Economic Freedom Matters
by Tom Donelson on March 16, 2017 at 3:24 PM
For the past eight years, we have seen something not seen since the Hoover Administration: no year in which economic growth has hit the 3% mark. We have had a recovery but it is the slowest on record and it was not fast enough or high enough to help millions of Americans increase their wages and income. Millions of Americans were left behind in this recovery and many workers in their prime could not get jobs.
There are many reasons for this. One reason not often discussed, but that should be, by this Administration and the Republicans, is the reduction in our economic freedom. Over the past two decades, the intrusion of government in our daily lives and economic lives has steadily increased and the Heritage Foundation ranking of economic freedom has the United States at its lowest level since they started their rankings.
The slowdown of opportunities can be directly laid at the feet of our economic policies since the turn of the century: ignoring what works and concentrating on government solutions to problems. The good news is that throughout the world, since the Reagan era, we have seen increases in income and growth among even the developing nations while poverty rates have declined by three-fold as many nations are beginning the process of opening up their economy. This is now being threatened as many of the developed nations, including the United States, are increasing government interventionist policies that are slowing down their economy.
This past year, the biggest jump in economic freedom is coming from the developing nations, whereas the United States and other developed nations are seeing their economic freedom being chipped away. The rise of populism in the United States and Europe is related to the slowing economy and the decline in income for many. It doesn’t help that the political elites in the United States and Europe have abandoned what has worked and simply ignore their own voters. The rise of the administrative state in both Europe and the United States has acted as an alternative government to the elected bodies while passing regulations that have the same impact as laws. The threat to our liberties is being felt as more individuals in the United States face an administrative tribunal as opposed to the courts. The EU is an unelected body that can pass regulations that supersede what many nations pass within their borders (one reason why the British left the EU).
The freer the nation is economically, the higher the average income and purchasing power. The purchasing power of those nations living economically free is six fold over more repressed nations. As a bonus, most of the economically free nations are also the most politically free nations. Economic freedom does coexist with political freedom.
In the United States, the increase in government debt and budget deficit has led to increased loss of economic freedom, labor dynamism and has helped to subdue investment. Job creation and labor participation has subsequently declined as government spending and regulations are strangling the entrepreneurial spirit that has built this country.
Bills like the Affordable Care Act, which have proved to be anything but, and Dodd-Frank are just part of the equation that is slowing down economic opportunities for Americans. The United States’ business top rates are among the highest and the overall tax burden is 26% of the economy with government spending at all levels nearly 40%. The overall public debt to the economy is 105%, which means government debt exceeds what our economy is worth. These numbers can’t hold forever in an era of slow growth.
The number one priority of the Trump Administration should be to increase our economic freedom by eliminating the factors that are interfering with our economy freedom. Do that and the average American will benefit.