January 13, 2005 | News Releases on
Analyst Offers Steps for U.S. to Regain Leadership in Economic Freedom
WASHINGTON, JANUARY 12, 2005-Policy-makers
should respond to the news that the United States is no longer
among the 10 freest economies in the world with a package of
pro-growth, pro-market legislation to restore the country's
standing, says a new paper from The Heritage Foundation.
The United States slipped to 12th this year in The Heritage
Foundation/Wall Street Journal's "Index of Economic
Freedom," an annual study that assesses economic opportunity and
obstacles to doing business around the world. Its score was
unchanged for the past two years, but three countries-Chile,
Iceland and Australia-passed it this year by advancing reforms in
their countries. It was the first time in the 11-year history of
the Index that the United States ranked outside the top 10.
Ana Eiras, an analyst in Heritage's Center for International Trade
and Economics and author of the rankings, says the United States
must address four key policy areas to reclaim a top-10 ranking:
- Cut corporate tax rates. Corporate tax rates in Iceland, Chile,
Hong Kong and Ireland are half the U.S. rate. Estonia has no
corporate tax; Singapore and Luxembourg have corporate tax rates 13
percentage points below the U.S. rate. Even high-tax nations such
as Britain and New Zealand do slightly better than the U.S.
Corporate taxes amount to a second tax on wages that already have
been taxed once and thus contribute to economic stagnation, and
they should be eliminated or at least cut, Eiras says.
- Cut government spending. Government spending tops $20,000 per
household in real dollars for the first time since World War II.
The government already owes $42 trillion if one counts money
promised to retirees and users of government health services. "Such
spending mortgages our economic future and creates bills our
children will find it difficult to pay," Eiras says.
- Support free trade, especially at home. It's not enough to
negotiate free-trade agreements with various countries or even to
establish free-trade zones, Eiras says. We must move to the next
frontier: Repeal anti-dumping laws and agricultural subsidies, and
stop protecting inefficient industries, such as sugar.
- Deregulate. America is considered one of the most
business-friendly nations in the world. But that won't continue,
Eiras says, unless we stem the flow of regulations. We could start
by allowing foreigners to invest in sectors of the economy from
which they currently are forbidden, such as nuclear energy,
maritime and air shipping, broadcasting and communications, she
says. Also, health and product-safety regulations, as well as food
and drug labeling rules, should be reviewed regularly and
eliminated where possible, as they can be particularly burdensome
to small- and medium-size businesses.