2013 Index of Economic Freedom

United States

overall score76.0
world rank10
Rule of Law

Property Rights85.0

Freedom From Corruption71.0

Limited Government

Government Spending47.8

Fiscal Freedom69.3

Regulatory Efficiency

Business Freedom90.5

Labor Freedom95.5

Monetary Freedom75.0

Open Markets

Trade Freedom86.4

Investment Freedom70.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 311.9 million
  • GDP (PPP):
    • $15.1 trillion
    • 1.7% growth
    • 0.5% 5-year compound annual growth
    • $48,387 per capita
  • Unemployment:
    • 7.9%
  • Inflation (CPI):
    • 3.1%
  • FDI Inflow:
    • $226.9 billion
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The United States, with an economic freedom score of 76, has lost ground again in the 2013 Index. Its score is 0.3 point lower than last year, with declines in monetary freedom, business freedom, labor freedom, and fiscal freedom. The U.S. is ranked 2nd out of three countries in the North America region, and its score remains well above the world and regional averages.

Registering a loss of economic freedom for the fifth consecutive year, the U.S. has recorded its lowest Index score since 2000. Dynamic entrepreneurial growth is stifled by ever-more-bloated government and a trend toward cronyism that erodes the rule of law. More than three years after the end of recession in June 2009, the U.S. continues to suffer from policy choices that have led to the slowest recovery in 70 years. Businesses remain in a holding pattern, and unemployment is close to 8 percent. Prospects for greater fiscal freedom are uncertain due to the scheduled expiration of previous cuts in income and payroll taxes and the imposition of new taxes associated with the 2010 health care law.

Restoring the U.S. to a place among the world’s “free” economies will require significant policy reforms, particularly in reducing the size of government, overhauling the tax system, transforming costly entitlement programs, and streamlining regulations.

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Background

The U.S. economy, the world’s largest, has not recovered fully from the 2008 financial crisis and ensuing recession. Under Democratic President Barack Obama, the federal system of government, designed to reserve significant powers to the state and local levels, has been strained by the national government’s rapid expansion. Spending at the national level rose to over 25 percent of GDP in 2010, and gross public debt surpassed 100 percent of GDP in 2011. A 2010 health care bill greatly expanded the central government’s regulatory role, and the Dodd–Frank financial overhaul bill roiled credit markets. The election of a Republican Party majority in the House of Representatives in late 2010 slowed spending growth, but the divided government that has left economic policy in flux seemed likely to continue following the reelection of President Obama in 2012.

Rule of LawView Methodology

Property Rights 85.0 Create a Graph using this measurement

Freedom From Corruption 71.0 Create a Graph using this measurement

Although property rights are guaranteed and the judiciary functions independently and predictably, the government’s treatment of the property rights of certain bondholders during the 2009 bailout of the automotive industry raised long-term questions about the rule of law. Corruption is a concern as the cronyism and economic rent-seeking associated with the growth of government have undermined institutional integrity.

Limited GovernmentView Methodology

In the absence of comprehensive tax reforms, the top individual and corporate tax rates remained at 35 percent as of mid-2012. Other taxes include a capital gains tax and excise taxes. The overall tax burden equals 24.8 percent of total domestic income. Total government spending continues to be around 42 percent of GDP. Budget deficits have exceeded $1 trillion in each year since 2009.

Regulatory EfficiencyView Methodology

Business start-up procedures, regulated primarily at the state level, are efficient, and the labor market remains largely flexible. However, over 100 new major federal regulations have been imposed on business operations since early 2009 with annual costs of more than $46 billion. Although core inflation remains muted, the failure to adhere to a rules-based monetary policy has introduced price distortions and long-term inflation risks.

Open MarketsView Methodology

The trade-weighted average tariff rate is 1.8 percent, and additional barriers such as anti-dumping laws and “Buy American” rules add to the cost of trade. Investment freedom is hampered by some sectoral limits. Although detailed regulations have been emerging only gradually, the financial reforms adopted in 2010 are likely to increase costs and uncertainty, complicating the banking sector’s recovery.

Country's Score Over Time

Bar Graph of United States Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing United States to other economic country groups

Regional Ranking

rank country overall change
1Canada79.4-0.5
2United States76-0.3
3Mexico671.7


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