And then it dropped like a stone.
Since 2009, the economic freedom index for America in the world has dropped from twelfth place to eighteenth place. The most recent drop was when the last two industrialized nations dropped their integrated capital gains/corporate tax rates to a level below America's, which are now the developed world's highest rates. A recently published joint report from the Canadian Fraser Institute and the American Cato Institute is rather damning. Before anyone jumps on me, I am fully aware that both institutes are conservative/libertarian. But that affects their political side. When they crunch numbers and prepare correlations, their statistics are as good as anyone's.
Here is how they define economic freedom for purposes of the study: “Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. An index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions.”
The size of American government has grown by leaps and bounds, mostly to regulate or “assist” business and protect the environment. The legal structure, particularly during the Obama years, attacks private property and contract rights from every direction. Sound monetary policy which protects the nation's solvency and predictability has gone down the drain. Regulatory agencies (such as the Environmental Protection Agency) are having far too much influence on business and personal decisions. For instance, a landowner ought to be able to build a house on his own property without worrying that the EPA will suddenly decide it's a wetland which must be left in its pristine state.
The government has accelerated its statist march with bailouts, funded by already-burdened taxpayers and designed to favor businesses which are cozy with the government and the government's agendas. The use of eminent domain to determine economic outcomes rather than the traditional need for public spaces makes for over-cautious investment decisions. Even the so-called “war on terror” has had its effect. Not so much because the increased need for security requires increased money, but more because the government wants to retain much of the machinery for itself (the Transportation Security Administration, for example).
Unions play a part in this as well. They were a major cause for the collapse of General Motors and Chrysler Corporation. Rather than allow GM to go into bankruptcy, and either emerge better than ever or lose out because it didn't fix its business practices, the government took over the decisions for one of America's major industries. The “too big to fail” nonsense has now been translated into “GM is alive and bin Laden is dead.” That's only because the federal government didn't throw bad money after worse to rescue bin Laden. Considering its debts, its financial policies, its support with taxpayer money, and the federal subsidies of cars nobody wants, GM's day of reckoning is still to come. The walking dead, as it were. The big banks are in a similar situation, though unions do not play as large a part.
Not that long ago, a young, determined, fiscally-sound entrepeneur could form a basic business plan, put the money together, find a location, and open his new business within a matter of months, or even just weeks. Today, he deals with multiple layers of government, each wanting a piece of his business decision-making. An environmental impact report alone can take months to years, and there's no guarantee that the regulatory agency won't change the rules even after the business owner has complied with the original rules. Food and safety rules have gone from “be reasonable” to “you have to provide entrances and facilities for companion mini-horses." Elaborate and “dignified” handicapped facilities must be provided rather than simple entrances which will accommodate a person in a wheelchair or on crutches.
Complicated payroll taxes and the minimum wage must be considered. With today's volatile economic conditions, many potential employers are simply not hiring, are terminating employees, or moving full time employees to part-time status because they simply can't determine in a fiscally-sound manner what the future holds. Ditto for business investors. Obamacare alone has turned a bad economic situation into a potential massive disaster. About the only people benefiting from this are lawyers, accountants, and big corporation cronies of the administration. The middle class that the Democrats claim to love is being eviscerated. The government simply needs to back off and let the free market and the involved individuals make the decisions.
So who are those countries with more economic freedom than America? Glad you asked. The top ten that both institutes agree on are (from best to least): Hong Kong (still technically part of mainland China), Singapore, New Zealand, Switzerland, Canada, Bahrain, Mauritius, Finland, Chile and Denmark. There was a time, well within my lifetime, when America was so far out in front that the others were almost irrelevant. Several of the top ten are nations which only recently Americans would have laughed at because of their huge social welfare obligations. As they move toward economic freedom, America moves the other direction. At least until January, 2013, I hope.