Investor’s Business Daily | Feb. 1, 2010
The latest index of economic freedom shows America falling fast, being ranked for the first time as “mostly free.” We’ve fallen behind Canada, and it’s look out below.
Our accelerating descent into a command-and-control economy with government pulling the strings is taking its toll.
The Heritage Foundation’s 2010 index of leading economic indicators shows that the land of the free is only mostly free, falling to eighth in the world from sixth last year, now sandwiched between Canada and Denmark.
That Canada, long considered a bastion of socialized medicine, is ranked as economically freer may surprise some. But our neighbor to the north has at least been trying to develop its domestic energy reserves, from hydroelectric to natural gas to oil extracted from its tar sands. Energy is the lifeblood of a free economy.
We have shackled our domestic energy producers with environmental regulations, leaving vast pools of energy lying offshore and in the ground. We regulate what you can build, where you can build it, even how. Endangered critters rank above equally endangered entrepreneurs. Climate change is more important than the business climate.
We have allowed our government to be the engine of stimulus when the only thing that’s being stimulated is government itself. The public sector booms while the private sector languishes as the federal government sucks the financial oxygen out of the room. Businesses are afraid to move because they are unable to plan in an environment where government is trying to tax or regulate everything that moves and most things that don’t.
Our government has taken upon itself the task of picking winners and losers, instead of letting the free market decide, and as a result we all lose. From car companies to financial institutions, the long arm of government has grabbed freedom by the neck, seeking to decide who gets paid what and how big companies and banks can grow.
Then there are the taxes, which are to business what vampires are to blood banks. A nation’s corporate tax rate is important. Its effect on a country’s competitiveness and its ability to draw or repel investment has a direct impact on economic health.
Companies are being driven offshore by a combined 39.1% federal and state tax rate that is second only to Japan’s. In some states, the combination leads the world. California, which would have the world’s eighth largest economy as an independent country, teeters on bankruptcy. If you were a CEO, would you headquarter there or in Switzerland or Ireland, which also rank above us?
The 2010 index shows the U.S. dropping from 80.7 points out of 100 in 2008 to 78 in 2009 and slipping from the “free” category to “mostly free.” America’s 2.7-point decline is among the fastest ever, ranking right up there with those of such socialist paradises as Bolivia, Libya and Hugo Chavez’s Venezuela, whose policies our administration czars are seeking to emulate.
The authors of the Heritage report — Kim Holmes, Anthony Kim and Terry Miller — cite the gargantuan growth of government in both size and power, noting that government spending last year equaled 37.4% of GDP. Spending increases totaled well over $1 trillion in 2009 alone, up more than 20% from 2008.
“Uncertainties caused by ongoing regulatory changes and politically influenced stimulus spending have discouraged entrepreneurship and job creation, slowing recovery,” the report states.
“Tax rates are increasingly uncompetitive, and massive stimulus spending is creating unprecedented deficits. Bailouts of financial and automotive firms have generated concerns about property rights.”
On these pages last November, former Microsoft COO Robert Herbold and Hoover Institution fellow Scott Powell noted that “ambiguity and the threat of new taxes from Washington, such as cap-and-trade, have already prompted 11 major U.S. companies to move offshore in the past year.”
They can be accused of being greedy, but not of being stupid.
We must stop bailing out failure and punishing success through regulation and taxation. Only then can the land of the free be economically free to thrive and prosper.
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