- The Washington Times - Friday, May 26, 2000

As Congress debated the Permanent Normalized Trade Relations Bill (PNTR), the Clinton administration reiterated its commitment to helping China embrace one of democracy's most cherished values economic freedom. Yet in light of the continuing growth of government expenditures, the president would do well to promote and uphold the same principles here in the United States.
Economic freedom is not only unfettered free-market association but also the existence of political, legal and economic institutions that support those freedoms. In China's case, economic freedom is extremely important because it is often the natural precursor to political freedom. Taiwan, for example, enacted a series of economic reforms in the 1960s that led to greater economic freedom and the growth of supporting institutions. Taiwan's gradual evolution from dictatorship, to free-market society, to the thriving capitalist democracy of today, is an excellent illustration to the United States of what greater economic freedom in China may bring.
While the United States should normalize trade relations with China to support this trend, we must also seek a greater level of economic freedom here at home. Though our country has been a tireless proponent of free trade in the last half of this century, we are not generally considered the world's most "economically free" nation. According to the Heritage Foundation/Wall Street Journal 2000 Index of Economic Freedom, the U.S. is in a three-way tie for fourth place with Bahrain and Luxembourg. We are currently outpaced by Hong Kong (despite its recent takeover by China), Singapore, and New Zealand first-, second- and third-place respectively.
The Heritage/WSJ Index, established in 1994, ranks countries in 10 functional areas including monetary policy, wages and foreign investment. While the United States does well in most such areas, we are marked way down because of our fiscal burden of government. Fiscal burden not only includes rising marginal tax rates and profligate spending, but unfunded liabilities such as Social Security, Medicaid and Medicare. In years to come, all three programs face demographic shifts and insolvency, further increasing the fiscal burden on future generations and posing a grave threat to their economic freedom.
The fiscal burden would be worsened if President Clinton's fiscal 2001 budget proposal were enacted. Mr. Clinton has proposed increasing government spending by $1.2 trillion over the next 10 years an amazing $857 billion in new discretionary spending and more than $300 billion in new entitlement initiatives. More than 100 new tax and fee increases are included in Mr. Clinton's budget. This would add another $220 billion to our surplus without one dollar going to true structural entitlement reform. With his budget, Mr. Clinton would further erode our economic freedom in the name of political expediency and a lasting "dynasty."
The world as a whole has made much progress toward limiting government, advancing trade and building solid economic institutions. But while 57 of the countries surveyed in the Heritage/WSJ study have improved their economic freedom, there is a long way to go in upholding these ideals. Of the 161 countries surveyed, 34 had lower economic freedom scores and 88 nations are still considered economically "unfree" or "repressed." It is in the interest of the United States to be the vanguard of the free market and assist countries, like China, to achieve greater levels of economic freedom. However, to maintain this status we must ensure our own economic freedom is preserved here at home.
Fortunately, there is time to re-stake the claim on our cherished economic freedom. First, we must scrap our incredibly complex and inefficient tax code in favor of a fair and simple tax that encourages entrepreneurship and growth. Second, we must halt the proliferation of wasteful government spending and continue the crusade to streamline government. Last and most importantly, we must address our future entitlement liabilities by reforming Social Security from a pay-as-you-go system to individual retirement accounts, increasing the economic power and freedom of all Americans.
In the interest of economic freedom for China, President Clinton said, "The more China liberalizes its economy, the more fully it will liberate the potential of its people their initiative, their imagination, the remarkable spirit of enterprise." The president should adhere to his own rhetoric when writing his budget. We must continue to reform our government not only ensure economic freedom for American generations to come but to set an example for all to follow.


Chris Hayter is a special assistant with Citizens for a Sound Economy.

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