Questions for discussion

1. How can the U.S. government be defined and in what documents are the U.S. basic laws set down?

2. What is the structure, powers, functions and responsibilities of the House of Representatives and the Senate?

3. What role do U.S. Congressional committees perform?

4. How does the U.S. legislature work?

5. What do you know about the Congressional powers of investigation, about informal practices of Congress, lobbyism?

6. What are the powers and duties of the U.S. President and his Cabinet?

7. What requirements must one meet in order to become President and how long can he stay in office?

8. How are the U.S. Presidential elections conducted?

9. Why is much of the modern electoral process concerned with winning swing populous states?

10. The day-to-day enforcement and administration of federal laws is in the hands of 15 executive departments, created by Congress to deal with specific areas of national and international affairs, isn’t it?

11. What are the powers and the responsibilities of the Supreme Court of the United States?

12. How many courts are there in the U.S.A. and what do they do?

13. What is the system of checks and balances about?

Unit 8

The u.S. Economy and demographics

The U.S. economy is the world's largest. Its nominal GDP was $15.606 trillion in June 2012, with the GDP growth of 2.3% between June 2011 and 2012. The U.S. economy also maintains a very high level of output per capita. In June 2012, GDP per capita was $48,450.

Today, the U.S. is home to 29.6 million small businesses, 30% of the world's millionaires, 40% of the world's billionaires, as well as 139 of the world's 500 largest companies. This is twice the total of any other country. The U.S. has been the birthplace of 161 of Britannica's 321 Great Inventions, including items such as the airplane, internet, microchip, laser, cell phone, refrigerator, email, microwave, LCD and LED technology, air conditioning, assembly line, supermarket, bar code, electric motor, and ATM.

The U.S. is one of the world's largest and most influential financial markets, home to major stock and commodities exchanges like NASDAQ, NYSE, AMEX, CME, and PHLX.

The U.S. also has the world's largest gold reserves and the world's largest gold depository, the New York Federal Reserve Bank. A large contributor to the country's success has also been its currency. The U.S. dollar still holds about 60% of world reserves, as compared to its top competitor, the euro, which controls about 24%.

Historically, 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, by foreign investors. Since the 1960’s, the U.S. economy has absorbed savings from the rest of the world. The U.S. is by far the most heavily “invested-into” country in the world, with foreign investments measuring almost $2.6 trillion, which is more than twice that of any other country. The U.S. is also by far the largest investor in the world, with U.S. investments in foreign countries totaling over $3.61 trillion, which is almost twice that of any other country. It should be noted that the American labor market has always attracted immigrants from all over the world and has one of the world's highest migration rates.

Almost two-thirds of the nation’s total economic output goes to individuals for personal use (the remaining one-third is bought by the government and business). In 2012, consumer spending coupled with government health care spending constituted about 70% of the American economy. The consumer role is so great, that the U.S. is characterized as having a “consumer economy”.

History: The U.S. economic history covers a period of more than two and a half centuries. It has its roots in European settlements of the 16th, 17th, and 18th centuries. The theoretical foundation of the American economic system was provided by Adam Smith, whose economic ideas of “laissez faire” had a strong influence on the development of capitalism. These ideas were compatible with the high value that America’s Founding Fathers placed on individual liberty. Freedom from economic control seemed an extension of freedom from control of religion, speech, and the press.

Historically, the main causes of the U.S. economic growth were:

• the number of available workers, their productivity and mobility, including a stable cheap labor pool of millions of immigrants from all over the world,

• a large unified market,

• a supportive political-legal system,

• vast areas of highly productive farmlands,

• vast natural resources (especially timber, coal and oil),

• a cultural landscape that valued entrepreneurship,

• a commitment to investing in material and human capital,

• willingness to exploit labor,

• a unique set of institutions designed to encourage utilization, extraction and manufacturing.

The U.S. pioneered in scientific management of production and coordination (motherland of the Second Industrial Revolution). The role of flexible organization structures known as corporations or voluntary associations of owners or stockholders cannot be denied as a contributor to the U.S. economic growth. They proved to be an effective device for accumulating the funds needed to launch a new business or to expand an existing one.

Mixed consumer economy: The U.S. has a capitalist mixed market-oriented economy. A central feature of the U.S. economy is the economic freedom afforded to the private sector. It makes most 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 the court system that generally protects property rights and enforces contracts.

Market forces in America operated with a minimum of government intervention till the end of the 19^th century. Strong government regulation in the U.S. economy started in the early 1900’s with the rise of the Progressive Movement. Since then government regulation has been introduced more than once as a measure to stabilize the U.S. economy.

In the U.S. there are certain limits to free enterprise and private ownership. Some services are better performed by public rather than private enterprise. E.g., in the U.S., government is primarily responsible for the administration of justice, education (although there are many private schools and training centers), the road system, social statistical reporting, and national defense. It regulates “natural monopolies,” and it uses antitrust laws to control or break up other business combinations that become so powerful that they can surmount market forces. Government also addresses issues beyond the reach of market forces. It provides welfare and unemployment benefits to people who cannot or will not support themselves, it pays much of the cost of medical care for the aged and those who live in poverty; it regulates private industry to limit air and water pollution; it provides low-cost loans to people who suffer losses as a result of natural disasters; and it has played the leading role in the exploration of space, which is too expensive for any private enterprise to handle. All of this is paid for by a system of progressive taxation. In 2012, the private sector constituted 55.3% of the U.S. economy, with federal government activity accounting for 24.1% and state and local government activity (including federal transfers) the remaining 20.6%.

Government's role in the U.S. economy was exercised through 1) government regulation and control, 2) through protective tariffs and subsidies to industry, i.e., direct services and assistance, 3) it built infrastructure, and 4) established banking policies, including the gold standard, to encourage savings and investment in productive enterprises. Lately, the government has maintained steady economic growth by adjusting spending and tax rates (fiscal policy) or managing the money supply and controlling the use of credit (monetary policy).

World’s leading producer: The U.S. has the largest and most technologically powerful economy in the world. Its economy is postindustrial, with the service sector contributing 79.2% of GDP, industry – 19.6%, agriculture – 1.2 %.

A shift from production of goods to the delivery of services is a dominant feature of the American economy. The large majority of service-providing jobs are found in the group of trade, transportation, and utilities occupations. Other key service industries for the U.S. include finance, tourism and information technology. This sector of the economy now contributes to the greatest share of the nation’s gross national product.

The industrial sector is highly diversified and technologically advanced. The leading business field by gross business receipts is wholesale and retail trade; by net income it is manufacturing. The U.S. produces approximately 18% of the world's manufacturing output, a number that has declined as other nations developed competitive manufacturing industries.

The industrial production rate was 5.3% in 2012. 20.3% of the population is employed in manufacturing, extraction, transportation, and crafts.

The U.S. as a world leading, high-technology innovator has the second largest industrial output in the world. The U.S. leads the world in airplane manufacturing. American companies such as Boeing, Cessna, Lockheed Martin, General Dynamics produce a vast majority of the world's civilian and military aircraft. Chemical products are also the leading manufacturing field.

The U.S. is the third largest producer of oil in the world, as well as its largest importer. In 2011, the U.S. imported 3,324 million barrels of crude oil, compared to 3,377 million barrels in 2010. The Wall Street Journal reported in 2012 that the country was about to become a net fuel exporter for the first time in 62 years. The paper reported expectations that this would continue until 2020.

It is the world's number one producer of electrical and nuclear energy, liquid natural gas, sulfur, phosphates, and salt. It is the world’s leading producer of aluminum, copper, and paper, and one of the top producers of automobiles. The main industries comprise steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining, and defense. No other nation exports as much high technology as the U.S. American firms have always been at or near the forefront in technological advances, especially in computers and in medical research, aerospace and bio-chemical products, and military equipment.

Agriculture: The U.S. is the third largest agricultural producer in the world behind China and India. Agriculture is a vital part of U.S. economy and society. The U.S. is a net exporter of food. In productive terms, the achievements of this sector of the economy are extraordinary. U.S. farmers produce enough food for domestic consumption and still supply 15% of the world’s food needs. While agriculture accounts for just 1.2% of GDP; only 0.7% of the population of the U.S. is employed in the agricultural sector.

The U.S. is the world's top producer of corn and soybeans. The U.S. controls almost half of the world grain exports. Products include wheat, corn, other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy products; forest products; fish.

U.S. business pattern: The overall pattern in American business is characterized by the trend towards large-scale enterprise. Giant corporations dominate. Small corporations are being consumed by larger ones and large corporations become even larger through mergers. Large corporations, once run by individuals with high public profiles like Henry Ford or Andrew Carnegie, are now often run by nearly anonymous career executives who rarely own more than a fraction of 1% of the corporation’s stock.

The end of the 20^th century saw a trend called deinstitutionalizing. While giant corporations determine much of the nation’s economic behavior, entrepreneurs have a significant impact on the American economy. Small businesses started by entrepreneurs provided more new employment than larger corporations. The high-tech era has produced a new generation of entrepreneurs, especially in dot-com business.

By the time all U.S. working people reach their retirement age, half of them may have had a period of self-employment of one or more years; one in four may have been engaged in self-employment for six or more years. Participating in a new business creation is a common activity among U.S. workers over the course of their careers. And in recent years entrepreneurship has been a major driver of economic growth in both the U.S.

American labor force: The World Bank ranks the U.S. first in the ease of hiring and firing workers. The U.S. population for 2012 was 314,283,000 million; the U.S. has the highest labor force participation rate in the world with 153.6 million (includes 12.794 mln. unemployed, July 2012). Of those employed, about 80% (79% to be exact) had jobs in the service sector. With 22.4 million people, government is the leading field of employment.

Small businesses are the largest employer in the country representing 53% of U.S. workers. The second largest share of employment belongs to large businesses that employ 38% of the U.S. workforce. The private sector employs 91% of Americans. Government accounts for 8% of all U.S. workers.

By occupation, 37.3% U.S. citizens were employed in managerial and professional and technical spheres, 24.2% - sales and office, 17.6% - other services, 20.3% - in manufacturing, mining, transportation, and crafts, 0.7% - in farming, forestry, and fishing.

Between 1973 and 2003, a year's work for the average American grew by 199 hours. As a result, the U.S. maintains one of the highest labor productivity in the world.

Employment: The U.S. labor market is huge but currently very volatile. The labor force has yet to recover fully from the 2008 financial crisis. Unemployment rates in the U.S. nearly doubled in 2009 from 5.8% to 9.3% while in 2010 it was over 10%. In January 2013, it was 7.9%.

Education, gender, race and location influence the unemployment rate. In 2012, female unemployment continued to be lower than male unemployment (7.5% vs. 9.8%). The unemployment among whites was much lower than African American unemployment (at 8.5% vs. 15.8%). The youth unemployment rate was 18.5% in July 2009, the highest July rate since 1948. In October 2009, 34.5% of young African American men were unemployed. Officially, Detroit’s unemployment rate was 27%, but Detroit News wrote that nearly half of the city’s working-age population were unemployed in 2009.

Social class in the U.S.: Economists have proposed class systems with 6 distinct social classes. These class models feature an upper or capitalist class consisting of the rich and powerful (less than 5% of the population), an upper middle class consisting of highly-educated and wealthy professionals (ca. 15%), a middle class consisting of college-educated individuals employed in white collar industries (ca.34%), a lower middle class (ca. 19%), a working class (12% )constituted by clerical and blue collar workers whose work is highly routinized, and a lower class (13-15%) divided between the working poor and the unemployed underclass.

Foreign trade: The U.S. is the world's largest trading nation. The U.S. is the world’s largest importer of goods and third largest exporter. Principal goods in America’s export trade ($1.497 trillion (2011 est.) are capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) - 49.0%, industrial supplies (organic chemicals) - 26.8%, consumer goods (automobiles, medicines) - 15.0%, agricultural products (soybeans, fruit, corn) - 9.2%, (2011).

The leading U.S. imports ($2.236 trillion (2011 est.) are agricultural products 4.9%, industrial supplies 32.9% (crude oil 8.2%), capital goods 30.4% (computers, telecommunications equipment, motor vehicle parts, office machines, electric power machinery), consumer goods 31.8% (automobiles, clothing, medicines, furniture, toys) (2011).

The U.S. is a member of several international trade organizations. The U.S. participates in the activities of such organizations as APEC, ASEAN (dialogue partner), Australia Group, BIS, FAO, G-5, G-7, G-8, G-10, NAFTA, NATO, OSCE, Paris Club, UN, UN Security Council, UNESCO, WHO, WMO, WTO, etc.

Main export partners of the USA are: Canada 19%, Mexico 13.3%, China 7%, Japan 4.5% (2011). Main import partners are: China 18.4%, Canada 14.2%, Mexico 11.7%, Japan 5.8%, Germany 4.4% (2011). So, Canada, China, Mexico, Japan, and Germany are top trading partners of the U.S. In 2009-2011, vehicles constituted both the leading import and leading export commodity.

Despite its huge domestic production, the U.S. economy depends heavily on foreign imports. Until recently, the U.S. consistently exported more goods than it imported. However, since 1971, the U.S. has been operating under a trade imbalance, importing more goods than it exports. E.g., the value of imports $2.236 trillion (2011 est.) substantially outweighs the value of exports $1.497 trillion. Foreign manufacturers are now selling more in the U.S. than Americans are exporting abroad. Most of America’s television sets, cameras and shoes and clothes are made by foreign companies.

Current international trade developments in areas such as foreign competitiveness, import-export policies, currency exchange rates and trade imbalance have posed tough problems for the U.S. economy.

In 2012, the total U.S. trade deficit was about $497 billion, which is $1.497 trillion in exports minus $2.236 trillion in imports. In 2012, the total U.S. budget deficit was about $190.53 billion.

Public debt history: In 1980, the U.S. public debt was $909 billion - or an amount equal to 33.3% of the U.S. gross domestic product (GDP). As of July 30, 2012, the U.S. public debt was $16.015 trillion against $15.600 of GDP.

In order to fund the national debt, the U.S. 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 from overseas. The U.S. Treasury statistics indicate that, at the end of 2006, non-U.S. citizens and institutions held 44% of the federal debt held by the public. Large foreign economies such as China, Japan, Arab states of the Persian Gulf and the EU own huge dollar reserves (especially as the U.S. is more in debt), so there is a fear that they will move away from the dollar. China's reserves are more than $3 trillion, the world's largest.

What are the reasons of such a debt? George Soros said the following: “Before the 2008 crash, the U.S. economy was built on debt and derivatives. Debt said "Eat, drink and be merry...you don't have to pay until tomorrow." Derivatives said "Trust me. Your investment will increase in value." And this derivative bubble burst in 2008”.

Current major economic concerns in the U.S. can be summed up as: government, business and consumer debt, low savings rates, falling house prices, low consumption rates and sizable trade and budget deficits, inadequate investment in deteriorating infrastructure, rapidly rising medical and pension costs of the aging population, soaring oil and grain prices and stagnation of family income in the lower economic groups.

One of the main reasons of the current U.S. economic problems is its enormous military expenditures. In fact, military spending by the U.S. government diverts resources from productive uses such as consumption and investment. Then come soaring oil prices, which eat into consumers' budgets. Imported oil accounts for about 60% of the U.S. consumption. E.g., in July 2008, oil peaked at $147.3 a barrel and a gallon of gasoline was more than $4 across most of the U.S. Meanwhile, bio-ethanol production increased the prices of grains by 3.5 times in 2008. These high prices caused a dramatic drop in demand.

At the same time, the start of the 21^st century witnessed an enormous inflow of capital from China, also considered as one of the root causes of the financial crisis of 2008: China was buying huge quantities of dollar assets to keep its currency value low and its export economy humming, which caused U.S. interest rates and saving rates to remain artificially low. These low interest rates, in turn, created the housing bubble of 2008 or the so-called the sub-prime mortgage crisis (when mortgages were cheap, house prices were inflated as people could afford to borrow more). This housing bubble collapse was a cause of the crisis in the financial markets worldwide.

So, the global economic downturn, the sub-prime mortgage crisis, investment bank failures, sky-rocketing military spending and tight credit, high oil and grain prices, declining dollar value, had pushed the U.S. into a recession by mid-2008. GDP contracted until the 3d quarter of 2009, making the deepest and longest downturn since the Great Depression.

Prominent economist George Soros wrote then: housing bubbles in the U.S. were caused by deregulation and financial liberalization of the U.S. economy.

To help stabilize financial markets, the U.S. Congress established a $700 billion Troubled Asset Relief Program (TARP) in October 2008. In January 2009, the U.S. Congress passed and President Barack Obama signed a bill providing an additional $787 billion fiscal stimulus to be used over 10 years – 2/3ds on additional spending and 1/3 on tax cuts - to create jobs and to help the economy recover. In March 2010, President Obama signed a health insurance reform bill into law to extend coverage to an additional 32 million American citizens by 2016, through private health insurance for the general population and Medicaid for the impoverished.

In July 2010, the president signed the DODD-FRANK Wall Street Reform and Consumer Protection Act, designed to promote financial stability by protecting consumers from financial abuses, ending taxpayer bailouts of financial firms, dealing with troubled banks that are "too big to fail," and improving accountability and transparency in the financial system.

All these programs were aimed at overcoming the consequences of the 2008-2009 crisis, but at the same time they meant more government involvement and greater government spending which is expanding at an exponential rate.  Nowadays, federal spending is almost 18 times higher than it was back in 1970. Barack Obama proposed a budget that would increase the U.S. government spending to 5.6 trillion dollars in 2021. 

It will, in its turn, lead to the growth of the national debt at a breathtaking speed.  Now many economists say the sad truth is - that it is the U.S. government - that has a massive debt problem.  The Federal Reserve prints more and more money out of thin air. And all of this new money is creating a tremendous inflation. 

The U.S. economy as it currently exists is unsustainable. It cannot function without debt.  In one of his speeches in 2012, Vladimir Putin accused the U.S. of living beyond its means "like a parasite" on the global economy and said dollar dominance was a threat to the financial markets. From the above said we may conclude that the U.S. federal government is massively overextended, most of state and local governments are massively overextended, most of major corporations are massively overextended, and the majority of U.S. consumers are massively overextended.

The only way that the game can continue is for the Federal Reserve to print increasingly larger amounts of paper money out of thin air and for everyone in the economic food chain to go into increasingly larger amounts of debt. But no debt spiral can go on forever.  At some point this entire house of cards is going to collapse.

U.S. Demographics: The U.S. population is currently 314,283,000 (July 2012) including an estimated 11.2 million illegal immigrants.The U.S. population growth rate reflects 13.83 births and 8.38 deaths per 1,000 people.

Total fertility rate in the U.S. is 2.01 children born/woman (2012 est.).

Life expectancy is high

• total population: 78.37 years

• male: 75.92 years

• female: 80.93 years

U.S. population distribution: About 5% of the earth’s inhabitants live in the U. S. Yet, it remains less densely populated than other large countries or other industrialized nations — in 2004 there were 32 persons per sq km. California and Texas are currently the most populous states. In 2009, almost two-thirds of the U.S. population lived in states along the three major coasts — 38% along the Atlantic Ocean, 16% along the Pacific Ocean, and 12% along the Gulf of Mexico. About one-third of all Americans at the beginning of the 21st century lives around the Great Lakes and in Northeastern states, and the corridor stretching from Boston to Washington, D.C., remained the most densely settled part of the U.S.

About 82% of Americans live in urban areas; about half of those reside in cities with populations over 50,000. In 2008, 273 cities had populations over 100,000, nine global cities had over 2 million (New York City, Los Angeles, Chicago, Dallas, Miami, Washington and Atlanta).

The states that attract newcomers, such as Colorado, Georgia, Texas, and Alaska, tend to have the highest proportion of young people and the smallest proportion of older people. Of all the states, Utah has the largest portion of young people, largely because of high birthrates among its predominantly Mormon population.

The states that experience more people leaving than arriving include Rhode Island, Pennsylvania, West Virginia, and North Dakota. Similarly, many northeastern cities have large elderly populations, while suburbs in the Southeast and Southwest have large populations of younger people. Florida is an exception to these trends, because it attracts many retirees.

The U.S. has a very diverse population. The ethnical distribution of the U.S. population (2009) on the U.S. territory is as follows:

• White 79.96%,

• Hispanics of any race 15.1%,

• African American 12.85%,

• Asian American 4.43%

• Native American and Alaska Native 0.97%

• Native Hawaiian and Pacific Islander 0.18%

• Multiracial 1.61% (2009)

The population growth of Hispanic or Latino Americans is a major current demographic trend. Between 2000 and 2010, the country's Hispanic population increased 32% while the non-Hispanic population rose just 4.3%.

Demographic Forecasting: The growing American economy has always required a lot of workforce which could be reached both by the increase of the birth rate and by attracting immigrants. Nowadays, when the birthrate is decreasing, the only way to help the country offset the aging population is to supplement it by immigration.

The Census Bureau estimates that the U.S. population will grow from 300 million in 2006 to 397 million in 2050 with expected immigration, but only to 328 million with zero immigration. "If we have zero immigration with today's low birthrates the American population would eventually begin to shrink."