What the U.S. Economy Produces
This article is excerpted from the book Outline of the U.S. Economy,
published by the Bureau of International Information Programs.
Standing by itself, U.S. manufacturing would be the eighth-largest economy
in the world.
U.S. Manufacturing Institute
2006
The U.S. economy is in the midst of its second radical conversion. The
first represented a shift from agriculture to manufacturing. The past
quarter-century has witnessed a further evolution toward finance, business
services, retailing, specialized manufacturing, technology products and health
care. The first revolution mated European capital to America's burgeoning 19th
century expansion, while the current transition reflects Americans' response to
unprecedented global competition in trade and finance.
Like other economies, the U.S. economy comprises a circular flow of goods
and services between individuals and businesses. Individuals buy goods and
services produced by businesses, which employ individuals and pay them wages and
benefits, providing the income that individuals use to make new purchases of
goods and services and investments, or to save.
The most common measure of the U.S. economy is the federal government's
report on the gross domestic product (GDP). GDP records the value in dollars of
all goods and services purchased in the United States by individuals and
businesses, plus investments, government spending, and exports and imports from
abroad. (It does not include sales by foreign companies located in the United
States or by American companies operating in foreign countries.)
GDP is made up both of goods and services for final sale in the
private-sector market and nonmarket services, such as education and military
defense, provided by governments. In principle, the value of goods and services
in the market reflects an exchange between willing buyers and sellers and is not
fixed by government, with some notable exceptions such as government farm and
energy subsidies.
In 2011, the $15.1 trillion U.S gross domestic product comprised
approximately $10.7 trillion in personal spending by American consumers; $1.9
trillion in private investments for homes, business equipment and other
purposes; and $3 trillion spent by governments at all levels, minus an
international deficit of $578 billion - the difference between what the United
States imported and exported and its net financial transactions with the rest of
the world.
Looking at GDP another way, in 2010 governments collected $2.7 trillion in
taxes, roughly 60 percent of that on personal income and the rest on production
and business profits. Governments paid out $3.2 trillion in benefits, primarily
to individuals, and $202 billion in interest to holders of government debt. (The
United States places near the middle of major economies in its overall tax
burden, ranking 18th out of 35 nations surveyed in 2009 by the Organization for
Economic Cooperation and Development.)
GDP sources are broken down into major economic sectors such as
manufacturing and retail sales. Comparing the 2010 output of these sectors with
1980 shows the magnitude of the shift from goods to services over the past 30
years. In 2010, manufacturing provided 12 percent of total U.S. domestic output
of goods and services. In 1980, its share was 20 percent. Finance and real
estate services overtook manufacturing, contributing 21 percent of the U.S.
economic output in 2010 versus 16 percent in 1980.
Suppliers of professional
business services, including lawyers and consultants, contributed as much value
as manufacturing - 12 percent of the domestic economy. This figure was only 7
percent in 1980. Retail and wholesale trade, at 12 percent, was slightly lower
than in 1980. The category of health care and private educational services was 9
percent in 2010, compared to 4 percent in 1980. Government at all levels
accounted for 14 percent of the country's economic output in 2010, essentially unchanged from 1980. Oil and gas production dropped to just over
1 percent of the nation's output in 2010, from 2 percent in 1980.
Excluding government's share of the economy, goods-producing companies made
up 21 percent of total private-sector output in 2010, down from 34 percent in
1980. The services sector climbed from 67 percent to 79 percent during that
period.
(This is a product of the Bureau of International Information Programs,
U.S. Department of State.)
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