Editor’s Note: This is the fourth story in a series about the unprecedented dependence Americans have on their federal government. The first story shows how the food-stamp program has doubled under President Obama, as it did under President George W. Bush. The second story reports the strain on the welfare system caused by record numbers of Americans retiring amid a declining workforce. The third story shows how the government obscures the figures that indicate the real unemployment situation in the U.S.
NEW YORK – With the United States sinking on
several major indices of economic freedom as it celebrates its Independence
Day, free-market advocates have reason to ask, “What ever happened to the land
of the free and the home of the brave?”
A review of several credibly researched global
indices makes clear economic freedom in the United States has dropped in an
alarming fashion since the year 2000, with no reversal in the trend yet evident
from the Obama administration’s highly touted “economic recovery.”
With the United States rapidly becoming the land
of the highly taxed and the home of the heavily regulated, it is losing its
position as the world leader in entrepreneurial free enterprise.
The economic theory underpinning global indices
of economic freedom stems back to Adam Smith’s classic book, “The Wealth of
Nations,” in which he stated in Book IV, Chapter 9, “Every man, as long as he
does not violate the laws of justice, is left perfectly free to pursue his own
interest his own way, and to bring both his industry and capital into
competition with those of any other man, or order of men.”
The basic concept is that greater economic
freedom will encourage the type of enterprise that will build general
prosperity for the nation as a whole. Limitation on economic freedom created by
burdensome intervention of the government in the economic affairs of the
nation, meanwhile, will hamper economic growth, thereby diminishing prosperity
and reducing the nation’s standard of living.
On the horizon: Lower
living standard? Economists warn that as
economic freedom in the United States diminishes, the nation risks losing the
high standard its citizens have enjoyed since the end of World War II.
“Until 2000, the United
States participated in the world’s march toward greater economic freedom, its
score rising from 7.6 in 1970 to 8.65 in 2000, when the country ranked second
only to Hong Kong in economic freedom,” Investor’s
Business Daily said in a June 12 article titled “Economic Freedom Made America
Rich – But It’s Falling.”
“Since
then, U.S. economic freedom has been faltering, declining to 7.74 in 2011 and
dropping the United States out of the Top 15 in the worldwide rankings,”
continued IBD authors Michael Cox and Richard Alm, the director and the
writer-in-residence respectively of the William J. O’Neil Center for Global
Markets and Freedom at the SMU Cox School of Business.
The economic fundamentals predict U.S.
consumption per capita of $25,460 a year, a striking 22.2 percent below today’s
figure, they write.
“We’re living above our means, just as many
Americans have sensed without any real reason –until now,” Cox and Alm noted.
They are concerned that America’s slip in
economic freedom will translate into a lower standard of living.
“For Americans, the impact on living standards
will most likely be gradual rather than sudden, perhaps manifested in sluggish
income growth or masked by higher inflation,” the authors wrote.
“The country still has a large capital stock per
capita, amassed over the decades of very high economic freedom, providing
Americans a cushion to maintain living standards or even continue to raise them
at a slow rate,” they stressed.
Their conclusion: “Unless the United States
reverses its decline in economic freedom, the best Americans can hope for is
middling growth in living standards, and they may not even get that.”
‘Anemic economic
recovery’
The conservative
Washington-based Heritage Foundation’s “2015 Index of Economic
Freedom,” an annual study conducted
with the Wall Street Journal that began in 1995, pegs the U.S.
freedom economic score at 76.2, the 12th freest in the world.
The Heritage Foundation commented on the years
of the Obama presidency, noting the “precipitous downward spiral in U.S.
freedom since 2008 has come to a halt in the 2015 index.”
It said the 1.6 point decline in overall
economic freedom in the United States over the past five years reflects
“broad-based deteriorations in key policy areas, particularly those related to
the upholding the rule of law and limited government.”
“The anemic post-recession recovery has been
characterized by slow growth, high unemployment, a decrease in the number of
Americans seeking work, and great uncertainty that has held back investment,”
the Heritage Foundation said. “Increased tax and regulatory burdens aggravated
by favoritism toward entrenched interests, have undercut America’s historically
dynamic entrepreneurial growth.”
The freedom index ranked five countries as
“free”: Hong Kong, Singapore, New Zealand, Australia and Switzerland.
Among the countries ranked “mostly free,” the
United States is sixth, behind Canada, Chile, Estonia, Ireland, Mauritius and
Denmark.
In an article titled “Why Does Economic Freedom
Matter,” Heritage Foundation authors Kim R. Holmes, Ph.D., and Matthew
Spalding, Ph.D., explained that ever since the American Revolution, the United
States has had a tradition of resisting over-reaching government intrusion that
limits economic freedom.
“America’s founders knew that liberty is about
more than just securing political freedoms,” Holmes and Spalding noted. “True
liberty requires economic freedom – the ability to profit from our own ideas
and labor, to work, produce, consume, own, trade, and invest according to our
own choices.
“Thomas Jefferson underscored that point when he
observed that ‘a wise and frugal Government, which shall restrain men from
injuring one another, shall leave them otherwise free to regulate their own
pursuits of industry and improvement,” Holmes and Spalding continued.
Expanded use of
regulations
Conservative think tanks are not the only
international groups concluding the United States is losing its place as the
world leader in entrepreneurial free enterprise.
The Fraser Institute, a
libertarian think tank based in Canada, in its 2014
Economic Freedom of the World index dropped the United States to No. 12 in economic freedom among the
152 nations currently evaluated.
“Throughout most of the period from 1980 to
2000, the United States ranked as the world’s third freest economy, behind Hong
Kong and Singapore,” the Fraser Institute report commented.
The report said the “expanded use of regulation
in the United States has resulted in sharp rating reductions for components
such as independence of the judiciary, impartiality of the courts and
regulatory favoritism.”
“To a large degree, the United States has
experienced a significant move away from rule of law and toward a highly
regulated, politicized, and heavily policed state.”
http://www.wnd.com/2015/07/u-s-losing-living-standard-as-economic-freedom-erodes/
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