Conservative Principles Now

Scott Brown’s shocking victory in Massachusetts on Tuesday was a shot across the bow of the liberal ruling class in Washington and declared one clear message: Americans do not like the direction the country is heading, and they’re not going to stand for it, even in the solidly-blue Bay State.

The United States’ direction today is a dangerous one, even when compared to the country’s state of affairs just one year ago, as revealed in the 2010 Index of Economic Freedom, which we are releasing this morning in a joint project with The Heritage Foundation and The Wall Street Journal. The Index analyzes just how economically “free” a country is, and this year America saw a steep and significant decline, enough to make it drop altogether from the “free” category, the first time this has happened in the 16 years we’ve been publishing these indexes. The United States dropped to “mostly free.”

The drop in rankings is notable as it comes in the same week that marks the one-year anniversary of President Barack Obama’s inauguration. By any standard, over the last year Americans’ overall wealth and prosperity has continued to decline. Americans, in fact, are more likely than ever to believe that their children and grandchildren will be worse off than the current generation. They believe future generations will live in a less prosperous and less economically mobile America. The traditional American faith in upward economic mobility – widely understood to be the American Dream – seems more elusive now than ever.

One recent poll by the Pew Research Center found that 55% of Americans believe their children will be worse off when they grow up, while only 36% see a better future for them. Similarly, a December 2009 Gallup study found that Americans are more pessimistic about our future now than at any time since the late 1970s.

Sadly, this bleak view of the future is understandable – after all, unemployment has skyrocketed and shows no signs of abating, government spending and debt are at unprecedented levels during peacetime, and our elected officials seem determined not only to ignore these alarm bells but to pursue policies – expensive new entitlement programs; debilitating new taxes on wealth creation, savings, and investments; and new government regulations that have created a climate of such uncertainty – that will cause entrepreneurs to stay on the sidelines rather than take the risks that have led the United States out of previous recessions. Studies indicate that this is indeed the case. “The largest force driving unemployment [in the U.S.],” Heritage’s James Sherk argues, “is the sharp drop in private-sector job creation” rather than job losses incurred through lay-offs.

In a nutshell, there is a growing sense that, in economic terms, America is less free and is destined to remain that way.

As the Index of Economic Freedom reveals (and as each and every American can feel in their daily lives), the United States is now the home of the mostly free. This development is huge – akin to learning that the premier rating agencies have been forced to downgrade U.S. Treasury debt to second tier status.

What exactly is the Index? It’s a comprehensive review of 179 countries around the world that considers economic freedom in ten separate areas. Five of these measurements — freedom in business, trade, investment, finance, and labor—measure the regulatory burdens government places on businesses and entrepreneurs. Three — fiscal freedom, government spending, and monetary freedom—examine the overall size and level of intrusiveness of government and its effectiveness in maintaining a stable economic environment. The remaining two—property rights and freedom from corruption—look at fundamental societal characteristics that underpin all modern prosperous economies.

Detailed analyses have found that citizens in countries with the highest scores on the Index enjoy much higher standards of living than their neighbors in countries that are less free. Freer countries, for example, have levels of per capita GDP that are more than 10 times higher than in countries that are mostly unfree or repressed. Higher levels of economic freedom also go hand-in-hand with broader indications of both economic and social well-being.

While some of the decline is attributable to policies enacted under the previous Administration, this year’s findings nevertheless should be especially relevant to the policy agendas now dominating Capitol Hill. Specifically, the Index records a wide disparity among the 20 largest economies in the world over the past year, with half continuing to increase economic freedom while the other half, including the United States and the United Kingdom, embraced policies that substantially diminished it.

In particular, countries that undertook large stimulus measures or other government-directed attempts to spur growth failed to realize economic growth. Not only have growth rates not increased, but the long term impact of these measures, which includes increased deficits, inflation, higher taxes, and protectionist measures against foreign trade, actually diminish economic activity. In the case of a country like the United States, which has such a large impact on the world economy, slower growth harms not only Americans, but citizens of almost every other country in the world, as well.

Alarmed by the findings in this year’s Index, The Heritage Foundation has embarked on a comprehensive project to identify those policy changes that, if enacted, would return the United States once again to the ranks of the freest countries on Earth. We will identify the policies in each of the ten areas of economic freedom that are most highly associated with true economic freedom, compare those “best practices” to the policies currently in place here, and recommend an economic freedom agenda worthy of America.

Quick Hits:

• Read more about the 2010 Index of Economic Freedom and watch a video by Heritage Vice President Kim R. Holmes, Ph.D. at JobsandFreedom.com.
• In the wake of Scott Brown’s victory in Massachusetts last night, Speaker Nancy Pelosi (D-CA) said of Congressional Democrats’ efforts at health care reform: “We will get the job done. I am confident of that. I have always been confident of that.”
• The Yemeni air force bombed the home of a suspected al-Qaeda leader as part of a government crackdown related to the attempted Christmas day airplane bombing over Detroit.
• Pennsylvania welcomed 53 Haitian orphans ranging from 11 months old to age 12 on Tuesday; the earthquake destroyed two of three buildings in their Port-au-Prince orphanage.
• Embattled Transportation Security administration nominee Erroll Southers withdrew his name from consideration this morning. The Obama nominee faced “fierce opposition” “since revelations that he may have misled Congress about an incident in the late 1980s involving a background check of the boyfriend of his ex-wife.”

As Congress tries to knock out the economy in one fell swoop with its economically dangerous cap and trade proposal, the Environmental Protection Agency (EPA) is taking a different approach: proposing smaller, regulatory jabs at the economy with the intent to reduce carbon dioxide and other greenhouse gas emissions.

First, the EPA worked with the Department of Transportation to propose new vehicle standards - a 5 percent annual increase in fuel economy starting with the 2012 model year, reaching 35.5 miles per gallon by 2016. Last week, they announced the largest emitters of greenhouse gases must report their emissions.

Now, they’re going after large facilities. Just yesterday, “The Environmental Protection Agency announced plans to regulate greenhouse gas emissions from power plants, factories and oil refineries — a warning shot to Congress that if it does not move to curb global warming, the Obama administration will act on its own.”

In her speech, EPA Administrator Lisa Jackson said,

By using the power and authority of the Clean Air Act, we can begin reducing emissions from the nation’s largest greenhouse gas emitting facilities without placing an undue burden on the businesses that make up the vast majority of our economy. This is a common sense rule that is carefully tailored to apply to only the largest sources — those from sectors responsible for nearly 70 percent of U.S. greenhouse gas emissions sources. This rule allows us to do what the Clean Air Act does best – reduce emissions for better health, drive technology innovation for a better economy, and protect the environment for a better future – all without placing an undue burden on the businesses that make up the better part of our economy.”

Although the newly proposed EPA rule will not apply to schools, restaurants and small businesses, it’s the large emitters of carbon dioxide that provide America with 85 percent of its energy needs. Regulating greenhouse gases with “the use of best technologies” will mean higher costs for energy passed on to schools, restaurants, small businesses, and of course, the consumer. Further, EPA’s attempt to exempt smaller entities is on flimsy legal ground and is not likely to withstand the inevitable and endless lawsuits from environmental activists

The Heritage Foundation’s analysis of the carbon capping Waxman-Markey bill project higher energy and other costs for a household of four - nearly $3,000 per year between 2012 and 2035. Gasoline prices will rise by 58 percent ($1.38 more per gallon) and average household electric rates will increase by 90 percent by 2035. And if the EPA is running the show, the micromanaging of our economy and the compliance costs that come along with it will only increase the costs.

On April 17, the EPA issued an endangerment finding, saying that global warming poses a serious threat to public health and safety. Interestingly, Jackson spoke as if 60-comment period on the endangerment finding and the EPA’s plan to regulate carbon dioxide was met with unanimous support. She said, “We have received more than 400,000 responses in the 60-day public comment period. And we soon expect a final document that will lay the foundation for reducing greenhouse emissions and confronting climate change.”

But through The Heritage Foundation’s StopEPA.com site, nearly 30,000 of you voiced your opinion against EPA regulations. Other organizations, such as The US Chamber of Commerce, American Solutions, FreedomWorks, and the Institute for Energy Research aggregated similar numbers, but there’s no mention of that.

Contrary to Administrator Jackson’s assertions, using the Clean Air Act to regulate CO2 would likely be the most expensive environmental regulation in history and will bypass the legislative process completely. While some Members of Congress undoubtedly support the EPA’s attempt to curb global warming, the fact that unelected and unaccountable EPA bureaucrats are trying to use backdoor rulemaking to reduce carbon dioxide makes it all the more objectionable.