United States Economy

United States Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax System

Basic data

In the fourth quarter of 2021, the US economy grew by percent year-on-year due to the recovery from the coronavirus pandemic. The federal budget deficit was $667 billion in the first six months of fiscal year 2022 (i.e., from October 2021 to March 2022), the United States Congress estimates. This amount represents roughly 40 percent of the deficit recorded during the same period in 2021 ($1,706 billion). Revenues were $418 billion (or 25 percent) higher and expenditures were $622 billion (or 18 percent) lower than the same period a year ago. Economic growth in the fourth quarter of 2021 was the largest expansion since a record 33.8% growth in the third quarter of 2020, with private inventories making the largest contribution to growth (5.32 percentage points versus percentage points in the second estimate), in headed by motor vehicle dealers and wholesalers. In April 2022, the public debt of the United States was approximately US$30.37 trillion, an increase of approximately US$trillion from approximately US$28.2 trillion a year earlier. The US public debt has become one of the most prominent political issues in the United States in recent years. Fiscal policy reduced US GDP growth by 3 percentage points in the first quarter of 2022. According to the latest government estimate, GDP fell by 1.4% year over year in the first quarter of 2022. The fiscal drag on economic growth in the first quarter was largely due to the weakening effects of federal transfer payments on GDP, such as the pandemic-related expansion of unemployment benefits and business subsidies, which reduced growth by percentage points. However, overall inflation remains high and reached 8.5% year-on-year in March, which is still at the level of values ​​not known for 40 years. In April, inflation decreased to 8.3%, and in connection with the Fed’s tighter policy, it should decrease further. Overall, the US economy is in good shape, when, for example, unemployment fell further to 3.8% in February, and the Fed expects the economy to cope with rising commodity prices and a gradually tightening monetary policy. Problems persist in supply chains. The US unemployment rate remained at percent month-on-month in April 2022 and is the lowest since February 2020. The number of unemployed decreased by 11 thousand to 5.941 million, employment decreased by 353 thousand to 158.105 million.

According to cheeroutdoor.com, the US economy is characterized by a highly developed and technologically advanced service sector, which accounts for about 80% of its output. The U.S. economy is dominated by service-oriented companies in areas such as technology, financial services, healthcare, and retail..

Table from MOP + additionally balance of payments, indebtedness/GDP.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 2.2 -3.5 5.7 3.4 2.1
GDP/population (USD/PPP) 65,133.70 63,122.60 69,070.00 74,230.00 77 180.0
Inflation (%) 1.8 1.3 4.7 5.2 2
Unemployment (%) 3.7 8.1 5.4 3.8 3.7
Export of goods (billion USD) 1,643.20 1,432.00 1,748.00 1,971.00 2,069.00
Import of goods (billion USD) 2,497.53 2,336.60 2,865.00 3,150.60 3,242.10
Trade Balance (Billion USD) -864.3 -922 -1,130.60 -1,194.00 -1 188.4
Industrial production (% change) 0.9 -6.6 5.5 4.2 2.5
Population (millions) 329.1 331 332.9 334.8 336.7
Competitiveness III.63 X.63 X.64 ON ON
OECD export risk ON ON ON ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -12.4
Public debt (% of GDP) 99.6
Current account balance (billion USD) -727.4
Taxes 2022

The federal government collects revenue from a variety of sources, including personal income taxes, payroll taxes, corporate income taxes, and excise taxes. It also collects revenue from services such as entrance to national parks and tolls. In 2021, the federal government spent $2.77 trillion more than it took in, resulting in a widening deficit. By the end of 2021, the government had $28.43 trillion in federal debt. To pay for the deficit, the federal government borrows additional funds, which of course further increases the debt. The level of further indebtedness will also depend on the success of the Democratic administration’s ambitious plans, both on the spending and revenue side, as well as on the outcome of the congressional elections in the fall of 2022.

Foreign reserves in the United States are expected to be $42150.00 million at the end of this quarter, according to Trading Economics Global Macro Models and analyst expectations.

Banking system

The US banking system consists of the central bank (Federal Reserve System – Fed) and a developed network of commercial banks and savings banks. The Fed performs the function of the central bank and directs monetary policy. It has the right and obligation to determine the reserves of commercial banks for securing personal and business accounts, determines the discount rate or the amount and duration of a loan backed by securities. The Fed’s Board of Governors controls all reserve banks and their activities. Another important role is played by the Fed in separating the banking and commercial sectors of the economy, controlling the purchase of shares by banks and regulating the flow of information about banking activities to clients. The Fed has a dual character – it is a de facto “bank of banks”, where each bank must necessarily own the shares of the relevant regional branch of the Fed, and at the same time, like most central banks in the world, the Fed plays an important role in the economic policy of the state: the implementation of monetary policy focused on the fulfillment of individual economic goals (economic growth, inflation, full employment, etc.), then the implementation of banking supervision and the provision of financial services to the US government. According to the National Information Center – Federal Reserve System, the 5 largest banks in the USA by assets as of 1/1/2021 are: JP Morgan Chase New York, Bank of America Charlotte, Wells Fargo San Francisco, Citigroup New York, US Bancorp Minneapolis. Just as the US is the world’s financial center, so is the insurance industry. Czech companies trading and doing business in the USA must realize the importance of insurance for (almost) all aspects of business. In the first instance, it is worthwhile for foreign companies to contact an insurance broker, ideally with experience with businessmen from Europe. We recommend considering the engagement of a legal or insurance expert even if the American partner has already “automatically” included the relevant provisions in the contract, in most cases they are debatable (however, from the point of view of the Czech company, not without the help of a local expert standing on our side). Useful websites: www.naic.org; www.acli.org; www.dfs.ny.gov

Tax system

Taxes are direct and indirect. Most indirect taxes have a federal and state component. The federal government also determines some items of income tax. Most taxes are the responsibility of state authorities. The tax rate is different in different regions of the US. Direct taxes: – Corporate income tax (CIT) – is levied at all administrative levels (federal, state, local). – Social insurance (social security tax) and health insurance (medicare tax) – are paid by both the employer and the employee from their gross income. – Individual personal income tax – also levied at all administrative levels (federal, state, local). The deadline for payment is April 15. Some states do not collect this tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, and Tennessee from 2021). New Hampshire levies income tax only on dividends and interest income. Some states have only one income tax rate. Most states in the US have a progressive income tax. The lowest rate of the highest state income tax schedule is collected in the state of North Dakota (2.9%), the highest in California (13.3%). A foreigner does not pay income tax in the US if he spends less than 183 days here in a calendar year and is continuously paid by his foreign employer. Other criteria may be based on the so-called cumulative test, which is calculated from the number of days spent in the US over the past three years. – The US federal personal income tax has 7 tax brackets. The Tax Cuts and Jobs Act of 2017 (The Tax Cuts and Jobs Act of 2017), otherwise known as tax reform, reduced tax brackets and rates. The tax rate further varies depending on whether the person is married or not. Overview of 2021 tax rates at taxfoundation.org. Indirect taxes are sales tax, airport tax, telecommunications tax, excise tax.

United States Economy