5 Ways that America Is Being Out-America’d in 2015

From the port at Ellis Island to the shores at Plymouth Rock and the fields at Gettysburg, the United States has, for almost two and a half centuries, stood for certain ideals. The nation of the Enlightenment, it is unique in history for having been carved from certain fundamental beliefs in the individual rights of man and the role of government not as a master of man but as his protector from those who would violate his rights by force or fraud. However, from the founding of our country those ideas have been under attack from those who seek to subjugate the individual to the will of the collective. That assault escalated at the dawn of the last century with the peak of the progressive movement and, later, the fascism of the New Deal. Today, we observe a renewed passion by both sides of the debate. Gone is the mild moderation of the 1990s; in its place is a fevered debate between an ever-more shameless left, prying for greater and greater controls of the economy, and an American right gradually coming to realize the choice that it must make between capitalism and the mixed-economy politics of its last half-century of presidents and legislators.

Fortunately for those abroad, as the United States struggles under onerous new regulations like ObamaCare, other countries are, in some cases, moving in the opposite direction. Whether out of a respect for individual rights or pure economic efficiency, they are repealing regulations and opposing policies that the US has embraced in violation of its founding principles. Here are five instances in which America is being out-America’d in 2015.

  1. Canada Issues a Law Capping Regulations

So much for the days of Canada being the US’s more statist northern neighbor; for years, Canada has been moving in the direction of greater economic and personal freedoms. It now consistently outranks the US in lists of the world’s freest economies, and despite the more leftist inclinations of Quebec and younger Canadians, the trend shows no signs of stopping.

As of this past December, Canada dominated the Fraser Institute’s Economic Freedom of North America 2014 report with Alberta ranking as the freest state or province in North America and Canadian provinces filling the top three slots and four out of the top five.

Pushing them further ahead, in recent weeks Canada passed the Red Tape Reduction Act, becoming the first country in the world to require that for every new regulation passed another regulation of equal scale and cost must be repealed. In effect, it amounts to a cap on the regulatory state. Generation Opportunity reports that though the law is new it has existed for years as unofficial practice, saving Canadians 98,000 hours of labor and over $20 million in 2012-2013 alone.

American advocates for capitalism should be jealous, to say the least. The US Code of Federal Regulations, at over 80,000 pages long, costs our economy nearly $2 trillion every year. Within it are at least 300,000 regulations carrying criminal penalties. The total has to be rounded off because, in reality, no one knows the exact number.

Congratulations and a heartfelt “Well done(!)” to Canada for their effort to leash their regulators. We can only hope that in time our country might follow your example.

 

  1. Those Scandinavian welfare dreamlands? They’re freer than the US in a lot of ways

It is a rare debate on the merits of capitalism versus socialism that an advocate of state controls doesn’t bring up the subject of Sweden, Norway, Denmark, or Finland as an example of socialist (or, at the very least, welfare statist) planning having succeeded in practice. The Scandinavian countries almost invariably dominate global economic rankings for prosperity. While, as Daniel Mitchell has often pointed out, the Nordic model essentially amounts to trading away economic growth for stability, it’s hard not to admit that, all in all, they do a lot of things very well.

There are just two catches. First, Scandinavian countries’ economies are not as controlled as they are often portrayed to be. Second, being a “welfare state” doesn’t mean that they are moving ever more in the direction of state controls; to the contrary, they have in many ways been moving in the opposite direction—towards less controls and greater economic freedom—for decades. The socialist heyday in Sweden in the 1970s, for instance, is a far cry from where the country stands today, and its prosperity is largely creditable to its efforts toward greater economic freedom.

As the US watches the costs of Social Security, Medicare, and Medicaid gradually swallow up its fiscal future, Sweden has already privatized Social Security accounts. It also offers school vouchers, no death tax, no wealth tax, and a lower corporate income tax rate than the US (then again, so does essentially every country in the world!). Tax rates, government-run healthcare, and fiscal matters aside, Sweden is vaguely reminiscent of many policies advocated by moderate US Republicans.

A look at other Scandinavian countries in the Economic Freedom of the World Report reveals similarly unexpected findings. Denmark is ranked as the 13th best country in the world for protecting property rights, 25th best for avoiding overregulation, 12th for sound money, and 12th for freedom to trade across borders. Finland ranks 2nd for its protection of property rights, 13th for cross-border trade, and 28th for sound money. Norway, while not performing well in some other variables, also lands in the top 10 for property rights protection at number eight. Compare this to the US, which comes in at 36th in protection of property rights, 38th for sound money, 29th for freedom to trade internationally, and 10th in regulation (still terribly onerous and costly, as I addressed above). Meanwhile, the UK lands in the top 10 for three out of these five variables, putting us to shame.

Long story short: the success of some European countries in consistently outranking the US isn’t proof of the superiority of socialism and state controls; it is evidence that the traditional assumption of America as being decidedly freer no longer fits, and that by outdoing us in protecting their citizens’ freedoms, these countries are reaping huge economic returns. Good for them! A lesson for us.

 

  1. Our Rankings for trade competitiveness are shameful

Beyond taxes, healthcare, and fiscal policy, there is one other area in which a moderate US Republican wouldn’t fit the Scandinavian model. As it turns out, he would probably make those European welfare statists look like amateurs when it comes to trade policy. The World Economic Forum’s Global Competitiveness Index ranks the US 33rd in the costliness of our trade tariffs, 33rd in the overall burden of our customs procedures, 44th in the business impact of regulations on foreign direct investments, and a cringe-worthy 71st in the prevalence of our barriers to trade.

These rankings place us far from the heights of such free-trade symbols as Singapore, Hong Kong, and the Scandinavian countries, down alongside such countries as Oman, Georgia, Azerbaijan, and Nigeria. American politicians’ susceptibility to lobbying and economic nationalism has led us to place alongside developing MENA states and former Soviet republics. Not exactly a feather in our hats.

Supporters of our costly and burdensome trade restrictions will argue that, despite it all, the US still conducts the most trade by volume of any country in the world. This is true. But how unambitious it is to settle for being so much less than we could be. If the US does the highest trade by volume of any country in the world with such a horrible trade regulatory profile, imagine what it could achieve were those restrictions lifted. The cost of living to US citizens could be drastically lowered at a time when many Americans are still struggling to find jobs and make ends meet. Latin American countries such as Chile (currently ranked 8th in the WEF’s Enabling Trade Index) have been climbing the free trade charts in recent years, simplifying their trade policies and reaping gains in the process. The US could take a lesson.

Unfortunately, leftists such as Bernie Sanders and Republicans such as Jeff Sessions and Mike Huckabee continue to fear-monger against free trade, whether in service to unions (more likely on the left) or pandering to anti-immigrant sentiments (more likely among Republicans). Sadly, their reliance upon bad economics for political gain is subsidized at the cash register by over 320 million Americans.

 

  1. The EU beats us in internet privacy rights, and others are making important strides

Internet privacy rights are not a variable factored independently into many country rankings, but it is safe to say that with the growing dependency of businesses upon information technology and data storage, that may change in the years to come. In the meantime, without clear ranking systems to compare, a simple eyeballing of other countries’ protections for internet privacy and our own should tell any observer that the US places somewhere between bad and dismal. We’re not as bad off as the usual suspects—Russia, Turkey, China—but, let’s be honest, if you have to say that, then the reality can’t be good.

The truth is that the entire EU, much of Asia, and Australia outstrip us by far, while countries such as Romania and Switzerland put us to shame. The EU is currently the gold standard in internet privacy and personal data protection. As the BBC reports, “The 27-country EU directive, passed in 1995, restricts the use, sharing, storing and collecting of personal data… defined as anything that can identify an individual — including a person’s address and their image.” Romania has gone beyond the EU’s provisions to pass ordinance No. 677/2001, protecting the free movement of personal data and giving Romania an NSA of its own. Unlike the US’s National Security Agency, however, Romania’s NSA is the National Supervisory Authority for Personal Data Protection—a body tasked with protecting the personal information of citizens from unlawful handling or misuse. Switzerland even goes so far as to restrict the flow of clients’ personal information from a company to a foreign third party if the foreign party is domiciled in a location without adequate privacy laws. Thus far, only Australia, Lichtenstein, and Italy meet Switzerland’s high standards.

With data storage and management comprising an increasing part of how business functions, we must ask ourselves: given the choice, would I want my data stored in the United States, under the prying eyes of the NSA, where analysts can easily access my private photos, files, and information, or would I rather it be stored in Europe or Australia? So much for the Fourth and Fifth Amendments.

 

  1. Our utterly dismal tax policies

I mentioned earlier that the US has essentially the highest corporate tax rate in the world. I say “essentially” because the UAE’s severance tax on oil companies exceeds it but applies more narrowly to a specific kind of corporation in that country rather than to all corporations and because the politics of oil and the UAE is one of international political economy’s more unique circumstances. Regardless, we not only have an abusively high corporate tax rate; our tax structure is also horribly uncompetitive in many respects.

Professor Steve Hanke addressed this issue just this week in typical brilliance, so I recommend his blog post for a sampling of just how bad the situation is. Explaining how other countries have learned to avoid the dangers of high corporate tax rates, he writes,

“The poor showing of the U.S. [in the Tax Foundation’s 2014 International Tax Competitiveness Index] resulted from other countries recognizing the need to improve their competitive position in an increasingly globalized world. Indeed, the only OECD member countries not to have cut their corporate tax rates since the onset of the new millennia are Chile, Norway, and, yes, the United States. The high U.S. corporate tax rate not only raises the cost of doing business in the U.S., but also overseas. The U.S., along with just 5 other OECD countries, imposes a “global tax” on profits earned overseas by domestically-owned businesses. In contrast, Estonia, ranked 1st in the ITCI, does not tax any profit earned internationally. Since these profits earned overseas by U.S.-domiciled companies are already subject to taxes in that specific country, there is a clear incentive for American companies to try to avoid double taxation. Indeed, many of the largest American multinational corporations have established corporate centers overseas, where tax codes are less stringent, to avoid this additional tax.”

In addition to this treatment of corporations, for individuals the US remains one of only two countries (the other being dictatorial, one-party Eritrea) to require citizens living and working abroad to pay income taxes to their home country (though Eritrea’s is only a flat 2%). There is a possibility for exemption from this for US citizens: Americans can file for a “foreign earned income exclusion” and might qualify. However, to the rest of the world the principle of individuals paying taxes for the services they receive from their government while domiciled in that country but not being required to do so while living abroad is self-evident. Stay here, receive government services, and pay for them; leave, and you don’t. It seems simple enough, but somehow that basic logic gets lost on the Land of the Free.

The examples here are far from comprehensive, and it would be easy to pick apart each of them and find innumerable individual rules, regulations, and provisions affording citizens and residents of foreign countries greater rights and freedoms than the US offers its own. None of this is to be antagonistic or derogatory towards the US. To the contrary, it is meant to highlight the ways in which America deviates from its founding principles, suffers for those deviations, and might succeed and flourish by embracing them again. There are many political and moral obstacles that stand between us and greater prosperity. It will be to our enduring detriment and shame, however, if we are to stand by and continue to proclaim the United States a symbol of freedom as the evidence to the contrary piles up. In its founding spirit and philosophy, she is the greatest nation in the history of the world, but that spirit is a mortal one. The first step in saving it is to acknowledge the ways in which America is losing its claim to being the world’s freest nation—not with pessimism and a sense of defeat, but with realism, an honest eye, and a clear voice. Only then are we truly assuming the responsibility of liberty.

 

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