U.S. Economic Freedom Index Rebound
The United States has seen an end to a five-year downturn in the Heritage Foundation’s Index of Economic Freedom, marking its largest annual increase in over two decades.
This year, the score jumped by 2.6 points to reach 72.8, placing the U.S. 22nd out of more than 176 evaluated countries. This rise is the most significant since 2001 and the second-highest in the index’s 32-year history.
The Heritage’s Index assesses twelve economic freedoms across four main categories: rule of law, government size, regulatory efficiency, and open markets, which each have three subcategories.
“The upticks in financial freedom, government spending, fiscal health, and investment freedom eclipsed the poorer scores on trade freedom, highlighting the positive impacts of significant tax and regulatory reforms,” said Anthony Kim from Heritage Foundation, emphasizing the correlation with U.S. economic growth and business confidence.
The U.S. sits at 72.8 in the rankings, trailing only Canada (75.6) and Chile (74.3) in the Americas, while Mexico is further behind at 92nd globally with a score of 59.8.
In the category of rule of law, the U.S. scores well on property rights and government integrity, surpassing global averages. However, the government’s size is less impressive, with a tax burden score of 75.3 against a world average of 78.4. Critically, fiscal health presents a major challenge, as the U.S. scored just 18.5, significantly lower than the global average of 65.9, largely due to high public debt and budget deficits.
Annual deficits are projected to escalate to $3 trillion within the next decade, raising concerns about national debt exceeding World War II levels.
In terms of regulatory efficiency, measures of business, labor, and financial freedoms were reported positively, exceeding the global averages as assessed by the index.
The trade freedom score was slightly below average at 67.6 compared to 70.2 globally. Meanwhile, investment and economic freedom scores were notably high at 80 each, well above the worldwide averages of 53.4 and 48.1, respectively.
Kim noted that the anticipated ramifications of restrictive tariffs on the global economy have not been as severe as expected, thanks in part to increases in investments in key sectors like energy and AI. Additionally, the absence of retaliatory tariffs from major nations like China and Canada has mitigated potential disruptions from ongoing trade tensions.
Countries topping the Heritage Index include Singapore (84.4%), Switzerland (83.7%), Ireland (83.3%), Australia (80.1%), and Taiwan (79.8%). On the contrary, those with the most oppressive regimes, such as North Korea (3.1) and Cuba (25.2), scored the lowest.
China (48.3) and Iran (41.8) are also low on the index due to their restrictive political and economic conditions.
Interestingly, Argentina’s economic freedom rating rose by 3.2 points this year, the largest increase of any nation, spurred by recent electoral reforms and changes led by President Javier Milei.
Kim pointed out that in spite of broader economic challenges, several nations, including Oman, the Philippines, and Morocco, have also made notable advancements in their economic scores. He highlighted that Paraguayan President Santiago Peña is actively promoting economic freedom and fighting corruption while forging alliances with democratic nations.
