The United States fell to sixth place in the World Economic Forum's 2006 global competitiveness rankings after ceding the top place to Switzerland.
In a report released today, the World Economic Forum said Washington's huge defence and homeland security spending commitments, plans to lower taxes further, and long-term potential costs from health care and pensions were creating worrisome fiscal strains.
"With a low savings rate, record-high current account deficits and a worsening of the US net debtor position, there is a non-negligible risk to both the country's overall competitiveness and, given the relative size of the US economy, the future of the global economy," it said.
Switzerland was deemed the most competitive economy in 2006, followed by Finland, Sweden, Denmark and Singapore. After the United States, which had topped the 2005 index, Japan, Germany, The Netherlands and Britain rounded out the top 10.
Ireland retained last year's position of 21st in the league.
The Geneva-based World Economic Forum said Switzerland's well developed infrastructure, plentiful scientific research, intellectual property protection and sophisticated business culture helped take the country to the index's leading position.
As in Switzerland, it said high-ranking Nordic countries benefited from strong institutions and excellent education and training, but said they lagged in labour market flexibility.
Most European Union countries saw stable competitiveness readings over the past year, but Italy's competitiveness ranking fell to 42nd - compared to 38th last year - due to ongoing macroeconomic and institutional weakness.
Russia slipped nine places for a 62nd-place ranking this year, largely due to private sector misgivings about the independence of the country's judiciary, according to the report based on surveys of more than 11,000 business leaders worldwide.
China's ranking also fell to 54 from last year's 48.