A Lack of Economic Freedom Threatens Our Political Freedom
One of the primary purposes of the United States and Pennsylvania Constitutions is to protect and preserve citizens’ political freedom. The Founders realized that the American experiment could not succeed if the people’s political rights–among them free speech, freedom of assembly, and freedom of the press–were not secure. And despite repeated attempts to undermine those and other essential political liberties, this nation and state still enjoy unrivaled political freedom relative to the rest of the world.
However, the Founders also knew that for political freedom to flourish, citizens must also enjoy maximum economic freedom. As Alexander Hamilton once noted, “Power over a man’s subsistence is power over his will”–and no entity holds more power over our economic, and thereby political, freedom than does government.
If government chooses to limit the right of an individual to hold onto his earnings, provide goods and services of his choosing, and honestly offer his products and/or labor as he desires in the marketplace, that individual will become inexorably more dependent on that government to survive on a day-to-day basis–and therefore less inclined to challenge it when it acts to limit his political freedom. This is clearly happening in Pennsylvania today.
Indeed, there is a large body of evidence showing that political freedom and economic freedom go hand in hand. At the same time, it is also true that nations showing the most respect for economic freedom generate the greatest economic growth. Now, in association with Forbes magazine, the San Francisco-based Pacific Research Institute (PRI) has measured economic freedom in each of the 50 states and documented the tangible effect it has on the financial bottom lines of all Americans in its U.S. Economic Freedom Index: 2004 Report.
The Index can be useful to state policymakers in several ways. It measures economic freedom in five broad sectors–fiscal, regulatory, judicial, government size and welfare spending–which thereby promotes a greater understanding of what is necessary for reasoned discussion and sound public policy reform proposals.
The Index found that the best places to start a business or find a new job are in states with the fewest regulatory roadblocks and fiscal obstacles, everything else considered. These findings confirm what many people have been saying for years–and point directly at the myriad reasons why Pennsylvania continues to struggle economically.
In fact, despite (or perhaps because of) Pennsylvania state government’s attempts to generate economic growth through taxpayer subsidies and government intervention in the marketplace, the commonwealth ranks 45th among the 50 states in economic freedom. Overall, the Index rates Kansas as the most economically free state, followed by Colorado, Virginia, Idaho and Utah. At the bottom of the list, only Illinois, Rhode Island, Connecticut, California and New York ranked below Pennsylvania. On a regional basis, the Great Plains and Rocky Mountain states rated as the most economically free, while the Northeast and Midwest states are the least economically free.
The Index also shows how Pennsylvania’s lack of economic freedom is shrinking citizens’ paychecks. Using an economic model to measure the correlation between economic freedom and personal income, it finds that a 10 percent improvement in a state’s economic freedom yields, on average, a one-half percent increase in annual per capita income. This translates into real money for Pennsylvania families. In fact, if the commonwealth was as economically free as Kansas, a family of four in Pennsylvania would realize a $3,952 increase in its annual income.
Economic freedom–or the lack thereof–determines not just our ability to earn a living, but ultimately the ability to control our destinies as free men and women. If Pennsylvania continues on its current path of increasing taxes and government spending at rates far in excess of population growth and citizens’ ability to pay, saddling our children with billions of dollars in new bonded debt in the vain hope that such policies will “stimulate” our economy, and enacting environmental regulations that limit where and how people can live, then its economic and political competitiveness will soon hit rock bottom.
Hopefully, policymakers who are truly serious about halting Pennsylvania’s decline and making our commonwealth an economic leader once again will embrace the Index’s call for policy reforms that advance economic liberty and, in turn, protect our political freedom.
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Grant R. Gulibon is senior policy analyst with the Commonwealth Foundation (www.CommonwealthFoundation.org), an independent public policy research and educational institute based in Harrisburg, PA. Permission is hereby granted to reprint in whole or in part, provided the author and his affiliation are cited.