Economy Introduction by Roger King 

Table of Contents

  1. Introduction

  2. Death Taxes

  3. Dominance in the World

  4. Repealing Estate Taxes

  5. Interest Rates

  6. National Debt

  7. Taxes

  8. Wealth

 

Introduction

U.S. Banks Face Contagion Risk on European Debt  By Dakin Campbell - Nov 17, 2011  U.S. banks face a “serious risk” that their creditworthiness will deteriorate if Europe’s debt crisis deepens and spreads beyond the five most-troubled nations, Fitch Ratings said.

“Unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” the New York-based rating company said yesterday in a statement. Even as U.S. banks have “manageable” exposure to stressed European markets, “further contagion poses a serious risk,” Fitch said, without explaining what it meant by contagion.

The “exposures” of U.S. lenders to major European banks and the stressed nations of Greece, Ireland, Italy, Portugal and Spain, known as the GIIPS, are smaller than those to some of the continent’s larger countries, Fitch said.

The six biggest U.S. banks -- JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. and Morgan Stanley (MS) -- had $50 billion in risk tied to the GIIPS on Sept. 30, Fitch said. So-called cross-border outstandings to France for all except Wells Fargo were $188 billion, including $114 billion to French banks. Risk to Britain and its banks was $225 billion and $51 billion, respectively.

Moody's Backs US's AAA Rating, S&P Cuts Fannie, Others By: CNBC.com  Aug 8, 2011  Meanwhile, S&P downgraded government-sponsored enterprises Fannie Maeand Freddie Mac to AA+ from triple-A, with S&P citing their reliance on U.S. government.

Ten of the country's 12 Federal Home Loan Banks were also cut to AA-plus. The banks of Chicago and Seattle had already been downgraded earlier to AA+.

Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. As part of a nationalized system, they account for nearly all new mortgage loans. Their downgrade might force anyone looking to buy a home to pay higher mortgage rates.

S&P also cut ratings for several of the main arteries of the US financial system—the Depository Trust Co., National Securities Clearing Corp., Fixed Income Clearing Corp. and the Options Clearing Corp.—were cut one notch to AA-plus.

Moody's cautious about U.S. deficit cuts Plan By Walter Brandimarte Aug 8, 2011  (Reuters) - Ratings agency Moody's Investors Service on Monday warned it might also downgrade the U.S. government's credit rating if its planned measures to reduce its budget deficit turned out to be not "credible" after all.

In his first comments after the move by rival rating agency S&P, Moody's analyst Steven Hess sounded a note of caution about Moody's rating of the U.S., repeating that the August 2 plan to cut deficits by $2.1 trillion was positive for the U.S. credit standing, but not enough to keep its rating on a stable outlook.

S&P downgrades U.S. credit rating for first time By  August 6, 2011  Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating to one notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future.

“It’s always possible the rating will come back, but we don’t think it’s coming back anytime soon,” said David Beers, head of S&P’s government debt rating unit.

The decision came after a day of furious back-and-forth debate between the Obama administration and S&P. Treasury Department officials fought back hard, arguing that the firm’s political analysis was flawed and that it had made a numerical error in a draft of its downgrade report that overstated the deficit over 10 years by $2 trillion. Officials had reviewed the draft earlier in the day.

“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokesman said Friday night.

The downgrade to AA+ will push the global financial markets into uncharted territory after a volatile week fueled by concerns over a worsening debt crisis in Europe and a faltering economy in the United States.

The AAA rating has made the U.S. Treasury bond one of the world’s safest investments — and has helped the nation borrow at extraordinarily cheap rates to finance its government operations, including two wars and an expensive social safety net for retirees.

Treasury bonds have also been a stalwart of stability amid the economic upheaval of the past few years. The nation has had a AAA rating for 70 years.

Analysts say that, over time, the downgrade could push up borrowing costs for the U.S. government, costing taxpayers tens of billions of dollars a year. It could also drive up interest rates for consumers and companies seeking mortgages, credit cards and business loans.

A downgrade could also have a cascading series of effects on states and localities, including nearly all of those in the Washington metro area. These governments could lose their AAA credit ratings as well, potentially raising the cost of borrowing for schools, roads and parks.

http://www.youtube.com/watch?v=OS2fI2p9iVs

http://www.bls.gov/  is the URL for Bureau of Labor Statistics

Treasury Releases Income Mobility Study  from the US Treasury Department  November 13, 2007  The Treasury Department today released a study on income mobility of U.S. taxpayers from 1996 through 2005.   The key findings of the study included:

 

Death Taxes  Link

  1. Introduction Since its addition to the U.S. tax code in 1916, the estate tax (often called the “death tax”) has been a major topic of debate among policymakers and tax policy scholars. The estate tax, a tax on the transfer of property at death, has undergone a number of changes over the years. Most recently the estate tax was modified by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). EGTRRA reduced the estate tax rate gradually to 45 percent in 2007-2009 and repeals it in 2010. In 2011, the estate tax will revert to its pre-EGTRRA form, with rates ranging from 41 percent to 60 percent.
  2. Summary More and more of the rest of the world realizes the futility of taxing saving, investment and capital income. The U.S. needs more saving and investment for job creation, higher standards of living and a strong economy in a very competitive global economy. The U.S. estate tax is an unnecessary  impediment to economic growth.

 

Dominance in the World

2012 Index Of Economic Freedom at the Heritage Foundation

Top 10 Countries

world rank country overall score change from previous
1 Hong Kong 89.9 0.2
2 Singapore 87.5 0.3
3 Australia 83.1 0.6
4 New Zealand 82.1 -0.2
5 Switzerland 81.1 -0.8
6 Canada 79.9 -0.9
7 Chile 78.3 0.9
8 Mauritius 77.0 0.8
9 Ireland 76.9 -1.8
10 United States 76.3 -1.5

 

Better In Rwanda at IBD Editorial 10/25/2011  Commerce: The U.S. has slipped again in world rankings that assess the ease of starting a new business. If we're to bring down our stubbornly high unemployment rate, this trend has to be reversed.

According to the World Bank's "Doing Business 2012" report, America is 13th among 183 countries ranked in the "Starting a Business" category. In the 2011 report, the U.S. ranked 11th. The year before, it was No. 8.

In 2009, the U.S. was ranked No. 6. It was fourth in 2008 and third in 2007.

In the 2012 ranking, the U.S trailed such job creators as Macedonia, Georgia, Rwanda, Belarus, Saudi Arabia, Armenia and Puerto Rico, which are ranked No. 6 through No. 12.

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  1. The United States has less than a century left of its turn as top nation. Since the modern nation-state was invented around the year 1500, a succession of countries have taken turns at being top nation, first Spain, then France, Britain, America. Each turn lasted about 150 years. Ours began in 1920, so it should end about 2070. The reason why each top nation’s turn comes to an end is that the top nation becomes over-extended, militarily, economically and politically. Greater and greater efforts are required to maintain the number one position. Finally the over-extension becomes so extreme that the structure collapses. Already we can see in the American posture today some clear symptoms of over-extension. Who will be the next top nation? China is the obvious candidate. After that it might be India or Brazil. We should be asking ourselves, not how to live in an America-dominated world, but how to prepare for a world that is not America-dominated. That may be the most important problem for the next generation of Americans to solve. How does a people that thinks of itself as number one yield gracefully to become number two?    Link 
  2. 2010 Index of Economic Freedom: America, No Longer the Land of the Free by heritage.org  January 20, 2010

    Unprecedented Decline for United States

    • U.S. Drops from "Free" to "Mostly Free": For the first time in the history of the Index for Economic Freedom, the United States is no longer in the top category of economically free countries and is even second in the North American region (behind Canada). This year's score of 78, though high in global standards, is 2.7 points lower than last year and bumps it to a second-tier country of freedom.
    • What Is Economic Freedom? Economic freedom refers to the ability of individuals to control their own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. Governments allow labor, capital, and goods to move freely and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.
    • Why the Index of Economic Freedom Is Important: Studies in the Index of Economic Freedom demonstrate important relationships between economic freedom and job creation, per capita income, economic growth rates, human development, democracy, the elimination of poverty, and environmental protection. The Index is annually released by The Heritage Foundation and The Wall Street Journal.

    What Changed in 2009?

    • U.S. Interventionism: The U.S. government's interventionist responses to the economic and financial crisis that began in 2008 have significantly undermined economic freedom and long-term prospects for economic growth.
    • Great Uncertainty: Uncertainties caused by ongoing regulatory changes and politically influenced stimulus spending have discouraged entrepreneurship and job creation, slowing recovery.
    • Tax Rates, Bailouts, and Stimulus: Tax rates are increasingly uncompetitive and massive. Stimulus spending is creating unprecedented deficits. Bailouts of financial and automotive firms have generated concerns about property rights.
    • Other Factors: There are multiple factors that affect a country's economic freedom--government size and regulation, trade restrictions, inflation and price controls, and labor policies, to name a few. Economic freedom has declined in seven of the 10 categories measured.

Importance of  Repealing Estate Taxes

  1. Impact on Saving: Like all other taxes on capital income, the estate tax also lowers the return to saving. Since saving is necessary to finance productivity-enhancing investment, which is essential for economic growth, it is important to consider the extent of this negative effect. A study conducted in 2001 by Douglas Holtz-Eakin, former director of the Maurice R. Greenberg Center for Geoeconomic Studies at the Council on Foreign Relations and a former director of the Congressional Budget Office (CBO), and Donald Marples, now Specialist in Public Sector Economics, Government and Finance Division, Congressional Research Service,1 shows that eliminating the estate tax would correspond to increased household saving of between $800 and $3,000 annually.
  2. Impact on Cost of Capital: The estate tax raises “the user cost of capital,” the internal rate of return required of a project so that the cash flows are sufficient to meet the market rate of return. Using data from the Health and Retirement Survey, in another econometric study,2 Dr. Holtz-Eakin found that entrepreneurs face an expected tax liability that is typically nearly five times as large as non-entrepreneurs because of the type of investments they make. For example, the top 10 percent of entrepreneurs face capital costs that are over 8 percent higher than they would be in the absence of an estate tax; for the top one percent, the cost of capital is over 14 percent higher. 
  3. Impact on Investment: The negative effect of the estate tax on saving and on the cost of capital is also reflected in investment. For example, Dr. Holtz-Eakin estimates that the estate tax reduces annual investment by sole proprietors and partnerships by about 2 to 6 percent. To give a sense of the magnitudes involved, according to U.S. data, investment by sole proprietors and partnerships totaled approximately $118 billion in 2001, suggesting a decrease in investment by these entities of $2.4 to $7.1 billion in this narrow category of small business alone. Moreover, according to a CBO study released in July 2005, “…estate taxes reduce after-tax returns on investment just as income taxes do, and a large body of research suggests that the income tax discourages entrepreneurial effort to some degree.”3
  4. Impact on Wages and Labor Supply: As noted by Dr. N. Gregory Mankiw, former chairman of President Bush’s Council of Economic Advisers and now Robert M. Beren Professor of Economics at Harvard University, even though the estate tax is a tax on capital, lower capital accumulation decreases the productivity of labor and thus reduces wages. Furthermore, Dr. Holtz-Eakin and Dr. Marples’ study shows that the estate tax also has a negative impact on individuals’ decisions to participate in the labor force. A “ballpark figure” of the impact suggests that eliminating the estate tax would raise labor force participation by single individuals aged 51 to 61 by 0.5 percent.
  5. Impact on Job Growth: Sole proprietors and other entrepreneurs are unusually sensitive to their personal tax situations. Drawing on research by Massachusetts Institute of Technology Professor James Poterba, which shows that the estate tax raises the tax rate on capital income by as much as 3 percentage points for older individuals, Dr Holtz-Eakin’s research shows that each one percent increase in the tax rate (including the estate tax) causes sole proprietorships to reduce their desire to employ a worker by 0.2 percent. As tax rates rise, the risk of additional hiring increases due to the need to meet a higher hurdle rate, thus fewer jobs are created. For sole proprietors who already have an employee on board, each one percent increase in the tax rate reduces the desire to employ additional workers by 0.4 percent. 
  6. Macroeconomic Impact: In 2001, shortly before the enactment of EGTRRA, the ACCF Center for Policy Research sponsored an analysis by Dr. Allen Sinai, Chief Global Economist, Strategist and President of Decision Economics, Inc., of the overall impact on the U.S. economy of reducing or repealing the estate tax. Dr. Sinai is one of the nation’s most highly regarded economists, a consultant to the Federal Reserve, the President’s Council of Economic Advisers, and the Congressional Budget Office, among other leading policymakers in the U.S. and abroad. The Sinai-Boston Econometric Model of the U.S. used for the study is a large-scale quarterly econometric model that includes considerable detail on aggregate demand, financial markets, sectoral flows of funds and balance sheets, interactions of the financial system with the real economy, and detailed trade and international financial flows. The study showed that immediate elimination or reform of the estate tax, retroactive to January 1, 2001, would result in:
    1. An increase in GDP by a cumulative $90 billion to $150 billion over the 2001–2008 period.
    2. An increase in job growth in the range of 80,000 to 165,000 per year and a slightly lower unemployment rate as a result. 
    3. A rise in the level of potential output by an average $6 billion to $9 billion per year.
    4. An increase in tax receipts, excluding estate tax receipts, in response to the stronger economy and financial system, feeding back approximately $0.20 per dollar of estate tax reduction, to some extent helping to pay for the estate tax reduction.

 

Interest Rates

  1. Although lower interest rates can jump-start the economy, they can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns. Higher rates can boost a currency.
  2. The euro's rise, which makes goods from the U.S. cheaper to buy, can hurt exports from countries that use the currency, among them Germany and France.

 

National Debt

Fed Now Largest Owner of U.S. Gov’t Debt—Surpassing China By Terence P. Jeffrey November 16, 2011  (CNSNews.com) - At the close of business on Tuesday, the debt of the federal government exceeded $15 trillion for the first time--with the largest single owner of the publicly held portion of that debt being the Federal Reserve.

Over the past year, as the Federal Reserve massively increased its holdings of U.S. Treasury securities and entities in China marginally decreased theirs, the Fed surpassed the Chinese as the top owner of publicly held U.S. government debt.

In its latest monthly report, the Federal Reserve said that as of Sept. 28, it owned $1.665 trillion in U.S. Treasury securities. That was more than double the $812 billion in U.S. Treasury securities the Fed said it owned as of Sept. 29, 2010.

Meanwhile, as of the end of this September, entities in mainland China owned $1.1483 trillion in U.S. Treasury securities, according to data published todayby the U.S. Treasury Department. That was down slightly from the $1.1519 trillion in U.S. Treasury securities the Chinese owned as of the end of September 2010, according to the same Treasury Department report.

  1. Our trade deficit in manufacturing soared nearly 300 percent from 1997 to 2005, surging to $662.5 billion. Our business and government leaders soothingly remind us that we are a technology economy and needn't be distracted by developments like the reversal of what was a $35-billion surplus in high-tech goods to what is now a $44-billion deficit. It's great to be The Superpower.

  2. Most people think a shrinking deficit is, automatically, a good thing. They accept the mercantilist view that exports are a source of wealth,  while imports somehow impoverish us.  The problem is, as we've noted before, that that's exactly backward.  When the trade gap shrinks, the economy usually tanks — and when that big, bad trade deficit gets even bigger, the economy grows strongly.  Instead, Cato Institute economist Dan Griswold looked at what happens when the U.S. trade deficit expands or shrinks— as it's doing now. What he saw confounds the common wisdom — and puts the lie to those who claim we should make shrinking the trade deficit (that is, erecting trade barriers) a major policy goal.  Going back nearly two decades, Griswold discovered that when the trade deficit "improves" — that is, gets smaller — real GDP grew just 1.9% on average, while joblessness rose. When the deficit got slightly bigger — or "worsened" — real GDP rose an average of 3%, while unemployment fell.  What happened when the deficit "rapidly worsened," sending the pundits and media experts into paroxysms of doubt and concern for our economy? The "worsening" trade picture led to boisterous 4.4% GDP growth, and big drops in unemployment.  What happens is consumers buy fewer imports when the economy gets weak — thus helping the deficit to "improve" as the overall economy weakens. On the other hand, a booming economy with richer consumers sucks in imports — and creates a bigger deficit.   Link

  3. What about all that money we're burning? Not to worry. Spend it if you got it. Well, we really don't have it, actually. We're borrowing more than $2 billion a day to send to those lesser souls who are uncomfortably situated in poorer nations that can only aspire to our superpower status.

  4. As to our government's budget deficit, again, that's not a problem. Our federal government keeps two sets of books: one that shows our budget deficit shrank to $319 billion last year and the Treasury Department set that shows $760 billion. Now, we don't want anyone to get needlessly anxious here. It turns out that our national debts and commitments actually stand at an incredible $49 trillion. But let's just keep that little number amongst ourselves.

  5. The federal government uses a quaint accounting system that would be illegal for any large enterprise in America, and there are those who believe our government should be more transparent, or perhaps honest, if you will. One of those with a very unpopular wet-blanket attitude is David Williams of the Citizens Against Government Waste. "If this happened in the private sector, we would call the government 'Enron,' " Williams says.

  6. The Birth Burden - The $156,000 that represents each American's share of the $8 trillion federal debt, plus $35 trillion in unfunded spending promises.  The average household share of the federal fiscal mess is $411,000.

  7. Pickens pointed out that the U.S. is currently sending half a trillion dollars out of the country each year to buy oil, in some cases from people who "are our enemies."   Link

     

Taxes

1.      Federal Tax Facts - Just in time for tax filing season, the Tax Foundation and Congress's Joint Committee on Taxation have compiled some useful facts about the federal tax system. Following are a few worth thinking about as taxpayers write their annual checks to Uncle Sam.

1.      In 2005, the federal government took $2.4 trillion out of the pockets of the American people. To put this number into context, it is about the same as the size of the entire U.S. economy in 1959 in inflation-adjusted terms. Only two other countries on earth have economies as large as our federal government: Germany and Japan—and Germany just barely makes the cut, with a gross domestic product of $2.7 trillion. China, which everyone is so alarmed about, has an economy significantly smaller than the federal government, with a GDP of $1.9 trillion—about equal to what the U.S. raises just from taxes on individuals.

2.      Contrary to popular belief, the vast bulk of federal taxes are paid by the wealthy. According to the JCT, in 2006, 53.7 percent of all federal income taxes were paid by those with incomes over $200,000. Those with incomes between $100,000 and $200,000 paid 28.3 percent of all individual income taxes. Thus those with incomes over $100,000 paid 82 percent of the total. They also paid 44.4 percent of all payroll taxes.

3.      Those with incomes below $40,000 paid no federal income taxes at all in the aggregate; the positive liability for those who paid anything was more than offset by tax rebates from the Earned Income Tax Credit for many more who paid nothing. In total, the EITC put $41 billion into the pockets of low-income workers in 2005, 91 percent of it being paid to those with no income tax liability. However, according to the Tax Foundation, three-fifths of Americans believe that it is wrong for anyone to pay no taxes at all, that everyone should pay something to finance the government.

4.      So-called tax loopholes—deductions and exclusions that reduce one's tax liability—are mainly used by the middle class, not the wealthy. The largest tax expenditures are the exclusions for pension contributions and health benefits for workers. Among the largest deductions are those for mortgage interest and state and local taxes. In 2005, taxpayers saved $62 billion in taxes due to the mortgage interest deduction, with 72 percent of that going to those with incomes below $200,000. The child credit saved taxpayers $46 billion—almost all of it claimed by the middle class. Just $8 million went to those with incomes over $200,000.

5.      Not surprisingly, three-fifths of taxpayers believe their taxes are too high; only two percent think they are too low. About a third of taxpayers would support a reduction in government services in order to achieve further tax cuts; just eight percent favor bigger government financed with higher taxes.

6.      Support for fundamental tax reform is high; four-fifths of taxpayers believe that the tax system is too complex; just three percent believe the tax system is fine the way it is. By better than a 2 to 1 margin, taxpayers would be willing to give up major tax deductions, such as that for mortgage interest or state and local taxes, in order to get lower income tax rates.

7.      Almost all taxpayers think that the top federal income tax rate of 35 percent is too high. More than 90 percent of taxpayers believe that the top rate should be no higher than 29 percent, with 70 percent saying that 19 percent should be the maximum.

8.      The Alternative Minimum Tax is a rapidly growing federal tax. Originally designed to tax only the rich, increasingly it is a tax on the middle class. In 2005, the AMT affected only 1.3 percent of those with incomes between $50,000 and $100,000. Unless Congress acts, this percent will rise to 42.8 percent this year and over 50 percent next year. This illustrates the problem with all soak-the-rich tax proposals—eventually they end up taxing the middle class, too.

  1. Thomas Sowell states “taxpayers whose incomes were in the bottom 20 percent in 1996 had a 91 percent increase in incomes by 2005.  Meanwhile, taxpayers in the top one-hundredth of one percent -- "the rich" or "superrich" if you believe politicians and the media -- had their incomes drop by 26 percent over those very same years.”  These facts are from a November 13, 2007 report from the Treasury Department titled "Income Mobility in the United States from 1996 to 2005."  Link

3.      For years, Republicans have largely ignored the problem of the AMT—enacting temporary patches to the tax cut to keep the problem from getting worse, but not even attempting to offer a permanent fix. The latest patch expired at the end of last year, which is why there is such a sharp rise in the percentage of taxpayers affected by the AMT projected.   Consequently, Democrats really have a gun to the heads—they must do something on the AMT by the end of the year. But because they have pledged to pay for all tax cuts, they must therefore raise taxes somehow to pay for an AMT fix. Republicans aren't likely to offer much help in that area, making tax policy in 2007 an interesting spectator sport.

  1. In 2004 the bottom one-half of income earners paid only 3.3% of all federal income taxes.  That's down from the Clinton years.  In fact, that's the lowest share paid by the bottom half ever.  According to The Wall Street Journal, the majority of American families with incomes less than $40,000 pay no income taxes at all!  When you factor in the welfare program known as the Earned Income Tax Credit, many of these families are coming close to getting a completely free ride!
  2. In 2004 the top 1% of all income earners earned about 19% of all income.  So ... the rich really are benefiting from Bush's tax policies, aren't they?  Just 1% earning 19% of all income?   Sorry to burst your bubble, but that figure was higher in the Clinton years.  During the time Clinton was in office this figure went from 13.8% to nearly 21%.  Funny how you didn't read a lot of newspaper stories during the Clinton years about growing income inequality, isn't it?  Now, under bush, the share of total income earned by the wicked rich has fallen! From 2002 to 2004, with the hated Bush tax cuts firmly in place, the top 0.1% of income earners saw their share of total income taxes paid go from 15.4% to 17.4%.  That's up a full 2% for those of you who went to government schools.  
  3. Since Bush's tax cuts the Imperial Federal Government has seen an increase of 79% in capital gains taxes, and 35% for taxes on dividends.
  4. The bottom 50% of income earners in this country earns about 13.9% of all income but they pay only 3.6% of the income taxes. Could it then be argued that the people in the bottom 50% of income earners aren't paying their fair share?
  5. The top 5% of income earners in the U.S. earn 31% of all income but the top 5% of all income earners are paying 54.1% of all income taxes.
  6. The top 1% of income earners in the U.S. in 2005 earned 16.5% of all income but are paying 33.7% of all income taxes. They're paying income taxes in an amount double their proportion of the income.

10.  Any taxes to the rich will also affect small businesses and family farms that often pay their income taxes as individuals.  The results is a huge damping affect on the economy.

 

Wealth

1.      Forget Kyoto - We curb emissions better, so why imitate Europe?  by David Freddoso April 11, 2007 10:35 AM   USA has 5 percent of the world’s population but we produce 25 percent of its wealth. Compared to Europe, we produce more jobs with higher wages, and we enjoy an economy that is 42.5 percent wealthier per person. Year after year, we leave Europe farther behind.