Skip to comments.Economic Freedom on the Wane
Posted on 01/19/2013 7:55:36 AM PST by Kaslin
Land of the free. Its right there in our national anthem. As well it should be -- the personal liberties we enjoy are the envy of many around the world.
But freedom is no accident. It requires constant vigilance. Takes economic liberty, an area where the United States has begun to slip quite a bit lately.
How would you say the U.S. compares to other nations? No need to guess. We can pinpoint it exactly by using an annual guide known as the Index of Economic Freedom.
Top three, you think? Top five? Nope. Last year at this time came the news that the United States had dropped to 10th place. Well, the 2013 Index is out, and we can see that the U.S. hasnt budged from that spot.
In fact, were lucky we didnt fall out of the top 10 altogether. Our Index score went down a bit over the last year. We held onto the No. 10 slot mostly because Ireland declined enough to wind up in 11th place.
As recently as 2008, the U.S. ranked seventh worldwide, had a score of 81 (on a 0-100 scale, with 100 being the freest), and was listed as a free economy. Today, the U.S. has a score of 76 (its lowest since 2000) and is mostly free, the Indexs second-highest category.
Before explaining why, lets back up and touch on how the editors of the Index -- published annually since 1995 by The Heritage Foundation and The Wall Street Journal -- determine the scores. Each country is evaluated in four broad areas of economic freedom:
1) Rule of Law. Are property rights protected through an effective and honest judicial system? How widespread is corruption -- bribery, extortion, graft, and the like?
2) Limited Government. Are taxes high or low? Is government spending kept under control, or is it growing unchecked?
3) Regulatory Efficiency. Are businesses able to operate without burdensome and redundant regulations? Are individuals able to work where and how much they want? Is inflation in check? Are prices stable?
4) Open Markets: Can goods be traded freely? Are there tariffs, quota or other restrictions? Can individuals invest their money where and how they see fit? Is there an open banking environment that encourages competition?
For the most part, of course, the United States does very well on these measures. Finishing 10th out of 177 countries, after all, is impossible if you dont have a large degree of economic freedom. Property rights are strong in the U.S. Our court system is independent. Business start-up procedures are efficient. The labor market is flexible.
But in certain key areas, the United States is lagging badly.
The biggest decline since last year comes in the area of regulations. Simply put, it's becoming costlier and more complicated to start up or maintain a business. More than 100 major new federal regulations have been imposed since early 2009, at an annual cost that exceeds $46 billion. Small wonder were stuck in a "jobless recovery."
Yet regulatory freedom is hardly our weakest spot. Indeed, we're above the global average in that category, and all the others -- except one: limited government. In short, its not so limited anymore.
The U.S. has the highest effective corporate tax rate in the developed world, and the top individual income tax rate has been raised to 39.6 percent. Were also saddled with a capital gains tax and an excise tax. The overall tax burden is 24.8 percent of total domestic income, meaning that government confiscates nearly $1 out of every $4 earned.
Total government spending is another Achilles' heel for the U.S. It amounts to 42 percent of gross domestic product (GDP), or what our economy produces in a year. Thats unacceptably high.
And it shows no signs of abating. Under current policies, government spending is headed in one direction only: up.
Thats why we have to get serious about cutting government down to size, overhauling our tax system, and transforming costly entitlement programs. Or is this our last year as a top-10 finalist in the Index
Economic liberty with what is granted by the Constitution go hand in hand.
Perhaps American citizens are getting a belated lesson in economics and an American History lesson as a result of the shocking policies of Congress and the Administration during recent months and years.
If the citizenry is awakened to the facts discusssed in Feulner's piece, and if they will go back and review the philosophy of the Framers of the U. S. Constitution, they may perhaps begin to understand how America went from being the symbol of freedom, opportunity and prosperity for millions throughout the world to its present ranking, as reported by Feulner. The following essay, is reprinted with permission from "Our Ageless Constitution." See
"Agriculture, manufactures, commerce, and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise." - Thomas Jefferson
"The enviable condition of the people of the United States is often too much ascribed to the physical advantages of their soil and climate.... But a just estimate of the happiness of our country will never overlook what belongs to the fertile activity of a free people and the benign influence of a responsible government." - James Madison
America's Constitution did not mention freedom of enterprise per se, but it did set up a system of laws to secure individual liberty and freedom of choice in keeping with Creator-endowed natural rights. Out of these, free enterprise flourished naturally. Even though the words "free enterprise' are not in the Constitution, the concept was uppermost in the minds of the Founders, typified by the remarks of Jefferson and Madison as quoted above. Already, in 1787, Americans were enjoying the rewards of individual enterprise and free markets. Their dedication was to securing that freedom for posterity.
The learned men drafting America's Constitution understood history - mankind's struggle against poverty and government oppression. And they had studied the ideas of the great thinkers and philosophers. They were familiar with the near starvation of the early Jamestown settlers under a communal production and distribution system and Governor Bradford's diary account of how all benefited after agreement that each family could do as it wished with the fruits of its own labors. Later, in 1776, Adam Smith's INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS and Say's POLITICAL ECONOMY had come at just the right time and were perfectly compatible with the Founders' own passion for individual liberty. Jefferson said these were the best books to be had for forming governments based on principles of freedom. They saw a free market economy as the natural result of their ideal of liberty. They feared concentrations of power and the coercion that planners can use in planning other peoples lives; and they valued freedom of choice and acceptance of responsibility of the consequences of such choice as being the very essence of liberty. They envisioned a large and prosperous republic of free people, unhampered by government interference.
The Founders believed the American people, possessors of deeply rooted character and values, could prosper if left free to:
Such a free market economy was, to them, the natural result of liberty, carried out in the economic dimension of life. Their philosophy tended to enlarge individual freedom - not to restrict or diminish the individual's right to make choices and to succeed or fail based on those choices. The economic role of their Constitutional government was simply to secure rights and encourage commerce. Through the Constitution, they granted their government some very limited powers to:
Adam Smith called it "the system of natural liberty." James Madison referred to it as "the benign influence of a responsible government." Others have called it the free enterprise system. By whatever name it is called, the economic system envisioned by the Founders and encouraged by the Constitution allowed individual enterprise to flourish and triggered the greatest explosion of economic progress in all of history. Americans became the first people truly to realize the economic dimension of liberty.
Footnote: Our Ageless Constitution, W. David Stedman & La Vaughn G. Lewis, Editors (Asheboro, NC, W. David Stedman Associates, 1987) Part III: ISBN 0-937047-01-5