U.S. Economic Freedom Keeps Slip-Sliding Away

Last year, the Heritage Foundation’s Index of
Economic Freedom ranked the United States as the
tenth freest economy in the world; in this year’s just-released
Index, it comes in at
number 12. This sort of slide actually isn’t a new phenomenon;
Jesse Walker noted
when the Index first dropped the U.S. out of the top ten, which was
“partly a matter of other countries getting better, as opposed to
the United States getting worse.” Since then, though, the land of
the brave and home of the free-ish has been sliding on its own
merits, “with particularly large losses in property rights, freedom
from corruption, and control of government spending.” Even non-fans
of the Heritage Foundation’s number-crunching style should note
that an even more dramatic decline in America’s economic freedom is
reported by Canada’s Fraser Institute.

According to the 2014 entry
for the United States at the Index of Economic Freedom:

The U.S. is the only country to have recorded a loss of economic
freedom each of the past seven years. The overall U.S. score
decline from 1995 to 2014 is 1.2 points, the fourth worst drop
among advanced economies.

Substantial expansion in the size and scope of government,
including through new and costly regulations in areas like finance
and health care, has contributed significantly to the erosion of
U.S. economic freedom. The growth of government has been
accompanied by increasing cronyism that has undermined the rule of
law and perceptions of fairness.

This is after a gradual rise in the country’s economic
freedom ranking relative to other countries during the first ten
years of the index. While sniffer-outers of partisanship may wonder
why government spending received a better (though sliding) score
during George W. Bush’s not-so-frugal years than during Barack
Obama’s continuation of those policies, Bill Clinton’s tenure looks
like one of moderate improvement.

It’s probably not a shocker that property rights have suffered a
steady decline through the years—not just in the U.S. but around
the world.

The Index of Economic Freedom doesn’t stand alone in its
assessment. 

The Fraser Institute’s Economic
Freedom of the World: 2013 Annual Report (PDF) agrees that
the country is slip-sliding in the rankings.

Throughout most of period from 1980 to 2000, the United States
ranked as the world’s third-freest economy, behind Hong Kong and
Singapore. As Exhibit 1.5 indicates, the chain-linked summary
rating of the United States in 2000 was 8.65, second only to Hong
Kong. By 2005, the US rating had slipped to 8.21 and its ranking
fallen to 8th. The slide has continued. The United States placed
16th in 2010 and 19th in 2011. The 7.74 chain-linked rating of the
United States in 2011 was nearly a full point less than the 2000
rating.

What accounts for the decline of economic freedom in the United
States? While the US ratings and rankings have fallen in all five
areas of the EFW index, the reductions have been largest in Legal
System and Property Rights (Area 2), Freedom to Trade
Internationally (Area 4), and Regulation (Area 5). The plunge in
Area 2 has been huge. In 2000, the 9.23 rating of the United States
was the ninth highest in the world. But by 2011, the area rating
had slid to 6.93, placing the United States 38th worldwide. The
2.30-point reduction in the Area 2 rating of the United States was
tied with Venezuela as the largest reduction among the countries
rated.

That’s an even more dramatic fall from grace than the Index
indicates.

The U.S. now ranks behind Canada economic-freedom-wise in both
the Fraser and Heritage assessments. In fact,
U.S. federal policies now threaten the competitiveness, Fraser
reports, of U.S. states that seek to make it easier to earn and
keep money and property.