The good news is that America has stopped sliding in economic freedom. The bad news is that we’re stalled as Earth’s twelfth-freest economy.
The Heritage Foundation and the Wall Street Journal have just released their 21st annual Index of Economic Freedom. Once again, it finds the U.S.A. wheezing significantly behind the five most unfettered markets: Hong Kong, Singapore, New Zealand, Australia, and Switzerland. Among 178 nations rated on ten different economic metrics, from government spending to free trade, the bottom five are Eritrea, Zimbabwe, Venezuela, Cuba, and — dead last — North Korea.
Since 2010, America has missed the list of “free economies.” Instead, this country is “mostly free,” behind No. 11 Denmark and ahead of No. 13, the United Kingdom.
America’s northern neighbor long has endured friendly ribbing by the amiable superpower to the south. Homer Simpson once called Canada “America, Jr.” Regardless of such teasing, Canada can pride itself on staying comfortably ahead of the USA in economic freedom. This year, it’s No. 6 in the Index.
“Economic freedom has not advanced in recent years” in the U.S., Heritage Foundation president Jim DeMint laments in the Index’s preface. “We are performing far below potential as a result.”
The Index’s authors, Terry Miller and Anthony B. Kim, write:
Although the precipitous downward spiral in U.S. economic freedom since 2008 has come to a halt in the 2015 Index, a 1.6-point decline in overall economic freedom over the past five years reflects broad-based deteriorations in key policy areas, particularly those related to upholding the rule of law and limited government. . . . Increased tax and regulatory burdens, aggravated by favoritism toward entrenched interests, have undercut America’s historically dynamic entrepreneurial growth.
Miller and Kim applaud America’s unexpected energy renaissance. However, they cite Obamacare’s job-killing side effects as a key drag on the economy and note that “the regulatory burden has been mounting.” They point to 150 new regulations that Washington has imposed since 2009. Annual cost: $70 billion. Even worse, “As of 2014, 125 new regulations were in the pipeline.” Having mopped up nearly all serious water pollution and made smog largely a memory, Washington bureaucrats now behave like obsessive-compulsive clean freaks, battling parts per trillion of undesired chemicals.
The 2010 Dodd-Frank law is another red-tape monster. Acting more or less like “ObamaShare,” Dodd-Frank has fueled corporate risk-aversion and sandbagged financial managers with voluminous and unfathomable new guidelines. The so-called Volcker Rule limits proprietary trading among certain financial entities. You can find this one regulation online and print it for closer scrutiny. You will need 739 sheets of paper to do so. Dodd-Frank brims with many more such playpens for lawyers.
Taxes are a key variable in economic freedom and prosperity. “Despite occasional howls of protest over ‘tax cuts for the rich,’ much of the world has taken note of the impressive and sustained rates of economic growth that typically follow such cuts, and tax rates have come down worldwide,” write Heritage scholars Stephen Moore and Joel Griffith.
Alas, America’s 35 percent federal corporate tax remains stubbornly immune to this trend, putting the U.S. at a global competitive disadvantage. “Businesses are adapting by relocating overseas or through structural changes such as corporate inversions, in which companies legally reincorporate in a foreign country that has lower tax rates,” Moore and Griffith explain.
To propel and deepen investment, innovation, employment, and growth, the GOP Congress should place major tax-reduction and tax-simplification bills on Obama’s desk. They should give him every opportunity to do the right thing.
The Big Government–fueled Obama years have pushed the U.S. from No. 5 in 2008, President George W. Bush’s last year in office, to No. 12 today. About the best that one can expect is that a Republican Congress will yank hard on the bit in Obama’s mouth and stop him from unilaterally wrecking this nation any further in the autumn of his amazingly destructive presidency.
— Deroy Murdock is a Manhattan-based Fox News contributor and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University.