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Thursday, January 12, 2012

American Economic Freedom: Moving in the Wrong Direction

Economic freedom in the United States continues to decline according to the latest Index of Economic Freedom (compiled by the Heritage Foundation) as reported today by Ed Feulner in the Wall Street Journal.

This chart plots the Index from 2006 to 2012. There has been a decline every year since 2007 with a record decline from 2009 to 2010 and another large decline from 2011 to 2012. While nearly every component of the index has declined since 2007, two of the larger declines were due to an increase in government spending as a share of GDP (forcing that component down from 60.3 to 46.7) and a reduction on monetary freedom (bringing that component down from 83.8 to 77.2). The decline in monetary freedom was not due to all the discretionary interventions by the Fed (which the index does not measure), but rather to more government interventions in the price system. Here are the details.


This is not the only quantitative measure to show a decline in economic freedom for the United States. The Economic Freedom Index (compiled by the Fraser Institute) also shows a decline as Gene Epstein points out in this recent Barron’s column, though the data only currently go through 2009