The Economy of the USA

CONTENT

Introduction

1.1. Economy of the USA

1.2. History

1.2.1. After a Great Depression

1.3. Overview

1.4. Sectors

1.5. International trade

1.6. Currency and central bank

1.7. Government involvement

1.7.1. Regulations

1.7.2. Taxation

1.7.3. Expenditure

1.8. Income in the USA

1.9. Household income

1.9.1. Quintiles

1.9.2. Race

1.9.3. Education and Gender

1.9.3. Age of householder

1.9.4. Social class

1.10. United States Federal budget

1.10.1. Federal Budget data

1.10.2. Mandatory spending and entitlements

1.10.3. Social security

1.10.4 Medicare and Medicaid

1.10.5. Military spending

1.11. Labor unions in the USA

1.11.1. Labor unions today

1.12. Social class in the USA

1.12.1. Upper class

1.12.2. Corporate elite

1.12.3. Upper middle

1.12.4. Middle class

1.12.5. Traditional middle

1.12.6. Lower middle class

1.12.7. Lower class

1.13. Poverty

1.13.1. Factors of poverty

1.13.2. Understanding poverty

1.13.3. Overstating poverty

1.14. Business oligarch

1.14.1. American oligarch

1.15. American dream

Conclusion

Literature

Appendix    
 
 

Introduction 
 

     I would like to tell about economy in the USA. I consider that it is one of the most important and exciting themes nowadays. The economy of the United States has transferred many shocks, but continues to remain one of the most powerful in the world.

     The modern USA represents an interesting object of researches for economists of the whole world. The country that has managed for a rather short period of time to become the world’s economic leader should cause interest. Besides, nowadays America shows significant success in carrying out social programs: in supporting the poorest layers of the population, in solving the problems of unemployment, racial discrimination, criminality, etc. Certainly, a number of problems still remains, but the general dynamics of development are evident. The 1920s were called the New Era in American life. This decade was the time of unprecedented social, economic and political change. It was the time when America was becoming a modern nation. It was a period of almost uninterrupted prosperity and economic expansion. In 1928 Herbert Hoover, President of the country, proclaimed,” We in America are nearer to the final triumph over poverty that ever before in the history of any land. The poorhouse is vanishing from among us”. Only fifteen months later, the nation plunged into the severest and most prolonged economic depression in its history-a depression that continued in one form or another for a full decade. The Depression was a traumatic experience for individual Americans, who faced unemployment, the loss of land and other property, and in some cases homelessness and starvation. But the country had been able to survive and recover.

     There are a lot of problems in the national economy of Russia and Ukraine nowadays: the industrial production is decreasing, the prices are constantly rising, and the rate of inflation is very high. People are losing their jobs because many factories and plants are being closed.  This process reminds the period of the Great Depression in the USA.  I got interested in this theme for my research because I would like to understand the processes taking place in my country better.

     So, the main aim of this research paper is to understand how America being influenced so much by the Depression in the first half of the century was able to become a super power again in the second half of the XX century. Also I want to understand why this depression began in the beginning of the XX century despite positive social and economic development in the country at that period of time.

     In my research I would like to find out: how the life of America changed after the Civil War of 1861-1865; how America, being such a young country has become a super nation; regulations of government; different kinds of the social class; where the federal budget is directed; factors of poverty; The richest people of America; what does the American dream means and etc.

1.1. Economy of the United States

The economy of the United States is the largest national economy in the world in both nominal value and by purchasing power parity. Its nominal gross domestic product (GDP) was estimated as $14.4 trillion in 2008, which is about three times that of the world's second largest economy, Japan Its GDP by PPP is almost twice that of the second largest, China.                                                                          

     The U.S. economy maintains a very high level of output per person (GDP per capita, $47,422 in 2008, ranked at around number ten in the world). The U.S. economy has maintained a stable overall GDP growth rate, a low unemployment rate, and high levels of research and capital investment funded by both national and, because of decreasing saving rates, increasingly by foreign investors. In 2008, consumer spending made seventy-two percent of the economic activity in the U.S.                                                                                                                    

     Since the 1970s, the United States economy has absorbed savings from the rest of the world. The phenomenon is subject to discussion among economists. Like other developed countries, the United States faces retiring baby boomers that have already begun withdrawing from their Social Security accounts; however, the American population is young and growing when compared to Europe or Japan. The 2008 estimates of the United States public debt by the CIA Fact book and the International Monetary Fund were 61% of GDP, about the same as major European countries. The United States has been one of the best-performing developed countries, consistently outperforming European countries. The American labor market has attracted immigrants from all over the world and has one of the world's highest migration rates. Americans have the highest income per hour worked. The United States is ranked second, down from first in 2008-2009 due to the economic crisis, in the Global Competitiveness Report. 
 

1.2. History

     The economic history of the United States has its roots in European settlements in the 16th, 17th, and 18th centuries. The American colonies went from marginally successful colonial economies to a small, independent farming economy, which in 1776 became the United States of America. In 230 years the United States grew to a huge, integrated, industrialized economy that makes up over a quarter of the world economy. The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), and an entrepreneurial spirit and commitment to investing in material and human capital. In addition, the U.S. was able to exploit these resources due to a unique set of institutions designed to encourage exploration and extraction. As a result, the U.S.'s GDP per capita converged on that of the U.K., as well as other nations that it previously trailed economically. The economy has maintained high wages, attracting immigrants by the millions from all over the world. 

1.2.1. After the Great Depression

     For many years following the Great Depression of the 1930s, when the danger of recession appeared most serious, government sought to strengthen the economy by spending heavily itself or cutting taxes so that consumers would spend more, and by fostering rapid growth in the money supply, which also encouraged more spending. In the 1970s, economic woes brought on by the costs of the Vietnam conflict, major price increases, particularly for energy, created a strong fear of inflation. As a result, government leaders came to concentrate more on controlling inflation than on combating recession by limiting spending. Ideas about the best tools for stabilizing the economy changed substantially between the 1960s and the 1990s. In the 1960s, government had great faith in fiscal policy—manipulation of government revenues to influence the economy. Since spending and taxes are controlled by the president and the U.S. Congress, these elected officials played a leading role in directing the economy. A period of high inflation, high unemployment, and huge government deficits weakened confidence in fiscal policy as a tool for regulating the overall pace of economic activity. Instead, monetary policy assumed growing prominence. Since the stagflation of the 1970s, the U.S. economy has been characterized by somewhat slower growth.                                                                                                                                         

     The worst recession in recent decades, in terms of lost output, occurred in the 1973-75 period of oil shocks, when GDP fell by 3.1 percent, followed by the 1981-82 recession, when GDP dropped by 2.9 percent. Since the 1970s the US has sustained trade deficits with other nations. Output fell by 1.3 percent in the 1990-91 downturn, and a tiny 0.3 percent in the 2001 recession. The 2001 downturn lasted just eight months. In recent years, the primary economic concerns have centered on: high household debt ($14 trillion) including $2.5 trillion in consumer debt, high national debt ($9 trillion), high corporate debt ($9 trillion), high mortgage debt (over $10 trillion as of 2005 year-end), high unfunded Medicare liability ($30 trillion), high unfunded Social Security liability ($12 trillion), high external debt (amount owed to foreign lenders), high trade deficits, and a serious deterioration in the United States net international investment position (NIIP) (-24% of GDP). In 2006, the U.S economy had its lowest saving rate since 1933. These issues have raised concerns among economists and national politicians. The U.S. economy maintains a relatively high GDP per capita, with the caveat that it may be elevated by borrowing, a low to moderate GDP growth rate, and a low unemployment rate, making it attractive to immigrants worldwide.                                                                             

     The United States entered 2008 during a housing market correction, a sub prime mortgage crisis and a declining dollar value. On December 1, 2008, the NBER declared that the United States entered a recession in December 2007, citing employment and production figures as well as the third quarter decline in GDP.  
 
 

1.3. Overview (1) (2) 

     A central feature of the U.S. economy is the economic freedom afforded to the private sector by allowing the private sector to make the majority of economic decisions in determining the direction and scale of what the U.S. economy produces.] This is enhanced by relatively low levels of regulation and government involvement, as well as a court system that generally protects property rights and enforces contracts.                                                                            

     The United States is rich in mineral resources and fertile farm soil, and it is fortunate to have a moderate climate. It also has extensive coastlines on both the Atlantic and Pacific Oceans, as well as on the Gulf of Mexico. Rivers flow from far within the continent, and the Great Lakes—five large, inland lakes along the U.S. border with Canada—provide additional shipping access. These extensive waterways have helped shape the country's economic growth over the years and helped bind America's 50 individual states together in a single economic unit. The number of workers and, more importantly, their productivity help determine the health of the U.S. economy. Throughout its history, the United States has experienced steady growth in the labor force, a phenomenon that is both cause and effect of almost constant economic expansion. Until shortly after World War I, most workers were immigrants from Europe, their immediate descendants, or African Americans who were mostly slaves taken from Africa, or slave descendants. Beginning in the early 20th century, many Latin Americans immigrated; followed by large numbers of Asians following removal of nation-origin based immigration quotas. The promise of high wages brings many highly skilled workers from around the world to the United States.            Labor mobility has also been important to the capacity of the American economy to adapt to changing conditions. When immigrants flooded labor markets on the East Coast, many workers moved inland, often to farmland waiting to be tilled. Similarly, economic opportunities in industrial, northern cities attracted black Americans from southern farms in the first half of the 20th century. In the United States, the corporation has emerged as an association of owners, known as stockholders, who form a business enterprise governed by a complex set of rules and customs. Brought on by the process of mass production, corporations, such as General Electric, have been instrumental in shaping the United States. Through the stock market, American banks and investors have grown their economy by investing and withdrawing capital from profitable corporations. Today in the era of globalization, American investors and corporations have influence all over the world. The American government is also included among major the investors in the American economy. Government investments have been directed towards public works of scale (such as from the Hoover Dam), military-industrial contracts, and the financial industry.

     While consumers and producers make most decisions that mold the economy, government has a powerful effect on the U.S. economy in at least four areas, as the government uses a capitalist system. Strong government regulation in the U.S. economy started in the early 1900s with the rise of the Progressive Movement; prior to this the government promoted economic growth through protective tariffs and subsidies to industry, built infrastructure, and established banking policies, including the gold standard, to encourage savings and investment in productive enterprises. On June 26, 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce, commenting that the U.S. has outsourced too much in some areas and can no longer rely on the financial sector and consumer spending to drive demand.  
 

Sectors 

Energy

     The United States is the largest energy consumer in terms of total use, using 100 quadrillion BTUs (105 exajoules, or 29000 TWh) in 2005. The U.S. ranks seventh in energy consumption per-capita after Canada and a number of small countries. The majority of this energy is derived from fossil fuels: in 2005, it was estimated that 40% of the nation's energy came from petroleum, 23% from coal, and 23% from natural gas. Nuclear power supplied 8.4% and renewable energy supplied 6.8%, which was mainly from hydroelectric dams although other renewable are included such as geothermal and solar energy.

Agriculture

     Agriculture is a major industry in the United States and the country is a net exporter of food.

     Products include wheat, corn, other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy products; forest products; fish.

Manufacturing 

USA is the leading manufacturer in the world with a 2007 industrial output of US$2,696,880 millions. Main industries are petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining.

Finance

     The New York Stock Exchange is a stock exchange located at 11 Wall Street in lower Manhattan, New York City, New York, USA. It is the largest stock exchange in the world by United States dollar value of its listed companies' securities. As of October 2008, the combined capitalization of all domestic NYSE listed companies was US$10.1 trillion.

     NASDAQ, is an American stock exchange. It is the largest electronic screen-based equity securities trading market in the United States. With approximately 3,800 companies and corporations, it has more trading volume per hour than any other stock exchange in the world.

International trade

     The United States is the most significant nation in the world when it comes to international trade. For decades, it has led the world in imports while simultaneously remaining one of the top three exporters of the world.

     As the major epicenter of world trade, the United States enjoys leverage that many other nations do not. For one, since it is the world's leading consumer, it is the number one customer of companies all around the world. Many businesses compete for a share of the U.S market. In addition, the United States occasionally uses its economic leverage to impose economic sanctions in different regions of the world. The U.S. is the top export market for almost 60 trading nations worldwide.

     Since it is the world's leading importer, there are many U.S. dollars in circulation all around the planet. The historically stable American economy and effective monetary policy led to faith in the U.S. dollar. 2009 has seen government policy that is weakening the US dollar. Large foreign economies own huge dollar reserves (especially as the US is more in debt) so there is a fear that they will move away from the dollar.

     In order to fund the national debt (also known as public debt), the United States relies on selling U.S. treasury bonds to people both inside and outside the country, and in recent times a growing percent of buyers are international. 
 

Currency and central bank 

     The United States dollar is the unit of currency of the United States. The U.S. dollar is the currency most used in international transactions. Several countries use it as their official currency, and in many others it is the de facto currency.

     The federal government attempts to use both monetary policy (control of the money supply through mechanisms such as changes in interest rates) and fiscal policy (taxes and spending) to maintain low inflation, high economic growth, and low unemployment. A relatively independent central bank, known as the Federal Reserve, was formed in 1913 to provide a stable currency and monetary policy. The U.S. dollar has been regarded as one of the most stable currencies in the world and many nations back their own currency with U.S. dollar reserves.

     During the last few years, the U.S. dollar has gradually depreciated in value and its reserve currency status is no longer as high as previously. With increased US debt, policy that's weakening the dollar and the EU signing the Lisbon Treaty, the dollar is less of a global currency standard.

The dollar used gold standard and/or silver standard from 1785 until 1975, when it became a fiat currency. 
 
 
 

Government involvement 

Regulations

     The U.S. federal government regulates private enterprise in numerous ways. Regulation falls into two general categories.

Some efforts seek, either directly or indirectly, to control prices. Traditionally, the government has sought to prevent monopolies such as electric utilities from raising prices beyond the level that would ensure them extremely large profits. At times, the government has extended economic control to other kinds of industries as well. In the years following the Great Depression, it devised a complex system to stabilize prices for agricultural goods, which tend to fluctuate wildly in response to rapidly changing supply and demand. A number of other industries—trucking and, later, airlines—successfully sought regulation themselves to limit what they considered as harmful price cutting, a process called regulatory capture.

     Another form of economic regulation, antitrust law, seeks to strengthen market forces so that direct regulation is unnecessary. The government—and, sometimes, private parties—have used antitrust law to prohibit practices or mergers that would unduly limit competition.

     Bank regulation in the United States is highly fragmented compared to other G10 countries where most countries have only one bank regulator. In the U.S., banking is regulated at both the federal and state level. The U.S also has one of the most highly regulated banking environments in the world; however, many of the regulations are not safety and soundness related, but are instead focused on privacy, disclosure, fraud prevention, anti-money laundering, anti-terrorism, anti-usury lending, and promoting lending to lower-income segments.

Since the 1970s, government has also exercised control over private companies to achieve social goals, such as improving the public's health and safety or maintaining a healthy environment. For example, the Occupational Safety and Health Administration provide and enforce standards for workplace safety, and the United States Environmental Protection Agency provides standards and regulations to maintain air, water, and land resources. The U.S. Food and Drug Administration regulate what drugs may reach the market, and also provides standards of disclosure for food products.

     American attitudes about regulation changed minimally during the final three decades of the 20th century. Beginning in the 1970s, policy makers grew increasingly convinced that economic regulation protected companies at the expense of consumers in industries such as airlines and trucking. At the same time, technological changes spawned new competitors in some industries, such as telecommunications, that once were considered natural monopolies. Both developments led to a succession of laws easing regulation.

     While leaders of America's two most influential political parties generally favored economic deregulation during the 1970s, 1980s, and 1990s, there was less agreement concerning regulations designed to achieve social goals. Social regulation had assumed growing importance in the years following the

     Depression and World War II, and again in the 1960s and 1970s. During the 1980s, the government relaxed labor, consumer and environmental rules based on the idea that such regulation interfered with free enterprise, increased the costs of doing business, and thus contributed to inflation. The response to such changes is mixed; many Americans continued to voice concerns about specific events or trends, prompting the government to issue new regulations in some areas, including environmental protection.

     Where legislative channels have been unresponsive, some citizens have turned to the courts to address social issues more quickly. For instance, in the 1990s, individuals, and eventually the government itself, sued tobacco companies over the health risks of cigarette smoking. The 1998 Tobacco Master Settlement Agreement provided states with long-term payments to cover medical costs to treat smoking-related illnesses. 

Taxation

     Taxation in the United States is a complex system which may involve payment to at least four different levels of government and many methods of taxation. United States taxation includes local government, possibly including one or more of municipal, township, district and county governments. It also includes regional entities such as school and utility, and transit districts as well as including state and federal government.

     The National Bureau of Economic Research has concluded that the combined federal, state, and local government average marginal tax rate for most workers to be about 40% of income. The Tax Foundation concluded that government at all levels will collect 30.8% of the nation's income for 2008. Tax Day, the day by which tax returns are due, is usually April 15.

Expenditure

     The United States public sector spending amounts to about a third of the GDP.

     Each level of government provides many direct services. The federal government, for example, is responsible for national defense, backs research that often leads to the development of new products, conducts space exploration, and runs numerous programs designed to help workers develop workplace skills and find jobs (including higher education). Government spending has a significant effect on local and regional economies—and even on the overall pace of economic activity.

     State governments, meanwhile, are responsible for the construction and maintenance of most highways. State, county, or city governments play the leading role in financing and operating public schools. Local governments are primarily responsible for police and fire protection.

Overall, federal, state, and local spending accounted for almost 28% of gross domestic product in 1998.

     As of January 20, 2009, the total U.S. federal debt was $10.627 trillion (an increase of 85.5 percent over the previous eight years). The borrowing cap debt ceiling as of 2005 stood at $8.18 trillion. In March 2006, Congress raised that ceiling an additional $0.79 trillion to $8.97 trillion, which is approximately 68% of GDP. Congress has used this method to deal with an encroaching debt ceiling in previous years, as the federal borrowing limit was raised in 2002 and 2003. As of October 4, 2008, the "The Emergency Economic Stabilization Act of 2008" raised the current debt ceiling to US$ 11.3 trillion.

While the U.S. national debt is the world's largest in absolute size, another measure is its size relative to the nation's GDP. As of January 20, 2009, the debt was 73 percent of GDP, a level not seen in the U.S. since 1955 when the country was recovering from World War II. This debt, as a percent of GDP, is still less than the debt of Japan and roughly equivalent to those of a few western European nations. The US debt as a percent of GDP is more than the debt of

European Union as a collective. 
 

Income in the United States 

     Income in the United States is measured by the United States Department of Commerce either by household or individual. The differences between household and personal income is considerable since 42% of households, the majority of those in the top two quintiles with incomes exceeding $57,658, now have two income earners. This difference becomes very apparent when comparing the percentage of households with six figure incomes to that of individuals. In 2006, 17.3% of households had incomes exceeding $100,000, compared to slightly less than 6% of individuals. Overall the median household income was $46,326 in 2006 while the median personal income (including only those above the age of 25) was $32,140.

     Income inequality has increased considerably, with the mean after-tax income of the top percentile increasing 167%, versus 69% for the top quintile overall, 29% for the fourth quintile, 21% for the middle quintile, 17% for the second quintile and 6% for the bottom quintile. While wages for women have increased greatly, median earnings of male wage earners have remained stagnant since the late 1970s. Household income, however, has risen due the increasing number of household with more than one income earners and women's increased presence in the labor force. 
 

Household income in the United States (3)

     Household income is a measure commonly used by the United States government and private institutions. That measure counts all the income of all residents over the age of 18 in each household, including not only all wages and salaries, but such items as unemployment insurance, disability payments, child support payments, regular rental receipts, as well as any personal business, investment, or other kinds of income received routinely. The residents of the household do not have to be related to the head of the household for their earnings to be considered part of the household's income. As households tend to share a similar economic context, the use of household income remains among the most widely accepted measures of income. That the size of a household is not commonly taken into account in such measures may distort any analysis of fluctuations within or among the household income categories, and may render direct comparisons between quintiles difficult or even impossible.

     In 2007, the median annual household income rose 1.3% to $50,233.00 according to the Census Bureau. The real median earnings of men who worked full time, year-round climbed between 2006 and 2007, from $43,460 to $45,113. For women, the corresponding increase was from $33,437 to $35,102. The median income per household member (including all working and non-working members above the age of 14) was $26,036 in 2006. In 2006, there were approximately 116,011,000 households in the United States. 1.93% of all households had annual incomes exceeding $250,000. 12.3% fell below the federal poverty threshold and the bottom 20% earned less than $19,178. The aggregate income distribution is highly concentrated towards the top, with the top 6.37% earning roughly one third of all income, and those with upper-middle incomes control a large, though declining, share of the total earned income. Income inequality in the United States, which had decreased slowly after World War II until 1970, began to increase in the 1970s until reaching a peak in 2006. It declined a little in 2007. Households in the top quintile, 77% of which had two or more income earners, had incomes exceeding $91,705. Households in the mid quintile, with a mean of approximately one income earner per household had incomes between $36,000 and $57,657. Households in the lowest quintile had incomes less than $19,178 and the majority had no income earner.

     The 2006 economic survey also found that households in the top two income quintiles, those with an annual household income exceeding $60,000, had a median of two income earners while those in the lower quintiles (2nd and middle quintile) had median of only one income earner per household. Due to high unemployment among those in the lowest quintile the median number of income earners for this particular group was zero. Overall, the United States followed the trend of other developed nations with a relatively large population of relatively affluent households outnumbering the poor. Among those in between the extremes of the income strata are a large number of households with moderately high middle class incomes and an even larger number of households with moderately low incomes. While the median household income has increased 30% since 1990, it has increased only slightly when considering inflation. In 1990, the median household income was $30,056 or $44,603 in 2003 dollars. While personal income has remained relatively stagnant over the past few decades, household income has risen due to the rising percentage of households with two or more income earners. Between 1999 and 2004 household income stagnated showing a slight increase since 2004. According to the Bureau of Economic Analysis, per capita income has increased every year for the past 10 years, with an annual average of 5.2% gains for the past 4 years. The recently released US Income Mobility Study showed economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. Income mobility of individuals was considerable in the U.S. economy during the 1996 through 2005 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within 10 years. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups. 
 

Quintiles 

     Households are often divided into quintiles according to their gross income. Each quintile represents 20%, or one fifth, of all households.

Household type is strongly correlated with household income. Married couples are disproportionately represented in the upper two quintiles, compared to the general population of households. Cross-referencing shows that this is likely due to the presence of multiple income earners in these families. Non-family households (individuals) are disproportionately represented in the lower two quintiles. Households headed by single males are disproportionately found in the middle three quintles; single females head households concentrated in the bottom three quintiles.

     The highest income households are almost ten times as likely to own their homes rather than rent, but in the lowest quintile, the ratio of owners to renters is nearly one to one.

     The New York Times has used the quintiles to define class. It has assigned the quintiles from lowest to highest as bottom fifth, lower middle, middle, upper middle, and top fifth. 

Race 

     Despite advances minorities have made to exit poverty and with many Black Americans and Latino Americans joining the middle class, there is still an uneven racial distribution among the income quintiles. While White Americans made up roughly 75.1% of all persons in 2000, 87.93% of all households in the top 5% were headed by a person who identified as being White alone. Only 4.75% of all household in the top 5% were headed by someone who identified him or herself as being Hispanic or Latino of any race, versus 12.5% of persons identifying themselves as Hispanic or Latino in the general population. Overall, 86.01% of all households in the top two quintiles with upper-middle range incomes of over $55,331 were headed by a head of household who identified him or herself as White alone, while only 7.21% were being headed by someone who identified as being Hispanic and 7.37% by someone who identified as being African American or Black. Overall, households headed by Hispanics and African Americans or Blacks were underrepresented in the top two quintiles and overrepresented in the bottom two quintiles. Households headed by persons who identified as being Asian alone, on the other hand, were overrepresented among the top two quintiles. In the top five percent the percentage of Asians was nearly twice as high as the percentage of Asians among the general population. European-Americans were relatively even distributed throughout the quintiles only being underrepresented in the lowest quintile and slightly overrepresented in the top quintile and the top five percent. 
 

Education and Gender 

     Household income as well as per capita income in the United States rise significantly as the educational attainment increases. In 2005 graduates with a Master's in Business Administration (MBA) who accepted job offers are expected to earn a base salary of $88,626. They are also expected to receive "…[a]n average signing bonus of $17,428." According to the US Census Bureau persons with doctorates in the United States had an average income of roughly $81,400. The average for an advanced degree was $72,824 with men averaging $90,761 and women averaging $50,756 annually. Year-round full-time workers with a professional degree had an average income of $109,600 while those with a Master's degree had an average income of $62,300. Overall, "…[a]verage earnings ranged from $18,900 for high school dropouts to $25,900 for high school graduates, $45,400 for college graduates and $99,300 for workers with professional degrees (M.D., D.P.T., D.O., J.D., Pharm.D., D.D.S., or D.V.M.).

Considering how education significantly enhances the earnings potential of individuals, it should come as no surprise that individuals with graduate degrees have an average per capita income exceeding the median household income of married couple families among the general population ($63,813). Higher educational attainment did not, however, help close the income gap between the genders as the life-time earnings for a male with a professional degree were roughly forty percent (39.59%) higher than those of a female with a professional degree. The lifetime earnings gap between males and females was the smallest for those individuals holding an Associate degrees with male life-time earnings being 27.77% higher than those of females. While educational attainment did not help reduce the income inequality between men and women, it did increase the earnings potential of individuals of both sexes, enabling many households with one or more graduate degree householders to enter the top household income quintile.

     Household income also increased significantly with the educational attainment of the householder. The US Census Bureau publishes educational attainment and income data for all households with a householder who was aged twenty-five or older. The biggest income difference was between those with some college education and those who had a Bachelor's degree, with the latter making $23,874 more annually. Income also increased substantially with increased post-secondary education. While the median household income for a household with a householder having an Associates degree was $51,970, the median household income for householders with a Bachelor's degree or higher was $73,446. Those with doctorates had the second highest median household with a median of $96,830; $18,289 more than that for those at the Master's degree level, but $3,170 lower than the median for households with a professional degree holding householder.

     The change in median personal and household since 1991 also varied greatly with educational attainment. The following table shows the median household income according to the educational attainment of the householder. All data is in 2003 dollars and only applies to householders whose householder is aged twenty-five or older. The highest and lowest points of the median household income are presented in bold face. Since 2003, median income has continued to rise for the nation as a whole, with the biggest gains going to those with Associate's Degrees, Bachelor's Degree or More, and Master's Degrees. High-school dropouts fared worse with negative growth. 

Age of householder 

     Household income in the United States varies substantially with the age of the person who heads the household. Overall, the median household income increased with the age of householder until retirement age when household income started to decline. The highest median household income was found among households headed by working baby-boomers. Households headed by persons between the ages of 45 and 54 had a median household income of $61,111 and a mean household income of $77,634. The median income per member of household for this particular group was $27,924. The highest median income per member of household was among those between the ages of 54 and 64 with $30,544(This figure is not accurate, as it is lower than the next group). The group with the second highest median household income, were households headed by persons between the ages 35 and 44 with a median income of $56,785, followed by those in the age group between 55 and 64 with $50,400. Not surprisingly the lowest income group was composed of those households headed by individuals younger than 24, followed by those headed by persons over the age of 75. Overall, households headed by persons above the age of seventy-five had a median household income of $20,467 with the median household income per member of household being $18,645. These figures support the general assumption that median household income as well as the median income per member of household peaked among those households headed by middle aged persons, increasing with the age of the householder and the size of the household until the householder reaches the age of 64. With retirement income replacing salaries and the size of the household declining, the median household income decreases as well. 
 
 

Social class(4)

     Household income is one of the most commonly used measures of income and, therefore, also one of the most prominent indicators of social class. Household income and education do not, however, always reflect perceived class status correctly. Sociologist Dennis Gilbert acknowledges that "... the class structure... does not exactly match the distribution of household income" with "the mismatch [being] greatest in the middle..." (Gilbert, 1998: 92) As social classes commonly overlap, it is not possible to define exact class boundaries. According to Leonard Beeghley a household income of roughly $95,000 would be typical of a dual-earner middle class household while $60,000 would be typical of a dual-earner working class household and $18,000 typical for an impoverished household. William Thompson and Joseph Hickey see common incomes for the upper class as those exceeding $500,000 with upper middle class incomes ranging from the high 5-figures to most commonly in excess of $100,000. They claim the lower middle class ranges from $35,000 to $75,000; $16,000 to $30,000 for the working class and less than $16,000 for the lower class. 

United States federal budget 

     The Budget of the United States Government is the President's proposal to the U.S. Congress which recommends funding levels for the next fiscal year, beginning October 1. Congressional decisions are governed by rules and legislation regarding the federal budget process. House and Senate Budget committees each develop budget resolutions, which set spending limits for the House and Senate committees and for Appropriations subcommittees, which then approve individual appropriations bills to allocate funding to various federal programs. After Congress approves an appropriations bill, it is sent to the president, who may sign it into law, or may veto it. A vetoed bill is sent back to Congress, which can pass it into law with a two-thirds majority in each chamber. Congress may also combine all or some appropriations bills into an omnibus reconciliation bill. In addition, the president may request and the Congress may pass supplemental appropriations bills or emergency supplemental appropriations bills.