“[President Obama]'s brought change and he's begun to turn things around.”
—Debbie Wasserman-Schultz (D-FL), Democrat National Committee Chairwoman, December 12, 2011
The opening line of the 2012 Index of Economic Freedom, a publication of the Heritage Foundation in partnership with The Wall Street Journal, should depress any American struggling in this lackluster Obama economy, or anyone concerned about the country’s economic future for that matter: “Global economic freedom has declined over the past year...” The free market is being beaten by the forces of a too-big-to-succeed government, and millions of Americans out of work or struggling to make ends meet will continue to suffer the consequences of lost growth.
Analyzing economic policy developments in 184 countries, the annual Index highlights what it sees as one of the predominate causes of the recent economic weakness. The “rapid expansion of government” has stalled what was previously a trend of progress in global economic freedom until 2008. The study notes, “The big government approach has led to bloated public debt, turning an economic slowdown into a fiscal crisis with economic stagnation fueling long-term unemployment.”
In spite of the efforts of House Republicans to turn the Obama economy around, the United States has slipped to 10th place in the global rankings, down five spots from four years ago.
Issues of concern
It’s the spending, stupid! The component with the largest year-over-year decline in the United States’ overall score was “government spending.” The Index states that “government expenditures [federal, state, and local combined] have grown to 42.2 percent of GDP, and the budget deficit is close to 10 percent of GDP.” With a total public debt that recently exceeded 100 percent of GDP (i.e. our debt is now larger than the entire economy), the U.S. ranks a dismal 127th in this component.
Taxed enough already. Also pulling the country down in the “Limited Government” category is the “fiscal freedom” component, for which the U.S. ranks 133rd in the world. This component is a quantitative measure of the tax burden imposed by government and, which, according to the Index’s methodology, accounts for “both the direct tax burden in terms of the top tax rates on individual and corporate incomes and the overall amount of tax revenue as a percentage of GDP.” Without comprehensive tax reform, top individual and corporate tax rates at 35 percent, and an overall tax burden amounting to 24 percent of GDP, the U.S. remains a laggard with respect to fiscal freedom.
Creeping corruption. In perhaps the most concerning development, the U.S. lost significant ground in the “freedom from corruption” component, under the “Rule of Law” category. As the Index explains, “Corruption erodes economic freedom by introducing insecurity and uncertainty in economic relationships.” House Republicans have been pointing out the torrent of regulations from Democrats’ permanent bailout of Wall Street law that have injected an unprecedented level of uncertainty into the economy. The Index writes of the U.S., “Corruption is a growing concern as the cronyism and economic rent-seeking associated with the growth of government have undermined institutional integrity.” The 1,722 waivers granted from President Obama’s federal takeover of health insurance—including more than 2.2 million participants in union plans, which is more than half of all waiver recipients—would certainly support such findings.
The Index authors write in summary, “The overarching objective of economic policies must be to create an environment that provides the best chance for sustained economic growth, rising incomes, and improvements in overall well-being. The broad consensus, supported by volumes of research, is that vibrant and lasting economic growth is achievable only when governments adopt economic policies that increase individual choice and opportunity, empowering and encouraging entrepreneurship.” House Republicans remain committed to turning the Obama economy around and pursuing policies that move the U.S. and the world back in the direction of economic freedom, which is imperative for restoring Americans’ potential for prosperity, both now and in the future.