Macroeconomic Conditions for Doing Business in the US: A Study on Steel Manufacturing Startup

This study analyzes the macroeconomic conditions that influence the environment of doing business in the US, specifically for a steel manufacturing business startup. It covers topics such as general business environment, starting a business, dealing with construction permits, getting electricity, and registering property. The US economy has been noted to be fast growing and its economic growth rate is very high, making it favorable for starting up businesses. The paper also discusses the US government's taxation policy, recent monetary policy, and the effects of the 2008-09 global financial crisis on the US economy.

Running Head: US Macroeconomic Condition
Macroeconomic Conditions that Influence the Environment of Doing Business in the US. A
Study on a Steel Manufacturing Business Startup
By (Name)
(Tutor)
(University)
(Date)

US Macroeconomic Condition 2
Executive Summary
The US is the largest world economy ahead of China. This economy is developed and has many
trading partners. This paper is aimed at establishing how the US economy has performed in the
10 years from the pre-crisis period to post-crisis period. The results are useful in determining
whether is favorable for launching a steel manufacturing business. The economy has been noted
to be fast growing and its economic grow rate is very high. The high growth rate has enable the
government to raise greater tax revenues. The high economic growth rate is favorable for starting
up businesses in this economy as there is high demand for goods and services. The prices of raw
materials in the US are also attractive for starting a business given the fact that the average price
level given by inflation rate is low. The low inflation rate is also an indicator that US government
may be able to promote economic growth in the coming years by lowering the interest rate, this
will definitely lower the cost of capital. The current US interest rate is low and thus an investor
may choose to take a fixed interest loan that will minimize the risk of paying higher amounts in
the future in case the interest rate happened to be pushed up. The US government’s taxation
policy has been poor but in the recent years has undergone reforms that has been aimed at
promoting business establishment and expansions. The general business condition in the US are
very supportive for business establishment. The US economy has been confirmed to be the best
economy that one can consider initiating an investment

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Table of Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Analyses and Discussions.............................................................................................................................6
General Business Environment................................................................................................................6
Starting a Business in the US...............................................................................................................6
Dealing with Construction Permit........................................................................................................7
Getting Electricity................................................................................................................................8
Registering Property............................................................................................................................8
Getting Credit......................................................................................................................................9
Protecting Minority Investors..............................................................................................................9
Paying Taxes........................................................................................................................................9
Trading Across Borders........................................................................................................................9
Enforcing Contracts...........................................................................................................................10
Resolving Insolvency..........................................................................................................................10
US Business Cycles and Economic Growth.............................................................................................11
US Unemployment Rate........................................................................................................................12
The US Inflation Rate.............................................................................................................................13
The US Government Expenditure..........................................................................................................16
The US Real Interest Rate......................................................................................................................17
The US Domestic Transfer of Credit to Private Sector...........................................................................19
The US Taxation Policy...........................................................................................................................20
Recent Monetary Policy in the US.........................................................................................................21
Effects of 2008-09 Global Financial Crisis (GFC) in the US.....................................................................21
Conclusions and Recommendations..........................................................................................................22
Bibliography...............................................................................................................................................24

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Macroeconomic Conditions that Influence the Environment of Doing Business in the US. A
Study on a Steel Manufacturing Business Startup
Introduction
This paper is aimed at establishing the business environment in the US. The study is
meant to determine whether it would be viable to launch a steel manufacturing business in the
US economy. United States being a Federation of States has different regulatory scheme and
government structure for every state. Inter-state commerce is regulated by the national
government authority. Further, it also regulates foreign trade and activities of business national
scope and interest (Commerce.gov, 2017). Any business operating in the US states is faced by
different regulatory environment depending on its territory of operation (Porter and Rivkin,
2012). There are other local jurisdiction in the US with regulatory authority over issues on
building codes, land use, permitting, zoning, sanitation, etc. an example of these local
jurisdictions include municipalities, counties and some political units. Thus in order to determine
the suitability of doing business in the US, a further research would be necessary to determine
again which state is more favorable compared to the others. The regulatory scheme which
applies to business operations carried out in the US is dependent on; (i) organization of the
business; (ii) the way the business operates and its location; (iii) and finally the industry in which
the business falls in.
There are 4 categories in which the regulations are classified. (i) The common regulations
applicable for all businesses, e.g. tax codes, business registration and licensing, safety
requirements and public health requirements. (ii) The regulations affecting only specific business
operation aspects such as workplace safety, employee relations, building code and zoning. (iii)
The regulations focused on particular industries e.g. insurance, health care, agriculture,
pharmaceuticals, banking and finance. (iv) Regulations that are meant to protect the interest of
the business, e.g. Due process, intellectual property, and prevention of deceptive trade practices
and unfair competition. All these regulations demand for diligence, competent professional
support and appropriate attention. The schemes are manageable. The regulations are not meant to
discourage investment, most of them are put forward to protect the best interest of the business.
The most common example of a regulation most useful for manufacturing companies is
the Intellectual Property Protection (IP). An IP protection is meant to benefit the owner who

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comes up with a certain product out of creativity so that the owner will be able to benefit from
his/her invention without gratuitous competition, it increases the attractiveness of a product to
consumers. The IP consist of; (i) Trademarks which are words, symbols, phrases, images and
slogans that differentiate one product from that offered by competitors. (ii) Copyrights which
protects original works fixed in a tangible medium. E.g. music, videos, movies, books,
photographs, art and software. (iii) Patents that gives exclusive right to inventions. (iv) Trade
secrets that carefully guards private data and resources; these include formulas.
Launching a business in the US will need some prime assets that must be protected and
thus a need for IP protection. The United States offers a legal regime both at the state and federal
level to protect the IP assets. This enables an investor to exploit the assets fairly. The following
steps must be taken when planning to launch a business in the US: (i) An IP Audit must be
conducted before one enters the US. This means taking a stock of the intended IP assets and
estimating their worth in a rank. The assets will bring different value into the business and its
advisable to identify those will bring about the greatest value in ensuring survival for the
business. (ii) Secondly, a protection plan should be created. The identified and prioritized IP
assets need to be protected. There are two steps required for protection; one is to register the
product with copyright, trademark and patent authorities in the investor’s home country and also
in the US. Second is carrying out a review contacts by creating an awareness of your ownership
rights by contractors, investors and employees. (iii) Thirdly, one need to exercise diligence by
being watchful. Some competitors will always try to covet one’s IP by trespassing the held
rights. In the current era where technological changes have made it easy for IT specialist to
access any form of data in the internet, stealing of IP assets is very easy. The owner of the rights
need to keep constant monitoring to be able to detect when the IP assets are infringed.

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Analyses and Discussions
General Business Environment
Fig: The Rank of doing business in the US
Source: Doingbusiness.org (2018)
The graph represents the ranking of the US economy across 198 economies in the ease of doing
business.
Starting a Business in the US
There are different aspects of business startups that are covered in this topic. These topics
cover the requirement one is supposed to meet in order to launch the business successfully.
These topics include; number of procedure that one has to undergo, the requirement for paid-in
minimum capital, the costs of starting all ranges of businesses and the time taken before one is
successful in the establishment. Operating in the US biggest city has certain mandatory
requirement that must be observed. The ranking is done across 190 economies. The data for all
these economies is made comparable by the use of using a 100% standardized domestically
owned business. The business used is required to have a capital for start-up equivalent to 10
times its income per capital. It should be engaging in general commercial or industrial activities.
Further, the number of its employees every month after the commencement must be between 10
and 50; all domestic nationals. There are two types of limited liability companies that are
considered in starting a business but must have identical aspects. The only difference is the
ownership where one is owned by 5 married men and the other by 5 married women. The

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average of scores is obtained for each indicators component to determine the Distance to Frontier
(DTF) score.
The US is ranked 49 in the easiness of doing business. Its starting of business DTF is
91.23; the number of procedure - men is 6; time – men (days) is 5.6; % of income capital cost –
men is 1.1; the number of procedures for women is 6; the time – women (days) is 5.6; % of
income capital cost – women is 1.1; and % of income capital cost (paid-in minimum capital) is
0.0. These aspects are for the United States in general. However, there are different aspects
between the state of Los Angeles and New York City. For Los Angeles, the following business
startup aspects are applicable; starting of business DTF is 90.66; the number of procedure - men
is 6; time – men (days) is 8; % of income capital cost – men is 0.8; the number of procedures for
women is 6; the time – women (days) is 8; % of income capital cost – women is 0.8; and % of
income capital cost (paid-in minimum capital) is 0.0. For New York City, the following business
startup aspects are applicable; starting of business DTF is 91.61; the number of procedure - men
is 6; time – men (days) is 4; % of income capital cost – men is 1.3; the number of procedures for
women is 6; the time – women (days) is 4; % of income capital cost – women is 1.3; and % of
income capital cost (paid-in minimum capital) is 0.0.
Dealing with Construction Permit
The major issues covered under this topic are costs, procedures and time taken to build a
warehouse; this includes the acquirement of necessary licenses and permits, making a request of
all necessary inspections and its acknowledgement, submitting the required notifications and
obtaining utility connections. In addition, this topic also covers quality control index on building
measurement, quality of regulation for building evaluation, liability and insurance regimes,
Safety mechanisms and strength of quality control, and requirements for professional
certification.
For the US economy, the dealing of construction permit DTF is 75.77; its dealing with
construction permit rank is 36; the number of procedures is 15.8; time days is 80.6; the % of
warehouse value cost is 0.9; the quality control index for building (from 1-15) is 10.0. The
differential for Los Angeles and New York City are as follows. For Los Angeles, the dealing of
construction permit DTF is 27; the number of procedures is 17; time days is 68; the % of
warehouse value cost is 1.9; the quality control index for building (from 1-15) is 13. For New

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York City, the dealing of construction permit DTF is 44; the number of procedures is 15; time
days is 89; the % of warehouse value cost is 0.3; the quality control index for building (from 1-
15) is 8.
Getting Electricity
The major issues covered in this topic are: cost, time and procedure required to obtain a
permanent connection of electricity for the business’s newly constructed warehouse. Further, it
covers the measure of reliability of supply, the price of electricity, and the transparency of tariffs.
In the US, the DTF of getting electricity is 82.14; its ranked 49th; the number of procedures is
4.8; time (day) is 89.6; Percentage of income per capital cost is 23.7; supply reliability and index
of tariff reliability (from 0-8) is 7.2. The differential between Los Angeles and New York City is
as follows: For Los Angeles, the DTF of getting electricity is 52; the number of procedures is 6;
time (day) is 134; Percentage of income per capital cost is 38.9; supply reliability and index of
tariff reliability (from 0-8) is 6. for New York City, For Los Angeles, the DTF of getting
electricity is 23; the number of procedures is 4; time (day) is 60; Percentage of income per
capital cost is 13.6; supply reliability and index of tariff reliability (from 0-8) is 8.
Registering Property
The major issues discussed in this topic are: costs, time and steps involved in property
registration. It makes the case assumption of an entrepreneur wanting to buy land and building
which is free from title dispute for it has already been registered. Further, the quality of land
administration is measures. There are five dimensions for land administration index: land dispute
resolution, transparency of information, reliability of infrastructure, equal access to property
rights, and geographical coverage.
In the US, the DTF for registering property is 76.80, its ranked 37th; the number of
procedures are 4.4, the time (days) are 15.2; the percentage of property value cost is 2.5; and the
index of land administration quality (from 0-30) is 17.6. The differential between Los Angeles
and New York City is as follows: For Los Angeles, the DTF for registering property is 77.03, the
number of procedures are 5, the time (days) are 20; the percentage of property value cost is 0.9;
and the index of land administration quality (from 0-30) is 17. For New York City, the DTF for
registering property is 76.64, the number of procedures are 4, the time (days) are 12; the

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percentage of property value cost is 3.5; and the index of land administration quality (from 0-30)
is 18.
Getting Credit
There are only two major issues covered in this topic. These are: How strong is the credit
reporting system and how effective the collateral and bankruptcy laws are in facilitating lending.
In the US, the DTF of getting credit is 95; its ranked 2nd; the index of legal rights strength (from
0-12) is 11; the index of credit information depth (from 0-8) is 8; the percentage of adults
covered in the credit registry is 0.0; the percentage of adults covered by the credit bureau is
100.0. All this aspects of getting credit are equal for Los Angeles and New York City.
Protecting Minority Investors
The major issues covered in this topic are: the rights of shareholders, how strong the
protections of minority shareholders are in ensuring that the business directors do not misuse the
corporate assets for personal gains. Further, it covers governance safeguards and the requirement
for corporate transparency in order to reduce abuse risks (Doingbusiness.org, 2018). In the US,
the DTF for protecting minority investors is 64.67; its ranked 42nd; the index of conflict of
interest regulation (from 0-10) is 8.3; and the index of shareholder governance (from 0-10) is 4.6.
Paying Taxes
The issues covered in this topic are the tax amounts and mandatory contributions payable
by a medium-sized company in a given year. Further it measures administrative burden incurred
in tax payment and contributions. In the US, the DTF of paying taxes is 84.13; its ranked 36th;
the number of payment per year is 10.6; time (hours per year) is 175; the rate of total tax and
contribution (% of profit) is 43.8; and the index of postfiling (from 0-100) is 94.04.
Trading Across Borders
This issues covered in this topic include the cost and time spent on the logistical process
of goods importation and exportation. The measurement of cost for this processes excludes
tariffs. There are three procedural sets that are associated with this measurement; Domestic
transport, documentary compliance and border compliance. In the US, the DTF of trading across
borders is 92.01; its ranked 36th; the number of hours requirement for export boarder compliance
is 1.5; the boarder compliance cost of exporting (USD) is 175; the hours of documentary
compliance in exporting is 1.5; the documentary compliance cost on export (USD) is 60; the

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hours of boarder compliance on imports is 1.5; the boarder compliance cost on imports (USD) is
175; the number of hours for documentary compliance on imports is 7.5; and the cost of
documentary compliance on imports (USD) is 100.
Enforcing Contracts
The issues covered in this topic include the cost and time spent in resolving of a
commercial dispute; the local first-instance court is the base for the resolving. Further, it covers
the quality index of judicial processes, and it also carry out an evaluation to determine the
adoption of good practices by each economy in the promotion of efficiency and quality in the
court system (Doingbusiness.org, 2018). In the US, the DTF of enforcing contract is 72.61; its
ranked 16th; time (days) is 120; Percentage of claim value cost is 30.5; and the index quality of
judicial processes (from 0-18) is 13.8. The percentage of claim value cost in New York City is
lower than for Los Angeles.
Resolving Insolvency
The issues covered in this topic include outcome of insolvency, time and cost on
proceeding; this involves the domestic legal entities. The recovery rate is calculate by using these
variables. It represent the dollars cents recovered by secured creditors through debt enforcement,
liquidation and reorganization. In the US, the DTF of resolving insolvency is 91.07; its ranked
3rd; dollar cents recovery rate is 82.1; time is 1 year; percentage of estate cost is 10.0; outcome is
1 as a going concern; and index of insolvency framework strength (from 0-16) is 15.

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US Business Cycles and Economic Growth
Graph: The US annual GDP growth
Source: Data.worldbank.org (2018)
The US economy as observed in the graph above provided by the World Bank can be
argued to have a sound economic growth. This economy has performed well nearly all the years
under analysis. Before the year 2008, the US economy’s annual economic growth was already
falling as indicated by the lope of the curve from 2007 to 2008. This confirms the notion that the
GFC originated from the poor financial system in the US. The rate continued falling in 2008
until a negative growth rate of -2.776% was recorded in 2009 at the climax of the crisis. This was
the greatest recession that hit this economy, the magnitude of the negative growth rate was so
strong. However, this economy can be noted to gradually achieve a recovery in 2010 such that
annual growth rate rose from the negative record of 2009 to a positive record of 2.532% in 2010.
This rate was even greater than the one recorded in 2007 before the recession set in. since then,
the annual growth rate averaged around 2%; the highest record of 2.862% in 2015 was very
impressive. The lowest rate after the recovery was recorded in 2016 and was 1.485%. However,
based on the ability of the US to recover very first from the global recession, the economy’s

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annual growth rate is expected to remain higher in the coming years. A high economic growth
rate according to many economists represents a good performance for businesses. Thus, it can be
concluded that the economic growth in the US is supportive for doing business. Businesses are
thriving well and the investors’ confidence have been heightened.
US Unemployment Rate
Graph: the US Unemployment rate (Modeled ILO estimate)
Source: Data.worldbank.org (2018)
The unemployment rate for the US economy in the past years was very high. Before the
GFC (2007), the US economy according to the data provided by the World Bank reported an
employment rate of 4.62%. This rate was lower meaning that the economy was performing well
and was able to create huge number of jobs. The rate started rising in 2007 before the GFC, the
rise continued in 2008, through 2009 and the unemployment peak was reached in 2010 when this
economy reported a 9.63% rate of unemployment. From the value recorded in 2007 and that
recorded in 2010, it can clearly be said that the unemployment rate in the US more than doubled
during the GFC (Batten and Szilagyi, 2011). The US achieved its recovery in 2010 but the
unemployment rate was still higher but lower than 2010’s record. Since then, the rate continued
falling annually until the economy reported its lowest unemployment rate of 4.438% in 2017.

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Again we can say that this economy has gone back to the situation it was before the
global recession because the 2017’s unemployment rate reported was even lower than that of
2007. This is a representation of a strong economic performance in the US. Given the high
potential for growth, this economy’s unemployment rate might continue falling further in the
future. Unemployment represents the level of demand in an economy; high unemployment rate is
interpreted that the economy has higher number of people without income or with lower income
and thus it is an important determiner of the economy’s aggregate demand. Similarly, a lower
unemployment rate as is the case for the US is that there are many people who are employed;
they have income that assists in the purchase of goods and thus the Aggregate demand is high.
Most business startups, fail because of lack of a significant demand which raise the revenues for
the business. Given the low unemployment rate in the US, it can be concluded that it is in a
business cycle that is favorable for starting a business. There is high possibility that the business
may pick up very first owing to the soaring demand.
The US Inflation Rate
Graph: Inflation in the US (% Annual Consumer Prices)
Source: Data.worldbank.org (2018)

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The inflation rate data is obtained from the World Bank report. The inflation rate in the
US economy was very high even before the crisis. The official inflation rate target range for this
economy is 2% (Miller, 2018). In 2007, the economy reported 2.583% which was above the
target range. The situation became worse in 2008 when the rate rose higher; this was the peak for
the US inflation rate for the 10 years that have been analyzed. The peak inflation rate of 2008
was 3.839%. The global recession must have greatly hit this economy because the economy
moved from 3.839% to a deflation of -0.356% in 2009. There was more than 100% fall in the
inflation rate during the recession. However, the recovery of the US in 2010 pushed up the
inflation rate from the deflation state to 3.157% which was higher that the reporting of 2007
(pre-crisis period). Since then, the inflation rate fell annually until the economy nearly fell into
another deflation in 2015. The 2015 reporting for the US inflation rate was 0.119%. This greatly
lowered the investors and consumers’ confidence. However, the economy attained a significant
recovery and by 2016 the rate had risen to 1.262%.
The US inflation rate is still below the target rate. A high inflation rate represents a
heightened demand level in the economy (Albert, 2016). It means that there is a high circulation
of money is the economy which enables consumers to boost their level of demand. Lower rate of
inflation means that there is a shortage of demand in this economy and the money in the
circulation is low, thus people are not able to sustain their demand; most people are forced to cut
their spending (Federalreserve.gov, 2018). During a deflation, it means businesses receive low
demand from consumers and thus production falls causing them to reduce the number of
workers. The unemployment rate and the interest rate can thus be concluded to have a negative
relationship as illustrated by Pettinger (2017).

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Fig: Phillips Curve
Source: Pettinger (2017)
In this case, every rise in the inflation rate is associated with a lower unemployment rate.
For instance if we consider a movement of the inflation rate from 2% to 5% in the illustration
above, the unemployment falls from 6% to 3% as a result. This is because workers tend to
demand higher wages during high inflation rate period which lowers the affordability of the
company to hire more workers or even to maintain the pre-existing number of workers. Thus,
very low inflation rate is undesirable. The latest inflation rate for the US economy was still very
low and thus not appealing for a business startup. It doesn’t give enough confidence on the
business investment.

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The US Government Expenditure
Graph: General final consumption expenditure by the US government (% of GDP)
Source: Data.worldbank.org (2018)
The consumption expenditure by the US government was high during the pre-crisis
period and went up significantly during the crisis. In 2007, the US government’s expenditure was
15.263%. This rate rose in 2008 until it reached its highest level of 16.937% in 2009. The graph
above shows that the government employs fiscal policies during the period when the economy
fails to perform as expected. After the recovery was gained in 2010, the spending started falling;
the fall continued until the government spending was lower than the pre-crisis period. The lowest
consumption expenditure of 14.272% for the US government was reported in 2016. A higher
spending by the government means that the economy is well stimulated; the aggregate demand
rises and so does the economic growth. Similarly, a low spending by the government means that
the economy is dormant and the AD is low. A lower spending is not desirable because it means
that the development in this economy such as infrastructure is limited. A good business thrives in
a nation where the government spends more on its infrastructural development. However, lower
inflation rate may be view from another perspective that it raises the potential of an economy’s

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development since it can implement expansionary policies without much worrying.
Expansionary monetary policies are good for businesses because they are in favor of promoting
business expansions.
The US Real Interest Rate
Graph: US real interest rate (%)
Source: Data.worldbank.org (2018)
Before the global recession, the US economy was operating at a very high percentage real
interest rate. In 2007, the World Bank reported a real interest rate of 5.249%. A fall was
experienced in 2008, across to 2011 when the lowest level was reported; the lowest level was
1.161 which was closer to zero. The low real interest rate is associated by the expansionary
policy the use employed during the recession to seek a recovery. Since then, the rate has
continued rising but at a slow pace. Unlike other indicators of economic growth in the US that
performed better after the recovery than the pre-crisis period, the interest rate has remained to be
lower but on the rise. Since 2011, the highest rate reported was 2.208% and this was in 2016.

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Interest rate factors is better considered when starting a business because it also
determines the cost of business operations. It is the cost in which borrowed capital is repaid. It
also guides the investor in making the right choice when choosing the source of capital. Not all
source of capital have the same interest rate, some may be lower whereas other may be higher. If
the rate is higher, a loan borrowed today will attract a higher monthly interest payment which
may result in reduced profit for the business. Similarly, a low interest rate is good for an investor
because it attracts low monthly interest payment. Compared to the past years, especially during
the pre-crisis period, the US economy can be argued to have a moderate interest rate supportive
for initiating a business.
The interest rate also determine the types of loans that an investor may seek to take;
namely; fixed or the variable interest loans. For a fixed interest loan, one is mandated to pay
equal monthly interest payment till the maturity of the loan. For the floating interest loan, one is
mandated to pay monthly interest payments but the amounts are unequal and they depend on the
current rate of interest. The choice of the type of the loan is influenced by both the current and
the future interest rate. If the interest rate is low today, investors seek fixed loans since they will
be paying the same low amount each month even after there has been an increment in the market
rate. However, if the rate are higher currently and there is a future expectation that it may fall,
investors seek the floating rate so as to avoid being locked in paying high monthly interest
payment. In this case, the US interest rate is fairly low, the economy is having a sound economic
growth, and hence there is no possibility of future fall in interest rate unless the economy tend to
fall into a recession or rather the government need to raise the low inflation rate. Therefore, a
fixed interest loan may be the most favorable in this case to avoid future risks.

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The US Domestic Transfer of Credit to Private Sector
Graph: US domestic credit transfer to the private sector
Source: Data.worldbank.org (2018)
Domestic credit transfer to private sector means the resources given by the financial
corporations to private sector. They include loans, trade credits, non-equity securities purchase,
etc. an example of financial corporations is the banks that accept deposits and monetary
authorities. Other financial corporations according to the World Bank include; money lenders,
insurance corporations, foreign exchange companies, money lenders and pension funds. In fact,
these transfers determines the availability of funds for businesses in the private sector. During
the pre-crisis period (2007), the US economy had the highest transfer of domestic credit to
private businesses. The percentage of GDP for these transfers in 2007 was 206.303%. The
percentage fell to 188.024% in 2008, there was a slight rise to 191.84 in 2009 when the GFC was
on heat. After the US recovery was achieved in 2010, the credit transfer fell to its lowest point of
177.854%. Since 2010, the transfers picked up again until 2014 when the reported percentage
was 194.232%. In 2015, the transfers declined to 188.204%. The latest report on 2016 indicated
a rise to 192.165%.

US Macroeconomic Condition 20
The transfers are meant to promote development in the private sector which have high
contribution to the US jobs creation; thus the transfers are important in promoting social growth.
The World Bank noted that given a significant level of competition, the private sector can grow
very fast compared to the public sector. The development in the private sector expands income in
addition to creation of many jobs and is thus considered an engine of promoting productivity
growth. The US economy is growing and the credit transfers have a high possibility of rising
making it more attractive for business startup.
The US Taxation Policy
Graph: The US tax revenue (percentage of GDP)
Source: Data.worldbank.org (2018)
Given the US strong economic growth during the pre-crises period, the tax revenue was
very high. Tax revenue and economic growth has a positive relationship and thus the level of tax
revenue is a good indicator for economic health. The reported tax revenue for the US in 2007
was 11.289%. This later declined during the 2008 economic downturn; the lowest proportion of
tax revenue to the US GDP was recorded in 2009 (7.936%). After 2009, the tax revenue
percentage to the US GDP has been on a constant rise. However, the tax revenue after the

US Macroeconomic Condition 21
downturn has never reached the record of 2007 pre-crisis period. The next highest level was
recorded in 2015 (11.239%). In 2016 there was a slight fall from 11.239% to 10.893%. The US
is a strong economy because even during the financial crisis it managed to raise a significant
amount of tax revenue.
It is essential for a business start up to consider the tax policies for the host economy. A
higher tax rate is not good for any business at it raise the obligation costs. Higher tax lowers the
profitability of a business as it is considered one of the input price. However, tax is not
something that one should worry of anymore owing to the recent tax reforms that have been
introduced in the US. Murray (2018) noted that initially the maximum corporation tax in the US
was 37% but this under the recent reforms has been revised to 21%. This sounds good for the
business that we are intending to establish in the US economy. The Signing of the Tax Cuts and
Job Act in December 2017 has changed the tax obligations for small businesses. The recent tax
cut according to D'Angelo (2018) is expected to bring a break on business taxes everywhere.
Thus, the tax policy in the US is currently attractive for starting up a business.
Recent Monetary Policy in the US
One of the most important policy the US government implemented is the reduction in
corporation taxes from 35% to 21% (Davies, 2018). This December 2017 tax cut is the largest in
the history of US economy (Gittleson, 2018). This tax cut according to Rizzo (2018) was meant
to greatly boost investment level. In 2017, there was also an interest raise in the US. Ruche
(2018) noted than the increase from the range of 1.5 to 1.75 was the sixth by the US government
since 2015. France-Presse and Gillison (2017) noted that there was a possibility of further rise in
the coming years.
Effects of 2008-09 Global Financial Crisis (GFC) in the US
This economy was the stemming of the GFC (Morrissey, Lopez and Sharma, 2015). The
economy had a crash in the housing market. Its economic growth arte was greatly reduced; in
fact it experienced a negative growth rate. The unemployment rate went up as businesses lost
confidence and halting their production of goods; many people were laid off as an impact of this
crisis (Wanna, Lindquistand and Vries, 2015). The economy fell into a deflation where negative
inflation rate was reported. The level of government’s debt rose because the government had to
spend more to improve the situation. There was less flow of credit transfers to private sector

US Macroeconomic Condition 22
under thus a great fall in the investment level. The level of tax revenue was also lower which
created a greater balance budget deficit (Ariff, Farrar and Khalid, 2012).
Conclusions and Recommendations
Tax saving that will result from business benefiting from the tax reforms will stimulate
the economy and there is potentiality of growth. Businesses are aware that they will be saving
more revenues every month and thus they may add more labor for expansion, this will create
more jobs and the Aggregate demand will be pushed higher. Higher aggregate demand will be
more profitable for the business. Considering the regulatory environment for businesses in the
US, the IP rights protection is the best support offered by the government in promoting business
establishments. Protection of investors’ assets has heightened the investment confidence and thus
there is no more worry of investing in the US. Security of assets is an important factor that faces
foreign investments.
Other than the US having a favorable macroeconomic conditions for starting a business,
this economy also is ranked higher in term of doing business. Thus, my recommendation to my
company is to go ahead and make a good business plan which will assist in the determination of
the requirements for the launching of the steel manufacturing business in the US economy. The
business plan will include the specific location in the US which will need further research on the
regulatory environment applicable to that specific state. It will also include a financial plan to
estimate the costs and revenue prediction.
Starting a business in the US is easy as have been identified in the analysis of different
business aspects. Thus, it can be concluded that the US is the most favorable economy for a
business startup. However, it’s worth using the business aspect requirement to determine the
most appropriate city within the United States. The two states Los Angeles and New York has
confirmed to differ in business aspects requirement represented by their difference in starting of
business DTF. Even though some aspects are similar, such as; the number of procedure for both
men and women and % of income capital cost (paid-in minimum capital), the other aspects are
different. For instance, New York City requirement for % of income capital cost for both men
and women is higher in comparison to Los Angeles state; the time days for both men and women
is higher in Los Angeles but lower in New York City. However since cost consideration is the

US Macroeconomic Condition 23
most important factor, it’s easier and less costly to start the steel manufacturing business in Los
Angeles.
In the case of dealing with construction permits, the % of warehouse value cost for New
York is lower than that of Los Angeles which makes it more suitable location. The percentage of
income per capital cost and time (days) for New York City is significantly lower than that of Los
Angeles making it the most suitable location. It is less costly to register a property in Los
Angeles than in New York City making it the preferred location. The aspect of getting credit for
the business in Los Angeles and New York City is equal and thus any of the two state could be
taken depending on the cost of other aspects. The aspect for paying taxes in the US is supportive
for business operation. The time taken in complying on all the set procedures is lower for both
importing and exporting and the costs involved are significantly low. Contract enforcement cost
in New York City is lower than for Los Angeles and thus more preferable. Specifically, this
business should be launched in New York City as it has much cost benefits.
Based on this argument, any investor intending to launch a business in the US should not
worry but go ahead with the investment. The regulatory environment in the US is very
supportive and thus investors should avoid any kind of worry. Much of the regulation in the US
are beneficial to the business. The remedies provided by the US government for wrongful
appropriation of one’s IP rights is very strong. A guide to regulatory compliance in the US to
ensure that the protected IP and other business assets are fully enjoyed by the owner is made
available through the competent support by professional accountants, attorneys and advisors.

US Macroeconomic Condition 24
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