The Heritage Foundation has released its annual report on economic freedom around the world, which shows that the United States losing ground among international competitors, as Christine Hall explains:
The U.S. dropped from 8 to 9 on the just-released “Index of Economic Freedom” put out by the Heritage Foundation and the Wall Street Journal. That’s a bit of a downer, considering we used to be #4, back in 1995. The Index ranks nations on 10 measures of openness, rule of law, and competitiveness. Tellingly, all regions except Europe and North America achieved increased levels of economic freedom. In fact, the U.S. didn’t even earn a grade of “free” - which would’ve been a score of 80 or higher. If this were running or swimming, I think this is kind of like coming in maybe third place in the second-fastest heat. Woo.
Why is this important? As the Index authors explain, “economic freedom is key to overall well-being.” That means tangible benefits of living in a freer society, such as higher per capita incomes, better health, education, and security, and more personal freedom.
Seems we slipped a bit in business freedom (score of 91), trade freedom (86.4), government spending (54.6 - there’s a shocker, right?), monetary freedom (77.4). Somehow we squeaked a bit ahead in labor freedom (95.7), freedom from corruption (75), and fiscal freedom (68.3).
The good news from a global perspective is that the global average economic freedom score increased a bit, 0.3 percent, to 59.7, with the biggest improvements in developing and emerging economies. And more economies improved than took a dive.
Looking over the different areas that are scored, it’s not hard to see what is dragging us down…government spending. Here is what the report says:
In the most recent year, total government expenditures, including consumption and transfer payments, equaled 38.9 percent of GDP. Spending increases totaled well over $1 trillion in 2009 alone, an increase of more than 20 percent over 2008. Stimulus spending has hurt the fiscal balance and placed federal debt on an unsustainable trajectory. Gross government debt exceeded 90 percent of GDP in 2010.
Scores also dropped for Business Freedom, Trade Freedom and Monetary Freedom, but those changes were relative small.