Wednesday, January 26, 2011

Let's Hear It For The U.S.--We're Number 9

Yay! It's not whether you win or lose--it's how you play the game. When you get into the game, everyone's a winner. There are no winners or losers, only non-participants. OK, now I've run out of cliches which excuse America from living up to its obligations and remaining the envy of the free world.

In its seventeenth annual report, the Index of Economic Freedom published by the Heritage Foundation and the Wall Street Journal, it was determined that the United States is now in ninth position in the category of economic freedom. We were fifth under the Bush Administration, which is a testimony to big-government conservatism and the president's misplacing his veto pen for seven and a half years. Last year we were still number eight. If we keep dropping like this, we'll soon be challenging Venezuela and Haiti in the lack of freedom race.

The leaders were no particular surprise, with Hong Kong at the top followed by Singapore, Australia, New Zealand, Switzerland, Canada, Ireland (slipping fast, though), and Denmark. What was distressing is the company we're keeping in those bottom positions of the top ten--Bahrain (number 10), and Chile missing the cut at number 11 by a very small margin. Hong Kong was the perfect number one, because it is a province of one of the least free zones in the world, but has prospered because the government in Beijing is so mystified by Hong Kong's success that it has pretty much left it alone since taking over from Great Britain.

Now it wasn't that long ago that America was unchallenged for the top position, and even Democratic administrations through the Kennedy administration kept us in tip-top condition. America's economy is no longer in the pure category of "free," and has slipped to "mostly free." But don't worry, the Obama administration is working hard to remove the "free" part entirely. What freedoms and opportunity it can't take away by legislation and court action, it is now going full-bore on taking away through administrative agencies (remember the EPA and CO2).

Index authors Terry Miller and Kim R. Holmes say: "The national government's role in the economy has expanded sharply in the past two years [leaving no crisis unexploited], and the federal budget deficit is extremely large, with gross public debt approaching 100 percent of GDP." The freedoms lost between the fifth place Bush administration and the ninth place Obama administration are attributable largely to government interventionist policies and responses to the economic slowdown. "This has eroded economic freedom and long-term competitiveness. Drastic legislative changes in health care and financial regulations have retarded job creation and injected substantial uncertainty into business investment planning."

Sarbanes-Oxley didn't happen on Obama's watch, and Bill Clinton was an ardent advocate of free trade. But even before the market crash, the Democrats who had taken control of Congress began to put protectionist policies into place and most recently have reneged on free trade agreements with South Korea, Panama and Colombia. Two of those three countries had been given strong assurances that a South and Central American free trade association akin to NAFTA would be in the offing. And a free trade agreement with free South Korea would have been beneficial both economically and politically, given the horrendous North Korean economy and its starving millions.

Some countries such as Rwanda, of all places, are close to the US in economic freedom, but will never be genuine competition because of a dearth of political freedom and scant natural resources. There is no such excuse for an America with abundant natural resources, a huge entrepeneurial class waiting to be loosed, and a long history of creativity and innovativeness. In fact, while Rwanda is desperately trying to optimize the use of its meager natural resources, the unfree American economy is hampered by incomprehensible intrusion by government into the use and exploitation of America's wealth of natural resources.

Some significant indices of the eroding freedom of the American economy are as follows: The worldwide average income-tax rate for the wealthiest sector of individuals is 28.7%. America's is 35%. The big generators of jobs and money in the past were minimally unregulated and reasonably taxed corporations. That eroded badly with our corporate tax rate of 35% versus the world average of 24.8%. This not only harms corporate profits, but not coincidentally sends companies and jobs overseas. Worldwide government spending averages 33.5% of GDP, in America it is currently 38.9%. Overall tax burden worldwide is 24.4% of GDP, in America it is 26.9%.

Not that long ago, Americans who claimed taxes were too high (while we were still number one) were greeted with the derisive hoot of liberals who always said "we are the most undertaxed people in the world." Liberals and progressives were simply incapable of figuring out that their truism was the reason we were the economic giant that everybody else wanted to emulate outside of the realm of communism. And we weren't actually undertaxed. We were merely taxed at the most reasonably low rates that allowed for both economic freedom and money to pay for the government that would protect that freedom.

The Republicans have pledged to reverse this trend, and can at least make a start with a new substantial majority in the House. Even more progress can be made if Republicans take over both the Senate and the White House in 2012. But we've been down this road before, and it's going to take honesty, boldness, bravery and a commitment to keeping promises to turn our economic freedom around. Mere words are nothing without deeds.

Republicans have to man up and admit that for too many years they were just Democrats in disguise, or at best, fellow-travelers. We are facing perhaps our last chance to regain our preeminent position in the world, and it's crucial that the voters, Independent, Republican and Tea Party, continue to hold the government's feet to the fire. For all the criticism of the Republican Party being the "Party of No," saying no to socialism and government expansion is a perfectly valid exercise. And it's better than being called the "Me Too Party."


13 comments:

LL said...

Economic Freedom - is one of the reasons that we've been exporting capital and manufacturing. It's a key problem in building an economic recovery. I know that Joe (Slow Joe) Biden keeps scratching his old weathered scalp trying to figure out WHY the unemployment numbers are rising - and lack of economic freedom is the key.

Capital moves. People can move. Tax them here, they move there...

T_Rav said...

Hey, don't sell the Obama Administration short--wait until all these high-speed trains and high-speed Internet services get put in place, and then we'll be right back on top of the world!

Tennessee Jed said...

Nice post, Hawk. L.L. captures my response nicely. Our tax policy is what sends jobs overseas. All the training in the world to help our citizens gain marketable skills will not help if we make it advantageous to send capital elsewhere. Didn't we just discuss the curious case of the Government Motors Mexican plant?

Joel Farnham said...

LawHawk,

What is depressing is there are people still duped by Democrat/Liberal/Socialist rhetoric and welcome more government intervention. The long and the short of it, Obama still is a socialist and he isn't finished with messing around with the country. By hook or crook, he will do his damndest to destroy us.

LawHawkRFD said...

LL: The lefties all claim we're stuck in the past. But they are the ones who have entirely neglected to notice that companies can head for the exits a lot easier today than they could just fifty years ago. The internet they're so fond of claiming credit for makes that exit even easier. And then there's their simple incapability of understanding cause and effect, which is why they cannot understand the Laffer Curve.

LawHawkRFD said...

T_Rav: The high-speed trains are a vital part of Obama's plans. Businesses can get out of the country quickly and illegals can get in just as easily and just as fast. It's called "the new exchange rate."

LawHawkRFD said...

Tennessee: And to add to your thought, after we cut taxes (if we cut taxes) we have to rein in the administrative agencies. All the capital in the world and all the economic freedom imaginable does no good if the companies can't build or produce products because of crazed regulatory restrictions.

LawHawkRFD said...

Joel: Absolutely right. He spent half his address talking about investment (when he means "spending"), then came up with a few pie-in-the-sky projects that only green weenies are interested in. He is a doctrinaire socialist, and he depends for votes on his party left and the welfare class. So he can only talk about fiscal responsibility in abstract terms without daring to propose concrete solutions to the dangerous growth of government.

AndrewPrice said...

Who needs economic competitiveness? We all know jobs come from government spending.

rlaWTX said...

OK - a late comment on SOTU
[1] LOVED your responses on the open thread!!

[2] I watched a second where HE came in - is it wrong to hate the way he holds his chin up and looks down at everyone? I changed the channel.

[3] I flipped back over and saw another couple secs - it was grand to NOT see Pelosi! - why was Biden digging around in his ear during the SOTU? I can't stand The One's voice either!

[4] I went back to What Not to Wear & TNG reruns...

AndrewPrice said...

rlaWTX, If you want a breakdown of the speech, I'm going over it in about an hour. It stunk. You made the right call by changing channels.

LawHawkRFD said...

Andrew: And wealth comes from printing money at the mint. LOL

LawHawkRFD said...

rlaWTX: Right on target (oops, too violent). I have a name for that obnoxious pose of his--Mussolini Chin. All he needs to do now to perfect it is to cross his arms across his chest after he has pumped out one of his glorious non-sequiturs. I watched the whole miserable thing because I have to. I'd say it's like taking foul-tasting medicine, except the medicine actually does some good.

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