Wave Issue 0501 1/7/05 Article 1-01

***U.S. Falls out of the Index of Economic Freedom's Top 10

WASHINGTON
Jan. 4, 2005

For the first time ever, the U.S. does not rank among the world's
10 freest economies in the Index of Economic Freedom, published
annually by The Heritage Foundation and The Wall Street Journal.

The U.S.' score in the 2005 Index did not change from 2004. But
improvements in the economies of Chile, Australia and Iceland
enabled all three to surpass the U. S., leaving it in a tie for
12th with Switzerland and out of the top 10 for the first time in
the 11-year history of the Index.

As in previous years, the Index ratings reflect an analysis of 50
different economic variables, grouped into 10 categories: banking
and finance; capital flows and foreign investment; monetary
policy; fiscal burden of government; trade policy; wages and
prices; government intervention in the economy; property rights;
regulation; and informal (or black-) market activity. Countries
are rated one to five in each category, one being the best and
five the worst. These ratings are then averaged to produce the
overall Index score.

World-wide, the scores of 86 countries improved, the scores of 57
declined and the scores of 12 are unchanged from last year's
Index.

The U.S. recorded an overall score of 1.85 for the second
consecutive year, making it one of 17 countries rated as having
"free" economies. Another 56 countries finished between 2.0 and
3.0 and are considered "mostly free," 70 finished between 3.0 and
4.0 and received a "mostly unfree" rating, and 12 were considered
"repressed."

With top scores in property rights, banking/finance and monetary
policy, the U.S. is still a vibrant and dynamic economy, the
editors note. But a 4.0 rating in fiscal burden of government,
which ranks worse than all but 30 countries in the survey, held
it back. This reflects poor scores in the area of taxation. The
U.S. corporate tax rate ranks 112th out of the 155 countries
scored, and its top individual tax rate ranks an only somewhat
better 82nd. The fiscal burden rating also reflects the fact that
federal spending has reached levels not seen since World War II
and now costs the average household more than $20,000 per year.

www.heritage.org/index