You want to know why our economy is basically in its second lost decade? Try this:
Economic freedom in the United States has plummeted to an all-time low. According to the Economic Freedom of the World: 2012 Annual Report, co-published today with the Fraser Institute, the United States’ ranking has dropped to 18th place after having ranked 3rd for decades up to the year 2000. The loss of freedom is a decade-long trend—the United States ranked 8th in 2005—that has accelerated in recent years.
Virtually every U.S. indicator has seen a deterioration. Government spending and regulations have grown, the rule of law and protection of property rights have weakened, and foreign investment and non-tariff barriers have increased. Authors James Gwartney, Robert Lawson, and Josh Hall note some of the reasons for the decline, including the war on terror and the growth of crony capitalism.
As the graph below shows, the United States now has a lower economic freedom rating than it did in the 1970s.
Here are the the top 10 free economies: Hong Kong, Singapore, New Zealand, Switzerland, Australia, Canada — yes, fucking Canada — Bahrain, Mauritius, Finland and Chile. Notice something? All those countries are prosperous. Mauritius may sound strange, but it’s the best run and most democratic country in Africa. Supposed Libertarian paradise Somalia was not rated because they basically don’t have a government.
You can look at the in-depth report here. After reaching a peak in economic freedom in 2000, the last decade has simply been terrible. We’ve gone from 34th in size of government — bad enough — to 61st. From 9th in property rights to 33rd. From 18th in free trade to 42nd. From 2nd in regulation to 17th. Furthermore, this report is only through 2010. It only covers the Bush years and the first two years of Obama. So Sarbanes-Oxley, which I think bears more blame for our economic plight than anything else, is included. But Obamacare and Dodd-Frank have yet to kick in.
The Left is going on about how we’ve had a lost decade during which tax rates have been the lowest in history. Fair enough. But, as usual with the Left, they are missing the point. As Daniel Mitchell notes, low taxes are good, all things being equal. But they are not a magical elixir. George Bush and Barack Obama cut taxes. But they also increased regulation, stood in the way of free trade and massively grew government. It’s not that low taxes didn’t help or that cutting taxes now would help. It’s that there are other and, in this case, more powerful currents pushing us back.
Look at the above list. Canada and Australia aren’t exactly tax havens. Both have universal healthcare and the associated taxes. But because they have done other things — kept regulations sensible, kept government within its means, supported freed trade and free enterprise — they’re doing better than we are.
Just a moment. I’m still wrapping my head around this. Canada. Fucking Canada. The fucking maple-syrup chugging socialized-medicine having, “eh”-saying Dudley Do Right hockey fans in the frozen wasteland to our North are freer than we are.
OK. I’m back.
Now is this must be a reason to vote for Mitt Romney, right. Eh … maybe. Or maybe not:
Yet discussion of economic freedom seems curiously missing from the presidential campaign. President Obama, in fact, would further restrict economic liberty. He proposes a host of new subsidies and regulations. And don’t forget that the largest parts of Dodd-Frank kick in next year.
Meanwhile, when it comes to defending economic liberty, Mitt Romney has spent most of his time in a defensive crouch. He occasionally breaks form to promise he won’t really reduce taxes on the wealthy, won’t cut Medicare, and wants to keep some parts of Obamacare. He’s actually running ads attacking the president for not confronting China over trade.
Neither of these dim bulbs is talking about free trade. Neither is talking about deregulation except in the most vague terms. Neither has been mentioned Sarbanes-Oxley. Neither has talked about reining in Eminent Domain. Neither has proposed a plan to break up the big banks and control corporate welfare, as John Huntsman did.
Would Romney and a Republican Congress fix things? The last time the GOP had all the power, we sank from 2nd to 8th and eventually landed at 15th. Obama and a Democratic Congress dragged us down to 19th in just one year (with more falling to follow). Gridlock would keep things from getting worse, but won’t repeal SOX or expand free trade.
Frankly, I think it’s going to have to come down to us. Regardless of which of these guys in Air Force One come January, we are going to have to make this is an issue, just like we did with SOPA. We are going to have to put our politicians in a position where they simply have no choice but to cut it out. We did that in 2010 with the budget: Congress has exercised the first budget restraint in a decade. But our next target has to be regulation.
Because if we don’t get control of things, we’ll sink even lower. And we’ll continue to stagnate.