Politics & Policy

Blame Canada

Our neighbor to the north is more economically free than we are.

The state of our union is mostly free.

This may shock citizens who call America the “Land of the Free.” Alas, as the Heritage Foundation demonstrates, Washington has transformed Francis Scott Key’s timeless truths into mere lyrics.

In conjunction with the Wall Street Journal, Heritage’s 16th annual Index of Economic Freedom ranks 179 of Earth’s economies on ten factors including fiscal discipline, free trade, labor freedom, and corruption. By these measures, America is not No. 1. If economic freedom were an event at Vancouver’s Winter Olympics, America would not earn even a bronze medal. In fact, the U.S. fell from No. 6 last year to No. 8 today. No. 1 Hong Kong leads Singapore, Australia, New Zealand, Ireland, and Switzerland. Even Canada is economically freer than America.

Even worse, for the first time, the Index rates America “mostly free.” From a perfect “Freedom Score” of 100, the U.S. slid from 80.7 points in 2008 to 78 in 2009, thus dropping from the “free” category to “mostly free.” Denmark and Chile complete the top ten. So, at least, America is freer than they are.

America’s 2.7 percentage-point decline was among the steepest recorded. Only eleven economies deteriorated more rapidly. These include such Marxian paradises as Bolivia, Ecuador, Libya, and Venezuela. Not even Cuba, Zimbabwe, or North Korea (rated Nos. 177 to 179) slipped as much, although they already sat at the bottom of the list.

So, what went wrong?

Authors Kim Holmes, Anthony Kim, and Terry Miller explain that, for America, “Economic freedom has declined in seven of the ten categories measured in the Index.” These include notable decreases in financial freedom, monetary freedom, and property rights.” Specifically:

‐“Uncertainties caused by ongoing regulatory changes and politically influenced stimulus spending have discouraged entrepreneurship and job creation, slowing recovery. Leadership in free trade has been undercut by ‘Buy American’ provisions in stimulus legislation and failure to pursue previously agreed free trade agreements with Panama, Colombia, and South Korea. 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.”

Last year, “government spending equaled 37.4 percent of GDP. Spending increases totaled well over $1 trillion in 2009 alone, an increase of more than 20 percent over 2008.”

‐“Government interventions in financial markets and the automotive sector have raised concerns about expropriation and violation of the contractual rights of shareholders and bondholders.”

The president’s three-year freeze in domestic discretionary spending (but not until 2011) is a welcome tap of the brakes after the fiscal joyride of the Bush-Rove-Obama years. Still, Obama must do much more to regain the confidence of America’s business community. Bloomberg News recently surveyed 873 of its subscribers and found that 77 percent of its U.S. customers considered Obama anti-business. Only 27 percent judged Obama favorably. “Investors no longer feel they can trust their instincts to take risks,” New York broker David Young told Bloomberg.

Former Microsoft COO Robert J. Herbold and Hoover Institution fellow Scott S. Powell also argue that America has strayed from capitalism. In the November 23 New York Post, they identified Accenture, Covidien, Ingersoll-Rand, and Tyco International among eleven major companies that “have all completed or taken steps to change their domicile of incorporation — with Switzerland and Ireland as the most popular relocation destinations.” These and other companies have been chased offshore by America’s 39.1 percent combined federal and state corporate tax (the developed world’s second worst, after Japan’s 39.5 percent levy), Obama’s threats to tax multinationals’ unrepatriated foreign profits, plus a grim parade of brain-dead legislative measures and mind-numbing new regulations from Washington’s hundreds of agencies, boards, and commissions.

Manhattan financier Brett A. Shisler calculates that these eleven companies reported $97.2 billion in sales in 2008. What a pot of gold for Washington to jettison. Of course, this trend only will accelerate as U.S. corporate revenues, jobs, and hope become exports. So long as America leads the “mostly free” world, money will go where it is treated more politely — beyond the Home of the Brave.

Deroy Murdock is a nationally syndicated columnist and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University.

Deroy Murdock is a Manhattan-based Fox News contributor and a contributing editor of National Review Online, and a senior fellow with the London Center for Policy Research.

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