Economy Overview

The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $46,900.

In this market-driven economy, individuals and private businesses make most of the decisions, and the federal and state governments obtain needed goods and services mainly from the private marketplace. US businesses enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, they face higher barriers to enter their rivals' home markets than foreign firms face entering US markets.

US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment; their advantage has narrowed since the end of World War II. The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits—often referred to as the white collar vs. blue collar industries.

In the past decade, several various factors have significantly impacted the economic welfare of the United States. The war in March-April 2003 between a US-led coalition and Iraq, and the subsequent occupation of Iraq, required major shifts in national resources to the military. Hurricane Katrina caused extensive damage in the Gulf Coast region in August 2005, but had a small impact on overall GDP growth for the year. Soaring oil prices between 2005 and the first half of 2008 threatened inflation and unemployment, as higher gasoline prices ate into consumers' budgets.

Imported oil accounts for about two-thirds of US consumption. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and retirement costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups.

The trade deficit reached a record $819 billion in 2007 and $821 billion in 2008. The global economic downturn, the sub-prime mortgage crisis, investment bank failures, falling home prices, and tight credit pushed the United States into a recession by mid-2008. To try to stabilize financial markets, the US Congress established a $700 billion Troubled Asset Relief Program (TARP) in October 2008. The government used some of these funds to purchase equity in US banks and other industrial corporations.

In 2009, President Obama took office promising to do the following:

  • Add Consumer Credit Protections
  • Advocate Free Market
  • Help Community And Small-Business Development Agencies
  • Improve Options For Displaced Workers
  • Increase Regulation Of Financial Industry
  • Increase Transparency For Pension Investments
  • Prohibit Bonuses For Failed Execs

In January 2009 the US Congress passed and President Barack Obama signed a bill providing an additional $787 billion fiscal stimulus - two-thirds on additional spending and one-third on tax cuts - to create jobs and to help the economy recover.

In the fall of 2009, Congress’ attention was focused on health care reform, which many believe is one of the most pressing issues to our nation’s economy. Democrat leaders in the House, Senate and Obama administration assert it was their actions that kept the nation from falling into a deep fiscal depression. Republicans refuted, indicating:

  • The American people are hurting and continuing to lose jobs.
  • The Obama Administration and Congressional Democrats promised that their trillion-dollar "stimulus" would create jobs "immediately" and unemployment would not rise above 8%.
  • In June alone, almost half a million jobs were lost, driving unemployment to 9.5% - its highest level in almost three decades.
  • The Democrats' trillion-dollar stimulus isn't working.
  • The American people know we cannot tax and spend and bail our way back to a growing economy.
  • Small business, not government, is the engine of our economy.

The Show-Me State series, along with the Republican Party, believes in the power and opportunity of America’s free-market economy. It is imperative that our government leaders promote sensible business regulation, allowing our consumers, entrepreneurs and businesses more confidence. We believe interventionist policies that put the government in control of private industry is sometimes necessary, but more often sets a dangerous precedent in our national economy.

Click here for more information on Economic issues.

Sources: Commerce.gov; GOP.gov; NationalJournal.com