U.S. #18 in Economic Freedom

We like to think of the United States as the freest, most democratic country in the world.

That’s not quite the case. And, in recent years, our economic freedom has been eroding. In 2008, the U.S. ranked fifth on the Index for Economic Freedom, with a score of 80.6 out of 100. After eight years of increasing government control through the most excessive regulation in the country’s history, the U.S. ranked 17th.

On the 2018 Index for Economic Freedom, the overall score for the U.S. improved by 0.6 points to 75.7, but other countries improved even more and the U.S. ranking dropped to 18th. Still, when we wrote about the index in 2016, the U.S. had lost ground eight times in the previous 10 years; at least this year we showed some improvement.

“While the U.S.’s economic freedom ranking has dropped due to comparatively better improvements in other countries,” The Heritage Foundation observed, “the increase in its overall score would seem to indicate that the decade-long decline in America’s economic freedom may have been arrested. There are signs of renewed labor market dynamism and increased growth, and major regulatory and tax reforms are spurring business confidence and investment. The continuing decline in the score for government integrity reflects a growing perception of cronyism, elite privilege, and corruption.”

Grading is based on four factors: rule of law, government size, regulatory efficiency and open markets.

While noting that the Trump Administration has reversed the regulatory zeal of the Obama Administration, the Heritage Foundation wrote that, “The Trump Administration has undertaken regulatory reforms, but it is too early to judge their full scope and effect.”

And the government continues to subsidize many goods and services in sectors such as agriculture, healthcare and green energy.

The latest report also notes improvement in property rights, “rolling back of various acts of federal regulatory overreach in areas such as environmental protection, education, and health care that had infringed upon them.”

Countries with a higher rank that the U.S. range from the United Kingdom (#8 at 78) and Canada (#9 at 77.7) to Hong Kong (#1 at 90.2), Singapore (#2 at 88.8) and the United Arab Emirates (#10 at 77.6).

It will be interesting to see how the U.S. fares next year. Will tax reform and deregulation give the U.S. the push it needs to reverse “the decades-long decline?” Or will tariffs and other protectionist measures push the country even further down the list?

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