|Economic Freedom Index: U.S. Plummeted from 6th to 17th Under Obama|
By Timothy H. Lee
Thursday, February 23 2017
Anyone still perplexed by the economic malaise and popular discontent that characterized the Obama era need look no further than the erosion of economic freedom during his tenure.
When Obama entered the White House in 2009, the United States ranked sixth in the Heritage Foundation's annual Index of Economic Freedom.
Today, we've sunk to an unprecedented low of seventeenth, and no longer qualify as "free," but rather "mostly free."
Each year since 1995, the Index has ranked the world's countries in comparative levels of economic freedom, which it defines as the degree to which "governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself." Those are precisely the principles upon which the United States was founded.
And how does the Index quantify something as seemingly amorphous as economic freedom? It actually employs a methodology that is simultaneously comprehensive and precise:
We measure economic freedom based on 12 quantitative and qualitative factors, grouped into four broad categories, or pillars, of economic freedom:
1. Rule of Law (property rights, government integrity, judicial effectiveness)
Each of the ten economic freedoms within these categories is graded on a scale of 0 to 100. A country's overall score is derived by averaging these ten economic freedoms, with equal weight being given to each.
And each year, the objective evidence establishes beyond any sustainable doubt that greater economic freedom directly translates to greater prosperity:
Per capita incomes are much higher in countries that are more economically free. Economies rated 'free' or 'mostly free' in the 2017 Index generate incomes that are more than double the average levels in other countries, and more than five times higher than the incomes of people living in countries with 'repressed' economies.
Moreover, that wellbeing isn't solely economic in nature. As the Index summarizes, "The ideals of economic freedom are strongly associated with healthier societies, cleaner environments, greater per capita wealth, human development, democracy, and poverty elimination."
Given that clear causal relationship between a nation's economic freedom and its prosperity, it should come as no surprise that our record stretch of stagnation occurred as economic freedom deteriorated over the past eight years. America has now endured an unprecedented ten years without once reaching even 3% economic growth (the post-World War II annual average is 3.3%), labor participation rates have plummeted to levels unseen since before women fully entered the workforce 40 years ago and median incomes have stagnated. Meanwhile, federal spending, deficits and regulations reached unfathomable new highs under Obama, which the Index identifies as causes:
Large budget deficits and a high level of public debt, both now reflected in the Index methodology, have contributed to the continuing decline in America's economic freedom. Having registered its lowest economic freedom score ever, the United States is no longer among the world's 15 freest economies.
The anemic recovery since the great recession has been characterized by a lack of labor market dynamism and depressed levels of investment. The substantial expansion of government's size and scope, increased regulatory tax burdens, and the loss of confidence that has accompanied a growing perception of cronyism, elite privilege, and corruption have severely undermined America's global competitiveness.
Exacerbating matters, America's regression has occurred while other nations across the globe have generally advanced in economic freedom:
"Economic freedom has advanced in a majority of the world's countries over the past year. Global average economic freedom increased by 0.2 points to a record level of 60.9 on the 0-100 scale used in the Index of Economic Freedom. Since the inception of the Index in 1995, average scores have increased by over 5 percent."
"In the 2017 Index, 103 countries, most of which are less developed or emerging economies, showed advances in economic freedom. Remarkably, 49 countries achieved their highest economic freedom scores ever. Two large economies, China and Russia, are included in this group."
In a global economy that becomes increasingly competitive each day, America's deterioration is unsustainable.
Fortunately, the Trump Administration offers a ray of optimism. Alongside the prospect of tax reform, the dismantling of ObamaCare, repeal of Dodd-Frank, more reasonable labor oversight and more rational energy policy not dictated by environmental extremists, Trump has already signed regulatory reform mandating two regulations abolished for every one new regulation imposed.
The early results are remarkable. Markets have reached multiple record highs since the November election, and consumer confidence has skyrocketed. Rasmussen's right track/wrong track survey has reached the highest positive level ever recorded this month. Small businesses, which create the majority of new jobs in America, also report skyrocketing confidence since November.
But we must ensure that our resurgent optimism be translated into lasting, substantive policy improvement. By cooperating to promote economic freedom, Congress and the White House can reverse eight years of stagnation and decay, and return America to prosperity levels we once considered normal.
Related Articles :