- The Washington Times - Tuesday, January 27, 2009

REVIEWED BY WILLIAM H. PETERSON

Obamanomics is hard put here, but so too is Bushonomics.

In the foreword to the “2009 Index of Economic Freedom,” Wall Street Journal editorial page editor Paul A. Gigot says today’s widespread financial panic has done great harm. However, rather than rebuke national governments and their central banks across the world, the political class in the United States and Europe blames “deregulation,” thus opposing President Reagan’s key point that government is not the solution but the problem.

Mr. Gigot charges that under President Bush, the Treasury and the Federal Reserve “often moved in an ad hoc arbitrary fashion that fed the panic.” Also, in the case of the stalled Doha, Qatar, global trade round, then-President-elect Obama showed no signs of wanting to revive it. Mr. Gigot worries that U.S. taxes and spending could surge and energy and health care may be in for greater regulation - or worse.

In the preface, Edwin J. Feulner, president of the Heritage Foundation, also worries about the outlook for U.S. economic freedom, with its index here quite possibly dropping “significantly” in 2009. He reminds us that salvation lies in “a return to free-market principles.”

These principles re-emerge in this annual’s standard 10 parts of economic freedom: business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom.

Each part is again updated, reanalyzed and re-indexed country by country, 183 in all. Of interest: The top 10 in order are: Hong Kong, Singapore, Australia, Ireland, New Zealand, the United States, Canada, Denmark, Switzerland and the United Kingdom.

Note, the editors say, that four Asia-Pacific economies are in the top five countries that lead the world in economic freedom. One wonders: Is Asia, including giants China and India with a combined population of 2.3 billion, the region of the future?

Welcome in this 2009 edition is a supply-side essay, “The World Discovers the Laffer Curve,” by ace Journal economist Steve Moore. This curve demonstrates that government strategy everywhere should shun high tax rates and high government outlays, as both are unintended taxpayer disincentives to produce taxable income, thus cutting national economic growth.

The Laffer strategy is working, if reluctantly so within the political class. Mr. Moore notes that over the past 20 years, world individual and corporate tax rates have dropped more steeply than at any time in the past 100 years.

Mr. Moore hails the corporate income tax side, where downward rate momentum is most dramatic. The average tax rate in industrialized nations - with a notable exception - is off by almost half, to 25 percent from 48 percent since the beginning of the Reagan era.

The notable exception is the United States, with a corporate rate of 39.25 percent, while the average for other industrialized countries is 26.20 percent. Ouch.

Yet talk in the political class of the death of capitalism is overdone. I’m reminded of the wit of Mark Twain who cabled from London in 1897: “Reports of my death are greatly exaggerated.”

In sum, this solid annual report again makes good on its subtitle, “The Link Between Economic Opportunity and Prosperity,” which is as right as rain. As right, too, is the similar economic logic of the Laffer Curve.

Witness the big success of Europe’s second Switzerland, Ireland, whose sharply lowered tax rates attract capital, jobs and U.S. corporate foreign facilities such as those of Intel, Bristol-Myers-Squibb and Microsoft. So why not, America, cut our high taxes and government spending, a splendid way to speed America back to prosperity?

President Obama, please copy.

William H. Peterson is an adjunct scholar of the Ludwig von Mises Institute in Auburn, Ala.


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