Wednesday, September 19, 2012

U.S. Economic Freedom Plunges

by Ben Powell

Huffington Post
September 19, 2012

The United States is rapidly losing its status as one of the freest economies in the world. Economic freedom has decreased in the United States substantially since 2000 and lately its ranking among countries is plunging downward even faster. This spells trouble since economic freedom promotes growth and a higher standard of living.

Economists James Gwartney, Robert Lawson, and Joshua Hall publish an economic freedom of the world report annually. Their latest report, released this week, shows that the United States, which was ranked the second freest economy in 2000, now ranks 18th. Economic freedom increased from 1980 to 2000 in the United States while it was generally ranked behind Hong Kong and Singapore as the third freest economy in the world. Today it ranks behind European welfare states like Finland and Denmark, and places traditionally more hostile to economic freedom like Qatar.

The declines in freedom have occurred because the federal government has grown larger and more intrusive. It has been a non-partisan affair. Approximately two thirds of the decline in economic freedom occurred during Bush's presidency. But pace of decline doubled during the first two years of Obama's presidency. In fact, the new index is based off of data from 2010. If the rate of decline has remained unchanged over the last two years the United States has already fallen to 40th and ranks behind places like Romania, Sweden, and Panama. Unfortunately the data needed to investigate that is not available yet.

The decrease in economic freedom has occurred in most areas of the U.S. economy. The protection of private property rights showed the greatest decline. The decline is likely the result of the increased use of eminent domain, the ramping up of the wars on drugs and terror, and the increasingly uncertain business environment where it is unclear who the government will bail out and who will be allowed to breech contracts. The growth in the size of government and the increased scope, and administrative burden of, regulation have also decreased our economic freedom. Inflation adjusted government spending has grown by more than 50 percent since President Clinton left office.


See the Report