1	102.5	107.2	118.7	132.6	121.5	107.7	113.9	130.9	120.9
Euros per US dollar	0.6803	0.7577	0.8444	0.7387	0.7939	0.9534	1.128	1.062	0.9947	0.8557	-	-
British pounds per U.S. dollar	0.5009	0.5104	0.5812	0.5209	0.5600	0.6212	0.6981	0.6944	0.6596	0.6180	0.6037	0.6106
Chinese renminbi per U.S. dollar	7.3141	7.8175	8.0755	8.2865	8.2867	8.2871	8.2867	8.2782	8.2803	8.2789	8.2796	8.2982
French francs per U.S. dollar	-	-	-	-	-	-	-	-	-	5.65	5.899	5.836
Italian lire per U.S. dollar	-	-	-	-	-	-	-	-	-	1,668.7	1,763.2	1,703.1
German deutschmarks per U.S. dollar	-	-	-	-	-	-	-	-	-	1.69	1.969	1.734
Note: financial institutions in France, Italy, Germany, and eight other European countries started using the euro on 1 January 1999, with the euro replacing the local currency for all transactions in 2002. Their 1999 figures are for January.
*January 1 exchange rates