America has slipped one spot since last year — from Earth’s eighth-freest economy in 2010, according to the 2011 Index of Economic Freedom. This 17th annual report, jointly published by the Heritage Foundation and the Wall Street Journal, sifts through the wreckage caused by government’s turbocharged acceleration during the Bush-Obama years. America’s slump in the rankings (we’re down from No. 5 in 2008) confirms the urgent need for Washington to revitalize free markets and restrain government intervention.
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Among the 179 countries examined in the Index, Hong Kong is ranked first, followed by Singapore, Australia, New Zealand, Switzerland, Canada, Ireland, and Denmark. These nations all outscored the U.S. across ten categories, including taxes, free trade, regulation, monetary policy, and corruption.
America barely made the top ten. Bahrain was tenth, with 77.7 points, one decimal point behind America’s 77.8 score. Chile reached No. 11 with 77.4, just 0.4 points behind the United States.
Even worse, with a score below 80, the U.S. is spending its second year as a “mostly free” economy. As it departed the family of “free” nations in 2010, it led the “mostly free” category. Even within this less-than-illustrious group, America now lags behind Ireland and Denmark.
How did our once-unassailable country wind up so winded?
“The national government’s role in the economy has expanded sharply in the past two years, and the federal budget deficit is extremely large, with gross public debt approaching 100 percent of GDP,” explain the Index’s authors, Terry Miller and Kim R. Holmes. “Interventionist responses to the economic slowdown have eroded economic freedom and long-term competitiveness. Drastic legislative changes in health care and financial regulations have retarded job creation and injected substantial uncertainty into business investment planning.”
Miller and Holmes also criticize Washington for abandoning the free-trade posture of earlier years, an area where Democrat William Jefferson Clinton boldly guided his party, starting with the NAFTA trade pact. Washington Democrats these days scorn Clinton’s enriching example. As Miller and Holmes write, “Leadership and credibility in trade also have been undercut by protectionist policy stances and inaction on previously agreed free-trade agreements with South Korea, Panama, and Colombia.”
On fiscal freedom, the Index rates the U.S. as below average. The top American federal income-tax rate is 35 percent, versus a worldwide average of 28.7 percent. At 35 percent, America’s federal corporate tax outpaces the world’s 24.8 percent average and increases U.S. exports . . . of jobs. America’s overall average tax burden was 26.9 percent of GDP, compared with 24.4 percent globally.
America also earns a below-average score for government spending. Worldwide, such expenditures average 33.5 percent of GDP; in the U.S., 38.9 percent.
Compare America with Rwanda, the Index’s most-improved nation. This landlocked African country leapfrogged 18 spots, from No. 93 in 2010 to No. 75 today. How?
“Rwanda scores relatively high in business freedom, fiscal freedom, and labor freedom,” Miller and Holmes observe. “Personal and corporate tax rates are moderate. With a sound regulatory framework that is conducive to private-sector development, Rwanda has achieved annual economic growth of around 7 percent over the past five years.”
As I noted on my visit there last month, Rwanda remains poor, with a long list of challenges. Yet there is no denying its self-confidence and unflagging commitment to pro-market modernization. Rwanda is moving on up.
America remains blessed with wealth, durable institutions, and creative, clever, industrious citizens. Yet its self-doubt is fueled by an insatiable state that constantly devours more of the nation’s output, and with little to show for its gobbling. Depleted, America stumbles downhill.
Miller and Holmes surveyed the globe and reached this conclusion: Rather than multi-billion-dollar stimuli and 2,000-page regulatory behemoths, “the best results are likely to be achieved instead through policy reforms that improve incentives that drive entrepreneurial activity, creating greater opportunities for investment and job growth.”
The path back to American prosperity and preeminence lies in the leadership of both parties in Washington abiding by the previous paragraph.
— New York commentator Deroy Murdock is a nationally syndicated columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University. Murdock visited Rwanda, thanks to a grant from the SEVEN Fundof Cambridge, Mass. The views expressed here are his own and do not necessarily reflect those of the SEVEN Fund.
“the best results are likely to be achieved instead through policy reforms that improve incentives that drive entrepreneurial activity, creating greater opportunities for investment and job growth.”
D'ya think? Anyone with two firing economic synapses knows that. So why did we slip to 9th freest? Because what we are experiencing: high unemployment, massive debt, recession, etc. is on purpose. The President could take steps to resurrect this economy during this term. But despite the rhetoric, that is not the plan. He'd rather tour GE. As a nation, we still want to believe in the falsified, projected image of what we want this President to be rather than what he truly is. He has the power to pull the levers to jump start the economy, but again that is not the plan. So called Stimulus, QE, bailouts, that brilliant Obamacare, and the perpetual election/re-election campaign . . . that is the plan.
Agreed, however the first thought I had upon finishing the article was a British friend's saying--"Not bloody likely". If conservatives (different from Beltway Republicans) win back the Senate and WH in 2012, we can begin. Even then it will be slow going and problematic that a beginning will be made at all.
Given that Canada is higher on the list than the U.S., then one can't really say that the health care bill is leading us down the road to socialism, since no matter what one says of it, the current U.S. health care system is no where close to Canada's for being centralized.
Oh my goodness Mark - go to Canada as a lowly plain citizen and see how long you wait to see a doctor - for anything.
They are also having trouble sustaining their "free" health care. They are a nation of 30,000,000 and we are a nation of 300,000,000+. If they can't sustain their system do you really think we can sustain ours?
I see that nearly all of the top-tier countries have one form or another of socialized medicine. I also note that except for the USA, having large numbers of troops overseas is not a characteristic of any top-tier nations. However, there is not evident pattern relating to gun ownership or internal militarization. To my knowledge, all of them firmly enforce their borders against illegal immigration.
Canada's socialized healthcare is a Provincial system.
It is defined, regulated and paid for by each of the ten Provinces. Health care is defined in the Canadian Constitution as an Provincial responsibility. It is the last true single payer system(s) in the world. Health expenses consume roughly 40% of Provincial government budgets and this percentage climbing quickly.
Many health procedures are not defined as 'medically necessary' and therefore are not paid for by the governmnent (dental, chiropractic, cosmetic surgery, etc). These health expenses might be covered under an employer's plan (sound familar?) but are often just paid for by the paitent. Yes, finding a doctor is difficult and yes, you will wait hours and hours if you have to go to the ER and possibly wait months for routine surgery.
The Canadian Federal government has no involvement (funding, curriculum) in the K-12 education system (although extensively funds post-secondary education).
The current federal corporate tax rate is 16.5%, it is scheduled to go down to 15% in 2012.
But, there is a federal VAT of 5% and most provinces have a provincial sales tax of at least 7%. Combined Federal and Provincial income taxes are between 39-43%. This top bracket kicks in at around $100K with no mortgage interest deduction and very few other deductions. Freedom is relevant.
There's a kernel of truth in the rankings, but largely these rankings are based on a semantics game with the word "freedom". Singapore (#2) has far more limited freedom of speech than the US and is generally considered to be an authoritarian state. Remember the phrase," Disneyland with a Death Penalty"?
The western countries listed near the top are at least as far down the PC/Socialism hole as US, and in the case of Canada, which has no freedom of the press, and which crushes "thoughtcrime" like an Orwellian nightmare it is far worse.
Guess its all a matter of how you define "freedom".
I share your concern for the loss of liberty in America. And it is as obvious to me as it is to you that there is always a trade-off between personal liberty and government power. Americans once seemed to know by instinct that there is no free lunch, and that all Americans had to pull their own weight. We used to refer to these aphorisms as common sense. Common sense, though, is now often demonized as heartless or mean-spirited.
A wise old friend once told me that a sure way to make an enemy for life was to lend him more money than he could afford to repay. The loan recipient will soon be demonizing his benefactor as a way of assuaging his guilt over not repaying the debt. Today we have an expansive, and still growing, menu of entitlements in America, and the recipients apparently feel free to demonize their benefactors (i.e., the dwindling number of taxpayers.) The worst consequence of this situation is that Americans are losing their common sense, that is, their self-reliance and understanding that there is no free lunch.
"the best results are likely to be achieved instead through policy reforms that improve incentives that drive entrepreneurial activity, creating greater opportunities for investment and job growth.”
Maybe just get government the hell out of the way. The only thing it's ever created is poverty.
This country has basically lost it's economic freedom. Obamacare will put the final nail in the coffin. In 40 years factories have left by the hundreds if not thousands. We used to produce most of our clothes and our oil. The city I live in is filled with vacant factory buildings. Our government has done nothing in 40 years to help the loss of jobs. Instead, we were told NAFTA would be good for us and it's good that we are concentrating on "green" jobs and white color jobs. Except we have millions of people suited to blue collar jobs who have fallen into jobs that pay less than factory jobs. Our government is lying to us. We all know it. A few are leading the majority. Most Americans want their country to prosper. We are being held captive by the far left who is interested in redistributing our wealth to less properous countries. Insanity.
SueDinNY (and others). The offshoring of jobs to other countries has nothing to do with Liberal policies. This meme has taken over in conservative circles and it obfuscates the fact that pursuit of annual, double digit profit growth is the real reason for US jobs moving offshore. The US worker became too expensive, relative to foreign workers, back in the 1970's. As wage levels increased (largely due to the inflationary nature of our post-WW2 success boom), wages began climbing. For a long time, the ability of US manufacturers to sell worldwide continued to grow unhindered by foreign competition. However, in the 1970's and 1980's the first major competition came on the scene in the form of Japan. The quality of their products rapidly met and then exceeded the quality of US made products - and they were equally priced or less expensive. This meant that US profit margins would have to be cut into in order to boost quality. OR... you could sell products more cheaply by moving labor offshore (labor typically being the most expensive component of the manufacture of most items). Once US companies realized they could rely on offshore human capital, the die was cast. American worker wages first stagnated then declined in real terms as, increasingly, they were directly competing for jobs with individuals who were paid dollars a day, not dollars an hour.
Corporations exist for one reason only: to make profit. There was a time (as Frank Kelly above notes) when American people had a sense of loyalty. This sense applied to US corporations as well. However, there is no sense of loyalty or duty anymore - especially not on the part of the companies that make our economy run. These organizations are, more and more, part of international conglomerates who have no concern for their host nations. The American people to IBM, GE or Raytheon are interchangeable cogs.
Blaming some ephemeral coterie of "liberal" influences is misguided at best. The blame lies squarely at the foot of unfettered hyper-capitalism. I know it is taboo to say it, but the blind pursuit of profit with no sense of duty or loyalty to your own nation is what is destroying this country.
I'm pretty sure that any country who spends as much money on their military as the rest of the world does COMBINED, deserves to pay higher taxes for that "security".
