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Posts Tagged ‘Heritage Foundation’

The Index of Economic Freedom is my favorite annual publication from the Heritage Foundation. It’s a rich source of information, using dozens of data sources, about economic liberty around the world.

I first wrote about the Index back in 2010 and shared the bad news that the U.S. score dropped dramatically in Obama’s first year.

Well, the new Index lets us see the net effect of Obama’s entire tenure. The worse news is that the U.S. score has dropped to 75.1 on a 0-100 scale. And the worst news is that this represents America’s lowest score in the twenty-plus years that the Index has been published.

The United States is ranked #17 in the latest Index. We’re only in the “Mostly Free” category, behind Luxembourg and the Netherlands and tied with Denmark.

The top-ranked jurisdiction, once again, is Hong Kong. And what’s really amazing is that Hong Kong actually increased it score. Indeed, all five nations in the “Free” category managed to increase overall economic freedom.

So congratulations also to Singapore, New Zealand, Switzerland, and Australia.

Here’s a map showing the entire world. The worst nations are in red, with North Korea at the very bottom, followed by Venezuela and Cuba.

By the way, Cuba jumped 4.1 points last year, so maybe Fidel’s death is the beginning of some much-needed liberalization.

For more information on the United States, here’s the breakdown of America’s score. As you can see, our worst category is “government size.” In other words, we tax too much and spend too much.

America’s best score is for “regulatory efficiency,” which helps to explain why the U.S. gets a top-10 score from the World Bank’s Doing Business.

Let’s close by comparing the United States with Hong Kong. This charts shows how our scores have changes over time, and also shows the average score for the entire world.

The biggest takeaway is that the U.S. basically is halfway between Hong Kong and the world average.

The great unknown, of course, is whether America’s score will go up or down under Trump.

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My favorite Heritage Foundation publication (other than…ahem…my studies on government spending and the flat tax) is the annual Index of Economic Freedom.

Like the Fraser Institute’s Economic Freedom of the World and the World Economic Forum’s Global Competitiveness Report, the Index is a broad measure of liberty to engage in voluntary exchange in a system of secure property rights and honest government.

Unfortunately, the United States has been moving in the wrong direction in recent years. As you can see here, here, and here, America used to rank in the top 10. But this chart shows that the United States is now has fallen to number 12 and is considered to be only “Mostly Free.”

Index Ranking 2014

I’m not surprised to see Hong Kong and Singapore at the top of the list, but notice how large of a lead they have over the other four “Free” nations. Their big advantage, if you dig into the details, exists because of relatively low burdens of government spending and comparatively modest tax rates.

Canada’s strong performance shows how a nation can improve with the right reforms.

In the “Mostly Free” section, it’s kind of embarrassing that America is behind Denmark. The United States actually has a slightly better (or, to be more accurate, slightly less worse) fiscal regime (with “Lazy Robert” being the poster child for the welfare state), but Denmark gets very good grades for being very laissez-faire in other regards.

I’m pleased to see, by the way, that Chile and Estonia score reasonably well. Estonia has been a good role model in recent years for fiscal restraint (even if Paul Krugman can’t understand the numbers). Chile, meanwhile, engaged in many pro-growth reforms over the past three decades (though I’m worried the new government may harm the nation’s leading position in Latin America).

You’ll notice that Slovakia isn’t on the list of “Free” or “Mostly Free” nations. That nation suffered a big drop, in part because a socialist government repealed the flat tax. Such a shame.

One of the good things about the Heritage Index is that you can play with the data to compare nations based on particular variable. Here’s a chart showing scores for “government spending” in Europe. Wow, talk about a “red” continent.

Index Europe Spending

Switzerland stands out for being the only advanced nation with a semi-decent score of “Moderately Free,” though that’s nothing to brag about. But when all your neighbors are “Unfree,” you look good by comparison. No wonder Switzerland is in much better shape than France.

P.S. I prefer the Fraser Institute’s Economic Freedom of the World over the Heritage Index of Economic Freedom, not because I’m an expert on the methodology of the two publications, but for the simple reason that I assume Economic Freedom of the World must be slightly more accurate because, unlike the Heritage Index,  it showed the U.S. score declining during the Bush years.

P.P.S.  I wrote back in 2010 that we shouldn’t fear the supposed Chinese tiger and the new numbers in the Index corroborate what I wrote. China is mired way down in the “Mostly Unfree” category, with a score that puts them in 137th place.

P.P.P.S. If you like global rankings that make no sense, here are some quasi-amusing options.

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Having dealt with queries about whether I hate Republicans and whether my views have changed on anything, the newest edition of “Question of the Week” asks for my opinion about Senator DeMint moving over to become President of the Heritage Foundation.

Variants of this question came from several people, perhaps because folks know that I spent more than 15 years working for Heritage.

The short answer is that I think DeMint’s move generally is a good thing.

But first, the bad news. It is unfortunate that Senator DeMint no longer will be in the Senate. We need as many “Tea Party” lawmakers as possible since they are willing to fight for small government even when it means causing friction with establishment-oriented, go-along-to-get-along Republicans.

But DeMint’s departure won’t be too painful if Governor Haley of South Carolina appoints an equally strong advocate of small government to replace him.

Moreover, Senator DeMint no longer is a  lone voice for liberty. There are now some very strong defenders of small government in the Senate, including Rand Paul, Marco Rubio, Mike Lee, Ron Johnson, and (beginning in January) Ted Cruz. You can get a pretty good idea of which Senators fight for freedom, coincidentally, by looking at the Heritage Action for America vote rating.

So hopefully Senator DeMint won’t be missed too much.

But what about the implications for Heritage?

Josh Barro thinks DeMint’s selection is a mistake because it means Heritage will be less of a think tank and more of “a political pressure organization with a policy research arm.”

But I disagree with Josh’s concern. Think tanks fill various niches in the battle of ideas. Heritage (even when I disagree with the organization) has an unparalleled outreach program to folks on Capitol Hill and it also has a very impressive capacity to bring information to the grassroots.

Those are good features. In other words, think tanks shouldn’t all fit the same mold, featuring wonky guys with thick glasses publishing 50-page papers. Nothing wrong with that, of course, particularly since I’m a bit of a wonk myself. But just as diversity among governments is a good thing, so is diversity among think tanks.

What matters to me is whether DeMint will guide Heritage in the right direction. At times in recent history, it seems Heritage lost sight of its Reaganite roots. The organization, for instance, got some unfavorable publicity for supporting healthcare mandates (for friends of Heritage, this leftist video is very painful to watch). The Heritage Foundation also was far too timid last decade about criticizing Bush’s reckless record of excessive federal spending.

Given DeMint’s principled opposition to statism on Capitol Hill, I suspect he will lead the way in restoring Heritage’s bona fides as a proponent of small government. That’s very good news, especially at a time when congressional Republicans seem to be losing their nerve.

It’s also worth noting that DeMint has some libertarian sympathies, as Nick Gillespie explains for Reason.

All things considered, Senator Jim DeMint seems like a very solid pick for the top job at the Heritage Foundation. Particularly since he presumably will be an effective fundraiser, which is one of the main jobs for the leader of a non-profit organization.

And since this post is about think tanks, let me take this opportunity to say some nice things about my employer. More specifically, I want to congratulate Michael Cannon, one of my colleagues at the Cato Institute.

He was just featured in the New Republic, a left-wing magazine, as the leading opponents of Obamacare. Here’s a bit of what they wrote about him.

Obamacare’s leading critic

Can one very determined libertarian and one very distorted version of history keep millions of people from getting health insurance? We’re about to find out. The determined libertarian is Michael Cannon of the Cato Institute. He was among the most vocal opponents of the Affordable Care Act, going back to the time when it was still a glint in the eyes of Ted Kennedy. The idea of universal coverage is so antithetical to Cannon’s principles that he actually started an “Anti-Universal Coverage Club.” Once the law passed and took on the moniker “Obamacare,” Cannon became a leading advocate for its repeal. And since he understood the law might survive both the courts and the 2012 elections, as it eventually did, he also made the case that states should avoid complicity in its implementation—and, if possible, actively thwart it. He made that case in his writing and speeches, sometimes directly to the officials with responsibility for implementing the law. …And no single individual has done more to make the case for state resistance to Obamacare than Cannon.

Kudos to Michael. You know you’re doing a good job when your enemies are attacking you. Michael’s also done great work on entitlement reform, and you’ll recognize his mug if you watch my videos on Medicare and Medicaid reform.

At the risk of bragging, Cato is filled with people who make a difference. I’ve noted how Cato organized the first attack against Obama’s faux stimulus when others were sitting on their hands. And it was Cato scholars who helped rejuvenate the constitutional case for limited government.

So I’m glad that Heritage is moving in the right direction, and it was great working there for many years, but there shouldn’t be any confusion about the best think tank in Washington.

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