Economy of the United States

The Economy of the United States is the largest and one of the most technologically advanced national economies in the world, with a per capita GDP of $40,100. In this capitalist, market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace with taxes collected from firms and individuals. Business firms in the U.S. enjoy considerably less regulation than firms in many other states concerning decisions to expand capital plant, lay off workers, and develop new products, but there is a debate about how much relative regulation exists in the United States in the era of globalization. American firms are at or near the forefront in technological research and development, especially in computers, pharmaceuticals, and aerospace, although some advantages have narrowed since the end of World War II. The United States has transformed from being the world's largest creditor to having substantial fiscal and trade deficits; the significance of these deficits is disputed by economists.

Recent U.S. economic history

Main article: Economic history of the United States

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With President Harding's post–WW I "Return to Normalcy", the United States enjoyed a period of great prosperity. The stock market grew by leaps and bounds, and the economy was considered invincible. However, federal mismanagement of a 1929 recession brought about the infamous Great Depression, now widely attributed to the simple burst of a bubble induced by the Federal Reserve's policies. President Franklin D. Roosevelt introduced an array of social programs, known collectively as the New Deal, in an effort to alleviate the Depression, though some argue his policies had a negative effect. In 1941, the U.S. entered World War II, driving federal spending and debt up to record levels to drive industrial production, pulling the U.S. out of the Depression. The post–WW II years, like the 1920s, were a time of great prosperity in the United States. The economy remained stable until the 1970s, when the U.S. suffered stagflation. Richard Nixon took the United States off the Bretton Woods system, and further government attempts to revive the economy failed. As the decade progressed, the situation worsened. In November 1980, Robert G. Anderson wrote, "the death knell is finally sounding for the Keynesian Revolution." Ronald Reagan was elected President in 1980, and was of the opinion that "government is not the solution to our problem, government is the problem." Reagan cut taxes and reduced regulations, and the economy rebounded. Unemployment and inflation dropped back to normal levels, and as one journalist described it, it was no longer impressive to simply have a million dollars, it was the rate at which you made each million of dollars. The federal budget was balanced for the first time since the 1960s under the Clinton Administration, mainly due to massive investment in the stock market in the 1990s further accelerated by the dot-com boom. A recession began during the transition to the Bush Administration in connection to the end of the dot-com boom, and was exacerbated by the September 11, 2001 attacks, but tax cuts (which put the government back into deficits) helped the nation recover in a few years. Throughout, housing starts and purchases remained high, and the economy as of 2005 is considered by many to be strong in general. Some fear oil and gasoline prices may accelerate inflation, however. There are also warnings that the Federal Government needs to rebalance the budget to avoid potential default. While default does not appear a probable outcome, it is highly likely that persistent high budget deficits will drag down the economy in the future. This applies even more so to the current account deficit and external debt.

Related Topics:
President - Harding's - WW I - 1929 - Recession - Great Depression - Franklin D. Roosevelt - New Deal - 1941 - World War II - 1920s - 1970s - Stagflation - Richard Nixon - Bretton Woods system - Robert G. Anderson - Ronald Reagan - Clinton Administration - Dot-com boom - Recession - Bush Administration - September 11, 2001 attacks - As of 2005

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U.S. liabilities to foreigners is estimated at $13 trillion in 2005, and continues to grow at a healthy rate. http://www.bea.doc.gov/bea/newsrel/intinvnewsrelease.htm As of 2005, most foreigners still consider that the USA has deep and liquid financial markets and a sophisticated banking system, and continue to have confidence in investing in the USA.

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