Economy of United States

The United States is a highly developed mixed economy. It is the world's largest economy by nominal GDP and the second largest by purchasing power parity (PPP), behind China. It has the world's sixth highest per capita GDP (nominal) and the eighth highest per capita GDP (PPP) as of 2024. The U.S. accounted for 26% of the global economy in 2023 in nominal terms, and about 15.5% in PPP terms. The U.S. dollar is the currency most used in international transactions and is the world's reserve currency, backed by a large U.S. treasuries market, its role as the reference standard for the petrodollar system, and its linked eurodollar. Several countries use it as their official currency and in others it is the de facto currency. Since the end of World War II, the economy has achieved relatively steady growth, low unemployment and inflation, and rapid advances in technology.<br>The American economy is fueled by high productivity, well-developed transportation infrastructure, and extensive natural resources. Americans have the sixth highest average household and employee income among OECD member states. In 2021, they had the highest median household income. The U.S. has one of the world's highest income inequalities among the developed countries. The largest U.S. trading partners are Canada, Mexico, China, Japan, Germany, South Korea, the United Kingdom, Taiwan, India, and Vietnam. The U.S. is the world's largest importer and second largest exporter. It has free trade agreements with several countries, including Canada and Mexico (through the USMCA), Australia, South Korea, Israel, and several others that are in effect or under negotiation. The U.S. has a highly flexible labor market, where the industry adheres to a hire-and-fire policy, and job security is relatively low. Among OECD nations, the U.S. has a highly efficient and strong social security system; social expenditure stood at roughly 30% of GDP.

Top Sectors in United States

Health care in United States

The American system is a mix of public and private insurance. The government provides insurance coverage for approximately 53 million elderly via Medicare, 62 million lower-income persons via Medicaid, and 15 million military veterans via the Veteran's Administration. About 178 million employed by companies receive subsidized health insurance through their employer, while 52 million other persons directly purchase insurance either via the subsidized marketplace exchanges developed as part of the Affordable Care Act or directly from insurers. The private sector delivers healthcare services, with the exception of the Veteran's Administration, where doctors are employed by the government.

Energy in United States

Energy in the United States is obtained from a diverse portfolio of sources, although the majority came from fossil fuels in 2021, as 36% of the nation's energy originated from petroleum, 32% from natural gas, and 11% from coal. Electricity from nuclear power supplied 8% and renewable energy supplied 12%, which includes biomass, wind, hydro, solar and geothermal.Energy figures are measured in BTU, with 1 BTU equal to 1.055 kJ and 1 quadrillion BTU (1 quad) equal to 1.055 EJ. Because BTU is a unit of heat, sources that generate electricity directly are multiplied by a conversion factor to equate them with sources that use a heat engine.

Transportation in United States

The vast majority of passenger travel in the United States occurs by automobile for shorter distances and airplane or railroad for longer distances. Most cargo in the U.S. is transported by, in descending order, railroad, truck, pipeline, or boat; air shipping is typically used only for perishables and premium express shipments. Transportation is the largest source of greenhouse gas emissions in the United States.

Finance in United States

Measured by value of its listed companies' securities, the New York Stock Exchange is more than three times larger than any other stock exchange in the world.As of October 2008, the combined capitalization of all domestic NYSE listed companies was US$10.1 trillion.NASDAQ is another American stock exchange and the world's third-largest exchange after the New York Stock Exchange and Japan's Tokyo Stock Exchange. However, NASDAQ's trade value is larger than Japan's TSE.NASDAQ is the largest electronic screen-based equity securities trading market in the U.S. With approximately 3,800 companies and corporations, it has more trading volume per hour than any other stock exchange. Because of the influential role that the U.S. stock market plays in international finance, a New York University study in late 2014 interprets that in the short run, stocks that affect the willingness to bear risk independently of macroeconomic fundamentals explain most of the variation in the U.S. stock market. In the long run, the U.S. stock market is profoundly affected by shocks that reallocate the rewards of a given level of production between workers and shareholders. Productivity shocks, however, play a small role in historical stock market fluctuations at all horizons in the U.S. stock market.

United States - Key Economic Indicators

Exports & Imports

The United States is a global leader in trade, exporting over $1.6 trillion worth of goods and services in 2023. Major exports include machinery, electrical equipment, aircraft, vehicles, and agricultural products. The U.S. is also a significant exporter of services, with exports valued at approximately $1 trillion annually. In the same year, the U.S. imported goods and services totaling about $2.8 trillion, primarily consisting of machinery, electrical equipment, vehicles, pharmaceuticals, and apparel. China, Canada, Mexico, Japan, and Germany are among the largest trading partners.

Balance of Trade

The U.S. consistently runs a trade deficit, importing more goods and services than it exports. In 2023, the trade deficit was approximately $1.2 trillion. The deficit is partly offset by strong services exports and income from foreign investments. The balance of trade is influenced by global economic conditions, exchange rates, and domestic consumption patterns. Efforts to reduce the trade deficit include promoting exports through trade agreements and addressing trade barriers.

Infrastructure Development

The United States has a vast infrastructure network, including over 6.8 million kilometers of roads, numerous bridges, railways, airports, and ports. The government has allocated over $1 trillion for infrastructure investments under the Infrastructure Investment and Jobs Act. This legislation aims to modernize aging infrastructure, improve transportation efficiency, and promote sustainable development. Projects include road repairs, bridge replacements, and upgrades to public transit systems across the country.

Fiscal Policy

U.S. fiscal policy involves substantial government spending and taxation. In 2023, federal government spending reached approximately $8 trillion, covering areas such as defense, healthcare, education, and social security. Taxation in the U.S. includes a progressive income tax system, with rates ranging up to 37% for high-income earners, and a corporate tax rate of 21%. Tax policies are adjusted periodically to support economic growth, investment, and social welfare programs.

Monetary Policy

The Federal Reserve manages monetary policy to achieve stable prices, maximum employment, and moderate long-term interest rates. Key actions include setting the federal funds rate, conducting open market operations, and providing liquidity to financial institutions. In response to economic indicators, the Federal Reserve adjusted its policies, aiming to support economic expansion while maintaining financial stability.

Trade Agreements

The United States has a network of trade agreements that facilitate international commerce and investment. The United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA, and other agreements with countries like South Korea, Australia, and Israel, reduce trade barriers and promote fair competition. These agreements provide opportunities for U.S. businesses to access foreign markets. The U.S. also participates in multilateral trade organizations such as the World Trade Organization (WTO).

Environmental Regulation

Environmental regulations in the United States are enforced by federal, state, and local agencies to protect air and water quality, conserve natural resources, and address climate change. The Environmental Protection Agency (EPA) plays a central role in setting and enforcing standards for pollution control, hazardous waste management, and environmental assessments. Regulations cover industries such as manufacturing, energy production, and transportation, balancing environmental protection with economic development and public health.

Tax System in United States

Capital Gains Tax: The United States levies a capital gains tax on profits from investments such as stocks, bonds, real estate, and other assets. The tax rate depends on the taxpayer's income bracket and the holding period of the asset. Short-term capital gains (assets held for one year or less) are taxed at ordinary income tax rates, while long-term capital gains (assets held for more than one year) are taxed at preferential rates ranging from 0% to 20%.
Corporate Tax Rate: The corporate tax rate in the United States is 21% for most businesses. Some specific industries, such as certain financial services, may have different tax rates or rules. Prior to 2018, the corporate tax rate was 35%, but it was reduced to 21% under the Tax Cuts and Jobs Act. This rate applies to profits earned by corporations.
Sales Tax: Sales tax in the United States varies by state and locality. There is no federal sales tax, but states and local jurisdictions impose their own sales taxes on goods and some services at rates that range from 0% to over 10%. Sales tax is typically collected at the point of purchase and is not included in the price of goods or services displayed to consumers.
Property Tax: Property tax is imposed by state and local governments on the value of real estate owned by individuals and businesses. Rates and assessment methods vary by jurisdiction. Property taxes are an important source of revenue for funding local government services, such as schools, police, and fire departments.
Payroll Tax:Payroll taxes are used to fund social security, Medicare, and other social insurance programs. Employees and employers each pay a portion of the payroll tax, which is typically 6.2% for social security (up to a maximum income limit) and 1.45% for Medicare. Self-employed individuals pay both the employer and employee portions of these taxes.
Tax Deductions and Credits:The U.S. tax code includes a variety of deductions and credits that reduce tax liability for individuals and businesses. Deductions include expenses for mortgage interest, charitable donations, and certain business expenses. Tax credits directly reduce the amount of tax owed and can be refundable or non-refundable, such as the Earned Income Tax Credit (EITC) and Child Tax Credit.
Tax Compliance:Tax compliance in the United States is managed by the Internal Revenue Service (IRS), which oversees the collection of federal taxes. The U.S. tax system relies heavily on voluntary compliance, with taxpayers responsible for accurately reporting income and deductions. The IRS uses audits, penalties, and other enforcement measures to ensure compliance.
Tax Burden: The overall tax burden in the United States is significant but varies widely depending on income level, state of residence, and business structure. In 2023, federal, state, and local governments collected approximately $7.7 trillion in taxes, equivalent to about 33.4% of GDP. Individual income taxes and payroll taxes are major components of the tax burden, along with corporate income taxes and property taxes. Efforts to reform the tax system often focus on reducing the overall tax burden, simplifying the tax code, and promoting economic growth.

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