U.S. Sinks to 10th Place in Economic Freedom Due to Regulation, Spending

U.S. Falls in Index of Economic Freedom Sharp increases in government spending and costly regulations contributed to this year's decline in the United States’ ranking in the annual Index of Economic Freedom published by The Wall Street Journal and The Heritage Foundation. Quick Hits 2012 Index of Economic Freedom   Podcast: Interview with Index Editor, Kim Holmes, Ph.D.    Video: The Role of Economic Freedom   A Step Backward for Economic Freedom in 2012  The U.S. fell from ninth to tenth place in economic freedom among 179 competing countries. It was the fourth straight year of decline in economic freedom for the United States. As recently as 2008, the U.S. ranked seventh worldwide, and was considered a “free” economy. Today, the U.S. is only a “mostly free” economy. Most worrisome is the U.S.'s drop in the category of freedom from corruption. Index editors say this stems from the growing perception of corruption associated with government bailouts of troubled industries, including automakers and investment houses. The perception of corruption also grew due to regulatory exemptions granted to politically well-connected companies and special-interest groups. More than 1,100 companies won exemptions from provisions of the Patient Protection and Affordable Care Act, President Obama’s signature health care legislation.   “Corruption is a growing concern as the cronyism and economic rent-seeking associated with the growth of government have undermined institutional integrity,” the editors write. The Index’s editors also attribute the U.S. decline to increases in government spending and  the dramatic growth of regulations, particularly in health care and finance.  Spending by government consumes 42.2 percent of gross domestic product (GDP), and total public debt now is larger than the entire the economy.   The regulatory burden also continues to grow. More than 70 major rules imposed since 2009 cost Americans nearly $40 billion last year – leading to the largest U.S. decline, in the fiscal freedom category.   The Index offers solutions, pointing to the policies needed to improve the U.S.'s score: reduce the size of government, overhaul the tax system, and transform costly entitlement programs. These solutions are critical for bringing down high unemployment rates and reducing public debt to manageable levels.   For interviews please call (202) 675-1761.   Experts: Kim R. Holmes, Ph.D. Vice President, Foreign and Defense Policy Studies, and Director, The Kathryn and Shelby Cullom Davis Institute for International Studies James Roberts Research Fellow For Economic Freedom and Growth