Morning Bell: The Government Spending Threat to Economic Freedom

Conn Carroll / January 12, 2011

This morning, The Heritage Foundation and The Wall Street Journal released the 2011 Index of Economic Freedom, and while the news is good for many countries, it is depressing for the United States. All told, 117 countries, mainly developing and emerging market economies, improved their Economic Freedom Index score. Meanwhile the U.S. dropped to 9th place, remaining “mostly free,” weighed down by the burden of President Obama’s spending spree.

Of course, we should all celebrate the improving lot of many impoverished people across the globe. The data in this year’s Index again confirm the strong correlation not just between economic freedom and higher per capita incomes but between higher economic freedom and overall well-being (which takes into account such factors as health, education, security, and personal freedom) as well. The Index shows that freer societies reduce poverty at nearly twice the rate as less free societies do.

The United States, however, is no longer “the Land of the Free” economically. Our Economic Freedom Index score fell to 77.8, moving us down to 9th internationally behind such countries as Denmark, Canada, and first-place Hong Kong. What drove America’s decline? Huge increases in government spending. Despite obvious past failures of Keynesian spending policies in countries like Japan, the U.S. government undertook a massive government spending spree designed to combat unemployment and spur economic growth. This Keynesian stimulus has proved to be an abject failure: Unemployment is still above 9 percent for a post–World War II record 20th month in a row, and economic growth has not returned as strong as the Obama Administration predicted. (more…)