Economy of the United States

not adequately care for themselves. Social Security, which is financed by a tax on employers and employees, accounts for the largest portion of Americans' retirement income. The Medicare program pays for many of the medical costs of the elderly. The Medicaid program finances medical care for low-income families. In many states, government maintains institutions for the mentally ill or people with severe disabilities. The federal government provides food stamps to help poor families obtain food, and the federal and state governments jointly provide welfare grants to support low-income parents with children.

Many of these programs, including Social Security, trace their roots to the "New Deal" programs of Franklin D. Roosevelt, who served as the U.S. president from 1933 to 1945. Key to Roosevelt's reforms was a belief that poverty usually resulted from social and economic causes rather than from failed personal morals. This view repudiated a common notion whose roots lay in New England Puritanism that success was a sign of God's favor and failure a sign of God's displeasure. This was an important transformation in American social and economic thought. Even today, however, echoes of the older notions are still heard in debates around certain issues, especially welfare.

Many other assistance programs for individuals and families, including Medicare and Medicaid, were begun in the 1960s during President Lyndon Johnson's (1963–1969) "War on Poverty." Although some of these programs encountered financial difficulties in the 1990s and various reforms were proposed, they continued to have strong support from both of the United States' major political parties. Critics argued, however, that providing welfare to unemployed but healthy individuals actually created dependency rather than solving problems. Welfare reform legislation enacted in 1996 under President Bill Clinton (1993–2001) requires people to work as a condition of receiving benefits and imposes limits on how long individuals may receive payments.

National debt

The national debt, also known as the U.S. public debt and the gross federal debt, is the overall collective sum of yearly federal budget deficits owed by the United States federal government. The economic significance of this debt and its potential ramifications for future generations of Americans are controversial issues in the United States.

The borrowing cap debt ceiling as of 2005 stood at 8.18 trillion. In March of 2006, Congress raised that ceiling an additional .79 trillion to $8.97 trillion. 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. The size of the debt is in the trillions and consequently it has been part of popular culture to parody the growing debt with some type of doomsday clock, graphically showing the growing indebtedness every second.

While the U.S. national debt is the world's largest in absolute size, a more accurate measure is that of its size relative to the nation's GDP. When the national debt is put into this perspective it appears considerably less today than in past years, particularly during World War II. By this measure, it is also considerably less than those of other industrialized nations such as Japan and roughly equivalent to those of several Western European nations.

Poverty

This graphic shows the distribution of gross annual household income. The building's thirty exposed floors are easily divided into quintiles, each income quintile is thereby represented by six floors. Each floor represents the tenth of a third (3.33%) of households in the US and each section of 10 floors represent roughly one third of American society. The floors above the top black line represent those households with incomes of or exceeding $100,000. The floors below the bottom black line, however, represent those households who fell below the poverty threshold. In order to live on the top floor of the American income strata, a household's annual gross income must exceed $200,000.There is significant disagreement about poverty in the United States, particularly over how poverty ought to be defined. Using radically different definitions, two major groups of advocates have claimed variously that (a) the United States has eliminated poverty over the last century; or (b) it has such a severe poverty crisis that it ought to devote significantly more resources to the problem.

The two preceding definitions of poverty are very different because one group defines poverty as a lack of basic resources. Even with over 300 million people, The United States has a very low number of people who lack basic necessities (e.g., food, shelter and clothing). The other group argue that income inequality is providing the richest 10% with a much better standard of living than the poorest 10%.Much of the debate about poverty comes from groups who either support welfare programs and government regulation of the market or a market which is regulation free and not bound by a big social safety net. Measures of poverty can be either absolute or relative. Absolute poverty is defined in real dollar values, whereas relative poverty is a comparison of the highest to the lowest standard of living at a particular time period.

Income inequality

The United Nations Development Programme Report 2005 ranks income distribution in the United States as the 92nd most equal out of 124 countries, as measured by the Gini coefficient. The richest 10% make 15.9 times as much as the poorest 10%, and the richest 20% make 8.4 times as much as the poorest 20%. (See List of countries by income equality.)

This does not take into account absolute income levels. If, for instance, one country's poorest are richer than another country's average, then the inequality comparison becomes less meaningful.