January 15, 2008 | By Nathaniel Ward

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America ranks fifth-freest

For the 14th consecutive year, Hong Kong has the world’s most free economy, while the United States has the fifth-freest, according to the new 2008 edition of The Heritage Foundation’s Index of Economic Freedom.

» See the full ranking of global economic freedom

» View the chart comparing economic freedom and standard of living

Economic freedom is essential to prosperity, writes Heritage President Ed Feulner in The Pittsburgh Tribune-Review. “It’s a global race to the top. And the data demonstrate that the more countries dismantle excessive regulations and other barriers to free enterprise, the faster their economies grow — and the more prosperity their citizens enjoy.”

The United States places well in terms of business and labor freedom and property rights, but its scores on fiscal freedom and size of government mean that it lags behind such countries as Ireland (third-freest) and Australia (fourth-freest). Unlike in many advanced countries, the government has been “inactive in lowering corporate tax rates” and “unwilling to curb growing government expenditures, particularly public entitlements.”

The new Index, produced jointly with the Wall Street Journal and released Tuesday in Hong Kong, also finds that North Korea was once again the least economically-free country on the planet. Other authoritarian countries, like Venezuela, Iran and Cuba, also rank as repressed economically.

As a whole, “global economic freedom continues to hold steady while progressing more slowly than one might hope.”

Another misguided tax rebate?

In response to concerns about economic softness, Washington insiders are considering an “economic stimulus” package that would send a tax rebate of several hundred dollars to millions of taxpayers.

This is the wrong solution, however. It rejects tried-and-true pro-growth economic policies and instead relies on the discredited big-government economic theories of John Maynard Keynes.

“Tax rebates,” writes Heritage economist Brian Riedl, “don’t stimulate the economy. Cutting tax rates does.” Case in point: the economy remained stagnant in 2001 and 2002, after the 2001 tax rebates, but took off after the 2003 tax rate cuts.

“Simply put,” Riedl argues, “low tax rates encourage new wealth creation. Tax rebates merely redistribute existing wealth.”

“Tax rebates fail because they don’t encourage productivity or wealth creation,” he continues. “No one has to work, save, invest or create any new wealth to receive a rebate.”

Furthermore, “every dollar that government rebates ‘inject’ into the economy must first be taxed or borrowed out of the economy (and even money borrowed from foreigners brings a reduction in net exports). No new spending power is created. It is merely redistributed from one group of people to another.”

Making REAL ID a reality

Last week, the “Department of Homeland Security finally announced a plan to establish minimum standards for state-issued driver’s licenses and identification cards that are intended to be used for federal purposes,” Heritage Foundation national security expert James Carafano reports.

These cards, which would be used for things like passenger screening at airports, would definitely “not establish a national identity card.” In fact, Carafano explains that the REAL ID law would add privacy protections and keep intact traditional state roles in identification.

He concludes that “Congress should do its duty and support the department’s plan and fully fund the [forthcoming fiscal 2009] budget request for REAL ID implementation.”

Stewart Baker from the Department of Homeland Security and other experts will speak Wednesday at Heritage about what’s involved with implementing the REAL ID Act.

In other news

• A new California regulation would give state bureaucrats the ability to remotely control thermostats inside private homes. This imposition on property rights would be enacted in the name of electricity conservation and preventing blackouts. There is, of course, another way to ensure there’s enough electricity to meet demand: produce more electricity.
• The New York Times reports that Washington may not be able to prevent an economic downturn. This is quite right, but that almost certainly won’t keep politicians from trying and it won’t keep their “solutions” from actually making things worse.
• Are scammers taking advantage of global warming hysteria to sell bogus “carbon offsets”? The government is looking into it.
• Liberals in Congress have hardly abandoned their love for big-government regulation. Rep. Barney Frank (D-Mass.), for instance, recently wrote an article urging new additions to America’s regulatory burden.

Coming up at Heritage

To attend these or any other events at Heritage please RSVP at Heritage’s website.  Or you can view these events live online.  All times are Eastern.

• On Wednesday, Jan. 16 at 11:00 a.m., a panel of experts looks at what’s involved with implementing the REAL ID Act.
• On Friday, Jan. 25 at 11:00 a.m., Zimbabwe’s shadow justice minister, David Coltart, discusses prospects for economic recovery and political reform in Zimbabwe.

Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation.

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