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Special Report #82 on Economic Freedom

July 14, 2010

“Mostly Free” - The Startling Decline of America’s Economic Freedom and What to Do About It

By and

Inspired by the 2010 Index of Economic Freedom

“Mostly Free” — Not Good Enough!

In 2010, for the first time ever, the United States has fallen from the ranks of the economically “free” as measured by the Index of Economic Freedom, published annually by The Heritage Foundation and The Wall Street Journal. With a score of only 78.0 on the Index’s 0–100 scale, the United States has fallen below the cutoff (an average score of 80 or above) that earns countries the right to call themselves truly “free.” The United States’ current status? “Mostly free.”

How did this happen? What can be done to address the problem and allow Americans to reclaim the economic freedoms they have lost?

This booklet provides a snapshot of American’s economic freedom and compares conditions in the United States with those in other countries around the world. A program of straightforward but bold reforms is proposed to put the U.S. back where it belongs: as a world leader in economic freedom.

A Startling Decline

The United States is the 8th freest economy in the 2010 Index of Economic Freedom. Its score is 2.7 points lower than last year, reflecting notable decreases in financial freedom, monetary freedom, and property rights. Economic freedom has declined in seven of the 10 categories measured in the Index. Overall, the U.S. suffered the largest decline in economic freedom among the world’s 20 largest economies. The United States has fallen to 2nd place in the North America region, trailing Canada.

The U.S. government’s intrusive responses to the financial and economic crisis that began in 2008 have significantly undermined economic freedom and long-term prospects for economic growth. Uncertainties caused by ongoing regulatory changes and politically influenced spending have discouraged entrepreneurship and job creation, slowing recovery. Leadership in free trade has been undercut by “Buy American” provisions in stimulus legislation and failure to pursue previously agreed free trade agreements (FTAs) with Panama, Colombia, and South Korea.

Meanwhile, 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. The health care law is adding billions of dollars to the nation’s medical bill, as well as federal and state deficits, while fundamentally altering the structure of employment compensation.

The Economic Freedom Agenda

The U.S. Constitution was established, in the words of its Preamble, to “secure the Blessings of Liberty to ourselves and our Posterity.” That liberty is under assault today, and the threat, now as at the time of the Declaration of Independence, comes from a government that has become destructive of “Life, Liberty, and the pursuit of Happiness.”

Reclaiming their heritage of economic freedom will not be an easy task for Americans. Action is needed in every area to challenge politically powerful special interests. Politics as usual will not suffice. Indeed, it is politics as usual that has gotten us off track, with government encroaching daily into areas that Americans have traditionally regarded as private.

We don’t need a revolution, but we do need a restoration of the rights once considered unalienable—by the Founders and by the generations of Americans that followed them. The time to start is now. The actions that we need to take form the Economic Freedom Agenda for America.

The following pages provide a step-by-step guide to putting the U.S. back in the top ranks of the economically “free.” The specific recommendations are but one possible strategy to restore our economic freedom. They illustrate clearly the scope of reform that is needed. Other proposals, if honest in actually advancing economic freedom, could serve as well.

The important thing is to act now to arrest the decline of freedom and assert our rights as free people to set our own course toward greater prosperity in the future.

Read the entire report [PDF]

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