United States Economy: Decoding the Economic Tapestry of the United States

By Fouad Sabry

What is United States Economy

The United States of America is a mixed economy that is highly developed and advanced. Not only is it the largest economy in the world in terms of nominal GDP, but it is also the second largest economy in terms of purchasing power parity (PPP), followed by China. As of the year 2022, it has the seventh highest nominal per capita GDP in the world and the eighth highest per capita GDP in terms of purchasing power parity. In nominal terms, the United States of America accounted for 25.4% of the global economy in 2022, while in terms of purchasing power parity, it was approximately 15.6%. The United States dollar is the currency of record that is used the most in international transactions. It is also the reserve currency of the world. It is supported by a vast market for U.S. treasuries, its function as the reference standard for the petrodollar system, and its connected eurodollar. In a number of nations, it serves as the official money, while in others, it is the currency that is used in everyday transactions.

How you will benefit

(I) Insights, and validations about the following topics:

Chapter 1: Economy of the United States

Chapter 2: Reaganomics

Chapter 3: Economy of Switzerland

Chapter 4: Economy of Australia

Chapter 5: National debt of the United States

Chapter 6: Comparison of Canadian and American economies

Chapter 7: Economic policy of the Bill Clinton administration

Chapter 8: Fiscal policy of the United States

Chapter 9: United States federal budget

Chapter 10: History of the United States public debt

Chapter 11: Economic policy of the George W. Bush administration

Chapter 12: Income inequality in the United States

Chapter 13: Great Recession

Chapter 14: Financial position of the United States

Chapter 15: Foreign trade of the United States

Chapter 16: Economic policy of the Barack Obama administration

Chapter 17: Great Recession in the United States

Chapter 18: Political debates about the United States federal budget

Chapter 19: Deficit reduction in the United States

Chapter 20: Abenomics

Chapter 21: Economic policy of the Donald Trump administration

(II) Answering the public top questions about united states economy.

(III) Real world examples for the usage of united states economy in many fields.

Who this book is for

Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of United States Economy.

• Language: English
• Publisher: One Billion Knowledgeable
• Release date: Apr 1, 2024

Book preview

Chapter 1: Economy of the United States

The American economy is a highly developed example of a mixed type.

British settlements along the East Coast in the 17th and 18th centuries marked the beginning of the economic history of the United States. The United States' population exploded after 1700, and with it came a rise in both imports and exports. Colonies' trade was aided by continents including Africa, Asia, and Europe.

Washburn and Moen Manufacturing Company in Worcester, Massachusetts, 1876

In just 180 years, the United States was able to develop into a major, unified, and industrialized economic powerhouse that accounts for roughly 20% of global GDP. Since then, the United States' GDP per capita has caught up to and even surpassed that of the British Empire and other countries it formerly lagged behind economically. Consistently high wages in the economy drew people from all over the world to the country. In the 1820s and 1830s, factories gradually replaced workshops as the primary means of production. Improved patent protection is the result of recent legislation.

More than 80% of the population in the early 1800s worked in agriculture in the United States. The lumber and sawmill industry, the textile industry, and the shoe and boot industry dominated the manufacturing sector. Rapid economic growth in the nineteenth century can be attributed in part to the abundance of natural resources. The number of farmers continued to increase as a result of plentiful land, but the manufacturing, service, transportation, and other industries grew at a much faster rate. As a result, the percentage of Americans living in rural areas decreased from over 80% to roughly 50% between 1850 and 1860.

Oil wells in Los Angeles, 1905

Consolidated B-24 Liberators at the Consolidated-Vultee Plant in Fort Worth, Texas, 1943

McDonald's restaurant in Mount Pleasant, Iowa, 2008

Improvements in the quality of life for average Americans were made possible at the turn of the century thanks to new innovations and refinements to existing ones. Many companies expanded into the national market as a result of taking advantage of economies of scale and advances in communication. Fears of monopolies driving up prices and reducing output were stoked by the concentration of these industries, but rapid cost cutting by many of these companies has reversed these trends. These multinational corporations were successful because they provided their employees with some of the highest pay in the world.

Former president Donald Trump with automobile industry leaders, 2017

The United States experienced a recession in 2001, and the number of jobs did not recover to its pre-recession level until January 2005.

In Trump's presidency, the first half of 2020,

Midtown Manhattan, the largest downtown area in the world The April 2023 inflation rate was 4.9%, which was about 3% higher than the 2% rate the Federal Reserve had set as their goal.

Below is a table displaying key economic indicators from 1980 through 2022 (along with IMF staff projections for 2023 through 2028). Below 5% annual inflation is shown in green.

CPI 1914-2022

Inflation

Deflation

Money supply, measured by M2, rises annually.

United States real quarterly GDP (annualized)

U.S.

Real (after-inflation) Gross Domestic Product Growth Under Each US President (from Reagan to Obama) In 2020, The COVID-19 pandemic has caused a slowdown in economic growth, causing a -5.0% QoQ GDP contraction in Q1 2020 and a -32.9% QoQ GDP contraction in Q2 2020, respectively.

According to GDP (PPP) estimates adjusted for purchasing power parity, China overtook the United States economy in 2014. Prior to that point, the United States had the highest GDP (PPP) figures, but China has more than tripled the U.S. growth rate for each of the past 40 years. Although the European Union is a political union and not a country, its GDP in 2017 was roughly 5 percent larger than that of the United States. However, in terms of nominal GDP, the United States' economy continued to dominate.

Number of businesses by type (US Census Bureau, 2019)

2015 nominal GDP (in millions of dollars) by sector (at 2005 constant prices)

2016 Nominal GDP by Sector (at Current Prices, Millions of Dollars).

In terms of the number of available positions,  Total quits

Quantity of unemployed

Job growth by US president, percentage change accumulated from the month following the inauguration to the last month of the term Those in charge (at the national, local government) in 2010 employed 22 million people.

US Census Bureau (number of employees per business)

The United States is home to nearly thirty million independent firms. Americans, including the country's 35 percent Hispanic, African American, Asian, and Native American minorities, have the highest average employee income among OECD countries.

U1-U6 unemployment rate

The U.S. unemployment rate reached 4.1% in December 2017. In May of 2023, it hit 3.7%.

According to 2012 estimates, the service sector accounted for 79.7 percent of all jobs in the United States, while the manufacturing sector accounted for 19.2 percent and the agricultural sector accounted for 1.1 percent.

Median personal income after taxes

Taxation of earnings by states

Employer-side payroll taxes

Revenue Sharing Program

After-tax median income

Employer-side payroll taxes

U.S.

real median household income (1984–2021)

U.S.

earnings (before and after taxes) of the top one percent of American households in 1979, 2007, and 2015 (CBO data).

The earlier year (1979) symbolizes the more progressive era prior to 1980, Inequality reached its highest point since 1980 in 2007, The 2015 figure reflects the combined effects of the Great Recession and Obama's tax increases on the top 1 percent.

The median household income in 2016 was a record-breaking $59,039. This number is a good indicator of the purchasing power of the middle class after adjusting for inflation. While this is encouraging news, the fact that it was only slightly higher than the previous record set in 1998 suggests that the purchasing power of middle-class family income has been stagnant or down for much of the past twenty years.

Globally, discussions about income inequality have heated up. In 2017, the United States had the 41st highest income inequality rate out of 156 countries, as reported by the CIA World Factbook (i.e., 74 percent of countries have a more equal income distribution).

With an increase of $5.2 trillion from 2016, the total net worth of American households hit a new high of $99 trillion in the fourth quarter of 2017. Gains in the stock market and home prices contributed to this rise. Since Q4 of 2012, this metric has consistently surpassed all previous highs.

Cost of housing by State

In the United States, the homeownership rate dropped to 64.2% in the first quarter of 2018 from a record high of 69.2% in the fourth quarter of 2004 during a housing bubble. The Great Recession, which lasted from 2007 to 2009, caused millions of homes to go into foreclosure, lowering the homeownership rate to its lowest point in history in the second quarter of 2016. From 1965-2017, the average homeownership rate was 65.3%.

Wages in the United States

Nominal wages

Salaries after adjusting for inflation

Most American workers have seen a decline or stagnation in their real wages (wages adjusted for inflation) and median incomes over the past twenty to forty years.

In 2009 and 2017, the federal minimum wage was $7.25 per hour, or $15,080 for the 2,080 hours in a year of work. For a single person, the minimum wage covers all of their basic needs, but for a family of four, it only covers about half of their basic needs.

While the number of jobs in the United States has increased over the past 50 years, the real wages of the vast majority of its workers have remained stagnant or fallen, according to a Pew Research Center study published in October 2014.

Number in poverty and poverty rate: 1959 to 2016.

United States.

Although the U.S. has a lower absolute poverty rate by market income than most other wealthy nations, since the 1980s, relative poverty rates have consistently exceeded those of other wealthy nations when compared using a common data set for comparisons.

Wealth inequality in the United States increased from 1989 to 2013.

A homeless camp under a highway bridge in New Orleans, LA

A homeless camp in New Orleans, March 2023

When compared to other wealthy countries, the United States has one of the weakest social safety nets, resulting in much higher rates of relative and absolute poverty reduction.

U.S.

2016 Health Insurance Coverage Statistics by Provider.

According to the Congressional Budget Office, 23 million people have gained health insurance as a result of the Affordable Care Act and Medicaid expansion.

The American healthcare system combines public and private sectors. Roughly 53 million seniors are covered by Medicare, 62 million low-income people are covered by Medicaid, and 15 million veterans are covered by the Veteran's Administration. About 178 million people who are employed receive health insurance subsidies through their employer, and another 52 million buy insurance either through the subsidized marketplace exchanges established as part of the Affordable Care Act or from insurers without any help from the government. With the exception of the Veterans Administration, which employs its own doctors, healthcare is provided by the private sector.

Although the United States ranks low among developed countries, it is at the forefront of medical innovation. Nine of the top ten most significant medical innovations since 1975 were developed or significantly contributed to by the United States alone, according to a 2001 poll of physicians, while the European Union and Switzerland were each responsible for five. Since 1966, more Nobel Prizes in Medicine have been awarded to Americans than to any other country. Between 1989 and 2002, private American biotech firms received four times as much funding as their European counterparts.

When compared to other developed nations, the United States has significantly more expensive healthcare. The OECD reports that in 2015, the United States spent 16.9% of GDP on healthcare, which is more than 5% more than the next most expensive OECD country.

A wheat harvest in Idaho

The United States' industrial output in 2013 was US$2.4 trillion, making it the world's second-largest manufacturer. It produces more manufactured goods than the combined output of Germany, France, India, and Brazil. Finance, IT, petroleum, steel, automobiles, construction machinery, aerospace, agricultural machinery, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining, and armaments are among its primary economic activities.

Aircraft production accounts for a sizable share of American GDP because the United States is the world leader in this field. The majority of the world's civilian and military aircraft are manufactured in factories across the United States by American companies like Boeing, Cessna (see: Textron), Lockheed Martin (see: Skunk Works), and General Dynamics.

Over the course of the last decade or so, the manufacturing sector of the American economy has lost a significant number of jobs.

Statistics released by the U.S.

Reports from the Census Bureau demonstrated, in 2008, business 'deaths' started exceeding business 'births' and that trend persisted through at least 2012.

Wheat, corn, and other grains, fruits, vegetables, cotton, meat, poultry, dairy, eggs, wood, and fish are all products.

The Interstate Highway System extends 46,876 miles (75,440 km).

The Port of Houston, a major U.S. port and one of the world's largest

Transportation by car plays a significant role in the U.S. economy. Automobiles are the most common mode of individual transportation, and they travel along a system of roads totaling four million miles (6.4 million km), Nearly 10% of all commutes in the United States are made using public transportation. The first high-speed rail system in the United States is being built in the state of California.

Although most major airports are owned by the government, the airline industry is privately held and has been largely deregulated since 1978.

Countries by natural gas proven reserves (2014).

The U.S.

has the fourth-largest natural gas reserves in the world.

The United States uses as much energy as the third largest country, China. according to Hirsch's report, global oil consumption is at 55%.

There were 2.808 billion barrels of crude oil imported by the United States in 2013, down from 3.377 billion barrels in 2010.

The United States is the birthplace of the Internet and is home to many of the world's most important Internet nodes.

Protectionist measures since 2008 by country

In the first quarter of 2018, U.S. household and non-profit net worth surpassed $100 trillion, continuing a trend that began in the fourth quarter of 2012.

The Federal Reserve is the central banking system of the United States.

The United States uses the dollar as its currency. When dealing across borders, most people exchange their money for dollars.

On Transparency International's 2019 Corruption Perceptions Index, the United States came in at position 23, with a score of 69 out of a possible 100. This is a drop from its 2018 score of 71 out of a possible 100.

In 2012, the United States ranked fourth on the World Bank's index of countries' friendliness to business, eighteenth on the Fraser Institute's Index of Economic Freedom around the World, tenth on the Index of Economic Freedom compiled by The Wall Street Journal and The Heritage Foundation, and fifteenth on the World Trade Organization's Global Enabling Trade Report in 2014,

Number of countries having a banking crisis in each year since 1800.

The source for this is the book This Time is Different: Only seventy countries are included in this account of eight centuries of financial idiocy.

Many things could be responsible for the recent upswing.

One of these is the rising share of the population that receives compensation for their efforts.

The striking aspect of this chart is the lack of banking crises that occurred during the Bretton Woods era, 1945 to 1971.

Figure 10.1 from Reinhart and Rogoff's book is a good analogy for this analysis (2009).

See the Ecdat package's help file for bankingCrises on the Comprehensive R Archive Network for more information (CRAN).

Numerous aspects of business life in the United States are subject to federal oversight. There are two main types of regulations.

Some initiatives aim to regulate prices in some way. State-regulated monopolies, such as those found in the electric utility industry, have historically been promoted by governments, with prices set at a level that allows for normal profits. The government has occasionally diversified its economic sway into new fields. It developed a sophisticated system in the years after the Great Depression to control the wild swings in agricultural commodity prices caused by fluctuations in supply and demand. Regulatory capture describes how other industries, such as trucking and airlines, successfully sought regulation to limit what they saw as harmful price-cutting.

In contrast to the other G10 countries, where most countries have a single bank regulator, the United States' system of bank regulation is extremely decentralized. Banks in the United States are subject to both federal and state regulations. The United States also has one of the world's most strictly regulated banking environments, but many of these rules have nothing to do with safety and soundness. Instead, they're aimed at things like protecting customers' personal information, disclosing relevant information, preventing fraud, stopping money laundering, thwarting terrorist financing, preventing usurious lending practices, and increasing access to credit for low-income people.

To advance public welfare objectives like public health and safety and environmental protection, governments have increasingly regulated private businesses since the 1970s. Standards for workplace safety are set and enforced by the Occupational Safety and Health Administration, while the United States Environmental Protection Agency sets and enforces regulations to protect the quality of the country's air, water, and land. Drug approval in the United States is overseen by the Food and Drug Administration, which also sets labeling requirements for edible items.

The United States has a multifaceted tax system with potentially four tiers of government and a wide variety of taxation mechanisms. Local governments such as counties, municipalities, townships, school districts, and other special-purpose districts such as fire, utility, and transit districts may also levy taxes in addition to the federal and state governments.

CBO: U.S.

Components of Federal Spending and Revenue in Fiscal Year 2022.

The healthcare system is a major cost driver, Social Security, and defense; income and payroll taxes are the primary revenue sources.

Congressional Budget Office (CBO) baseline scenario comparisons: June 2017 (essentially the deficit trajectory that President Trump inherited from President Obama), In light of Trump's tax cuts and budget bills, April 2018, and another one taking place in April 2018 (with the extension of Trump's tax cuts assumed), currently available policy expansions).

Indirect services are also provided by each level of government.

Officials in Washington, for example, is accountable for the safety of the country, investigation that frequently results in the creation of brand-new items, explores outer space, and manages a wide variety of initiatives aimed at enhancing the employability of the population (including higher