The latest edition of the Heritage Foundation’s Index of Economic Freedom has been released and the news is not good for America. In fact, according to the 2013 edition of the Index economic freedom is vanishing in the United States. The Heritage Foundation defines economic freedom as “…the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state.”
It should come as no surprise that the decline of economic freedom in America corresponds with the first term in office of the most regulatory-minded president in our nation’s history. The only reason Americans are not more focused on the mountain of federal regulations that have been promulgated by his administration is the distraction President Obama has created by driving the economy off a cliff. The decline began in 2009. In 2013, America dropped to its lowest position ever compared with other countries worldwide: tenth. That’s right. The nation that historically has been the world’s bastion of capitalism, free-market economics, and entrepreneurship now ranks behind Denmark (9), Mauritius (8), Chile (7), Canada (6), Switzerland (5), New Zealand (4), Australia (3), Singapore (2), and Hong Kong (1) in economic freedom.
The Index of Economic Freedom evaluates countries according to four broad criteria: 1) rule of law, 2) regulatory efficiency, 3) limited government, and 4) open markets. Based on its aggregate score in these four areas, a country is assigned one of five possible ratings: free, mostly free, moderately free, mostly unfree, or repressed. Historically the United States has been rated free in the annual Index. But for the first time in the history of the Index America’s rating has dropped to mostly free. The two factors that are causing America’s rating to drop are unlimited government and out-of-control regulations.
The countries that score the highest on the economic-freedom index are those that regulate the least and keep government out of the way of business. According to Ambassador Terry Miller—Director of the Heritage Foundation’s Center for International Trade and Economics—those that score the lowest in economic freedom are countries that “…use the coercive power of government to redistribute income and control economic activity.” Miller’s words should concern readers who are familiar with President Obama’s view on regulations, the redistribution of wealth, and government control of economic activity. He and his administration are doing the very things that Ambassador Terry says undermine economic freedom.
Government regulations are the enemy of economic freedom, and Barack Obama’s has been a regulation-a-minute presidency. According to the 2013 Index, there have been more than 100 new major federal regulations inflicted on American businesses since 2009 at a cost of more than $46 billion. This means that American businesses have been robbed of $46 billion in capital that could have been invested in expansion, new product development, quality improvement, and technological upgrades. It also means that while businesses in the United States are handing their hard-earned profits over to the federal government, their competitors in Denmark, Canada, Australia, Singapore, and Chile are investing their profits in becoming even more competitive.
As a nation’s rating in the Index goes down, its ability to attract foreign investment declines correspondingly, not to mention the ability of its indigenous businesses to compete on the global stage. How can American businesses compete in a global environment when the money they need to invest in competitiveness-enhancing efforts is siphoned off by the federal government in taxes and costly regulations? The former Soviet Union did not fall because it could not keep up militarily. It fell because it could not keep up economically. Given that Barack Obama has four more years, the same thing might very well happen to the United States.