posted April 22, 2006 11:27 AM
Worst country 
United States
Rank: 9
Score: 1.84
Category: Free
Quick Study
Trade Policy 2.0
Fiscal Burden 3.9
Government Intervention 2.0
Monetary Policy 1.0
Foreign Investment 2.0
Banking and Finance 1.0
Wages and Prices 2.0
Property Rights 1.0
Regulation 2.0
Informal Market 1.5
Population: 296,667,612
Total area: 9,629,091 sq. km
GDP: $10.7 trillion
GDP growth rate: 4.4%
GDP per capita: $36,067
Major exports: industrial supplies, consumer goods, automotive goods, telecommunication equipment, financial and insurance services, computer and information services
Exports of goods and services: $1.06 trillion
Major export trading partners: Canada 23.2%, Mexico 13.5%, Japan 6.6%, UK 4.4%, China 4.2%, Germany 3.8%
Major imports: crude oil, refined petroleum products, automobiles, consumer goods, financial and insurance services
Imports of goods and services: $1.63 trillion
Major import trading partners: Canada 17.4%, China 13.4%, Mexico 10.6%, Japan 8.8%
Foreign direct investment (net): –$134 billion
2004 Data (in constant 2000 US dollars)
Historically, the U.S. Constitution has provided strong protections for private property and economic liberties. Since World War II, the United States has generally taken a strong leadership position in expanding global trade through lower tariff barriers. Subsequent moves to deregulate, cut tax rates, follow stable monetary policy, and protect intellectual property rights have engendered strong growth. Regrettably, some recent trends have raised questions about such traditions. The U.S. Supreme Court's June 23, 2005, Kelo v. City of New London ruling on eminent domain exposes many Americans' property to arbitrary seizure; and while countries in Eastern Europe are adopting flat taxes, deregulating, and privatizing, the U.S. may be drifting toward bigger government. The U.S. has continued a leadership role in free trade with eight ratified free trade agreements, another signed agreement, and ongoing negotiations with other countries. However, continued use of the "anti-dumping" Byrd Amendment, combined with anti-China rhetoric, indicates an ongoing protectionist mindset. Moreover, legislated government spending under such laws as the massive farm subsidies of 2002, the massive Medicare prescription entitlement of 2003, and the massive transportation bill of 2005 has expanded without constraints, and Sarbanes–Oxley and other regulatory laws have raised compliance costs. The United States' trade policy score is 0.5 point better this year, and its fiscal burden of government score is 0.1 point better. As a result, the United States' overall score is 0.06 point better this year.
Trade Policy
Score: 2.0
The World Bank reports that the United States' weighted average tariff rate in 2004 was 1.8 percent, down from the 2.6 percent for 2002 reported in the 2005 Index, based on World Bank data. According to the Economist Intelligence Unit, the government imposes non-tariff barriers, including quotas, tariff rate import quotas, anti-dumping provisions, countervailing duties, and licensing requirements, on a number of goods. Based on the lower tariff rate, as well as a revision of the trade factor methodology, the United States' trade policy score is 0.5 point better this year.
Fiscal Burden
Score: 3.9
According to Deloitte, the United States' top federal income tax rate is 35 percent. The top corporate tax rate is also 35 percent. In 2004, government expenditures as a share of GDP decreased 0.5 percentage point to 36 percent, compared to a 0.2 percentage point increase in 2003. On net, the United States' fiscal burden of government score is 0.1 point better this year.
Government Intervention
Score: 2.0
Based on data from the Economic Report of the President, the government consumed 15.4 percent of GDP in 2004. In 2003, based on data from the International Monetary Fund's Government Financial Statistics CD–ROM, the United States received 3.03 percent of its total revenues from state-owned enterprises and government ownership of property.
Monetary Policy
Score: 1.0
From 1995 to 2004, the United States' weighted average annual rate of inflation was 2.50 percent.
Foreign Investment
Score: 2.0
The United States welcomes foreign investment. Foreign and domestic enterprises are treated equally under the law, and foreign investors are not required to register with or seek approval from the federal government. According to the Economist Intelligence Unit, however, "Foreign investments face restrictions in banking, mining, defence contracting, certain energy-related industries, fishing, shipping, communications and aviation." The government also restricts foreign acquisitions that threaten to impair national security. The U.S. imposes a general embargo against Cuba, Burma, Iran, and Sudan and limited sanctions against Iraq, Libya, North Korea, and Syria. The U.S. also has sanctions targeting specific individuals in the Balkans, the Taliban, Liberia, and Zimbabwe and those involved in terrorism and drug trafficking. There are no controls or requirements on current transfers, access to foreign exchange, or repatriation of profits. Purchase of real estate is unrestricted on a national level, although purchase of agricultural land by foreign nationals or companies with at least 10 percent foreign ownership must be reported to the U.S. Department of Agriculture. Some states impose restrictions on purchases of land and other types of investments by foreign companies.
Banking and Finance
Score: 1.0
According to the Economist Intelligence Unit, "The United States has the most dynamic and developed financial markets in the world…. A large network of national and regional banks…provides companies with capital and a broad array of financial services. Large multi-purpose money-centre banks with international reach manage corporate needs both at home and abroad. Legislation breaking down previously existing barriers between commercial banks, insurance companies and securities firms should spur cross-industry tie-ups…. Foreign financial institutions face few restrictions, and the largest among them are increasingly visible in the US marketplace. The US economy is very open and liberal, and offers a favourable operating environment." Federal and state governments share regulatory responsibility for banks. Reform in 1999 eliminated barriers to entry into U.S. financial markets and removed prohibitions against the purchase of banks by insurance and securities companies. However, concerns have been raised about the costs associated with complying with Sarbanes–Oxley regulations. This has facilitated both the creation of universal financial services companies and the competitiveness of U.S. banking, as well as further consolidation of the financial services industry, enabling U.S. firms to compete more effectively in global markets. Two government sponsored enterprises—the Federal National Mortgage Association (Fannie Mae) and Federal Home Mortgage Loan Corporation (Freddie Mac)—account for almost half of the $8 trillion outstanding on U.S. home mortgages. While both enterprises are shareholder-owned and listed on the stock market, they enjoy privileged treatment under congressional mandates. The overall trend in financial services is toward more competition and continued product innovation. From 1993 to 2003, the number of banking institutions fell by 29 percent to about 9,000, notes the EIU, which also reports that there were 276 banking mergers in 2003 and 180 in the first eight months of 2004.
Wages and Prices
Score: 2.0
The market sets most wages and prices. According to the Economist Intelligence Unit, "Price controls apply to some regulated monopolies in the United States (like utilities and the postal service), and certain states and localities control residential rents." Hawaii imposes caps on gasoline prices. The government also influences prices through subsidies, particularly for the agricultural sector, dairy products, and some forms of transportation. The federal government imposes a minimum wage.
Property Rights
Score: 1.0
The United States still does very well in most measures of property rights protection, including an honest and independent judiciary, a sound commercial code and other laws for the resolution of contract and property disputes between private parties, and the recognition of foreign arbitration and court rulings. However, the concerns outlined in recent years have worsened. Uncompensated government expropriations of property remain highly unlikely, but it is likely that local governments' abuse of eminent domain power with the seizure of private land (with some compensation) and its transfer to another party for a non-public or quasi-public use will accelerate with the U.S. Supreme Court's June 2005 Kelo v. City of New London ruling. By ruling that governments may take even non-blighted property and transfer it to another owner for the purpose of increasing the tax base, the Court's Kelo decision seriously undermines, or effectively eliminates, the U.S. Constitution's requirement that private property may be taken only for a "public use." Unless the decision is reversed or countered with legislative protections that stop the abuse of eminent domain, the practice will be difficult to isolate, and evidence of extensive use of this decision could be grounds for downgrading this factor in future editions of the Index. An even more serious problem is that governments at all levels impose numerous regulatory and land-use controls that diminish the value and enjoyment of private property. Examples include extensive "growth controls"; unreasonable zoning hurdles; facility permitting regimes; and far-reaching environmental, wetlands, and habitat restrictions on the use and development of real estate. Thus, the protections for private property are undermined by a vast bureaucracy that has the power to interfere substantially with many property rights. The level of protection for property in the United States will depend eventually on whether the courts and legislative bodies place clear limits on bureaucratic power or require cost-effective remedies for property owners whose rights have been affected. The Supreme Court's performance in such government "takings" cases has been decidedly mixed in recent years, and 2005 was worse than usual. Besides Kelo, two rent control decisions denying the recovery of any compensation further burden the owners of private property. Although the climate for judicial and legislative reform is improving, that is largely a reaction to these decisions, which are increasingly less favorable to property rights protections.
Regulation
Score: 2.0
It is easy to establish a business. "Through a fairly simple procedure," reports the Economist Intelligence Unit, a firm "can then set up offices, plants or other permanent establishments under the corporation laws of other states…. Firms may choose a location on the basis of which state's laws offer greater flexibility." The U.S. labor market is one of the world's most flexible. Regulations are applied evenly and consistently. However, many regulations—for example, the Americans with Disabilities Act, various civil rights regulations, environmental laws, health and product safety standards, food and drug labeling requirements, and Sarbanes–Oxley—although well-intentioned, can be onerous. In February 2005, the government approved the Class Action Fairness Act, a bill aimed at reducing the costs that businesses face from class-action lawsuits. Electronic commerce is minimally regulated. Corruption in the bureaucracy is rare.
Informal Market
Score: 1.5
Transparency International's 2004 score for the United States is 7.5. Therefore, the United States' informal market score is 1.5 this year.
http://www.heritage.org/research/features/index/country.cfm?id=Unitedstates
Lindaland
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