U.S. Economic Freedom Declines as Regulations Increase

Economic Freedom in the United States declined over the past year, according to the newly released 2012 edition of the Heritage Foundation/Wall Street Journal global Index of Economic Freedom. It’s not hard to find the culprit.

As Nick Schulz points out at the Enterprise Blog, “regulation is a growing problem for small companies.” He cites the Dismal Scientist (at Moody’s), which point out, “The most small firms since the late 1990s have begun citing regulation as their biggest problem. Regulation is poised to surpass taxes in the survey, which is rare.”

One major source of regulatory anxiety for businesses is the Affordable Care Act (ACA), better known as Obamacare. Implementation of Obamacare will entail a major regulatory enterprise, and it’s being done badly, according to new Mercatus Center study. The study’s authors, Christopher Conver Jerry Ellig, studied eight key Obamacare rules. They found “that the regulatory impact analyses (RIAs) for these regulations were seriously incomplete, often omitting significant benefits, costs, or regulatory alternatives. Analysis of equity was cursory at best.”

While distressing, that shouldn’t be surprising. As CEI’s Wayne Crews notes in his annual survey of the federal regulatory state, Ten Thousand Commandments: “[A] problem with cost-benefit analysis is that it largely amounts to agency self-policing. Agencies that perform ‘audits’ of their own rules would rarely admit that a rule’s benefits do not justify the costs involved.”

We are stuck in a regulatory recession. Getting out of it will require pushing up our economic freedom ranking. Unfortunately, the current administration shows no intention of doing that. As Wayne also likes to say, you don’t need to teach the grass to grow; you just need to take the rocks off of it. (Thanks to Iain Murray for the Heritage and Enterprise Blog links.)