Contact FreedomWorks

400 North Capitol Street, NW
Suite 765
Washington, DC 20001

  • Toll Free 1.888.564.6273
  • Local 202.783.3870

Newspaper Article

    Exporting America

    BY Matt Kibbe
    10/13/2006
    by Matt Kibbe on 10/13/06.

    Imagine it is the year 2025, and you are walking through a sea of professionals, crossing downtown streets quickly in dark business suits, talking on whatever futuristic device has replaced Blackberries. Construction cranes, new condo buildings, modern skyscrapers and help wanted signs are evidence of a booming economy, individual opportunity and a low unemployment.

    Economic growth has been significantly higher here than most other countries for decades, and editorial pages across the nation give due credit to innovative thinkers like Milton Friedman for having developed the intellectual foundation for a national economic policy based on low taxes, market competition, and individual ownership.

    There is still heated political debate, but most citizens, and even some members of the intelligentsia, now acknowledge that freedom works.
    With government spending escalating, Congressional unwillingness to shift from Social Security to an ownership-based retirement program, and failure to permanently maintain tax reforms that eliminate the death tax and cut tax rates on capital and dividends, the scenario described above may seem like a libertarian pipe dream.

    But it is not, because the intellectuals and citizens described are not American and the editorials are not printed in English. They are printed in Cantonese, Estonian, Hindi and Spanish, in countries where U.S. free-market ideas are today being successfully imported and implemented.
    In the last decade alone, dozens of nations have enacted the best policy recommendations of our brightest minds.

    The trend started in the 1970s, when Dr. Friedman and the “Chicago Boys” successfully began exporting the ideas of individual ownership and Personal Retirement Accounts (PRAs) to Latin America. The young Chilean labor minister Jose Pinera boldly ran with the Chicago vision in 1981 and the results can be seen and felt in the streets of Santiago today.

    Compared to our negative national savings rate, Chile has a national savings rate of 21 percent. Following the passage of their reform, their economy soared past their South American neighbors. Encouraged by Dr. Pinera, the PRA revolution spreads unabated, with more than 30 countries having replaced their failed defined benefit pension systems with some level of individual ownership and control, including left leaning nations such as Denmark, Sweden, and even Bolivia.

    Former communist nations of Eastern Europe are also enacting pro-growth, pro-market policies and watching their economies set the pace for world economic growth. Knowing that simple, non-intrusive tax code encourage people to work and expand economic activity, reformers in Lithuania, Estonia, and Latvia have all enacted flat taxes and seen growth rates consistently in the six to eight percent range in the past few years.

    In total, according to Flat Tax draftsman and evangelist Alvin Rabushka, nine countries have adopted some form of his proposal, including Estonia, Russia, Ukraine and Romania.
    The U.S. Congress, conversely, consumes it days – fiddling, one might suggest – debating flag burning and “windfall profits” taxes on energy. Big issues like retirement security and scrapping the tax code are relegated to commissions with no authority to legislate, and no vision regardless.

    While America is still a world leader in ideas, we are not a leader in tax competition. The U.S. federal tax code in 2006 weighed in at 66,498 pages, with compliance costs of $265 billion.
    With the U.S. government facing unfunded liabilities in retirement systems like Social Security and Medicare totaling an unfathomable $80 trillion, and a work force facing a future of shrinking benefits and higher taxes, Congress remains unwilling to consider reforms.

    Giving workers the right to choose a new defined contribution retirement system would reduce the massive debt in the current system, give individuals real ownership and control, and secure a better financial future for all workers.

    Our paralysis on tax and entitlement reforms may instead secure a future of high debt, high taxes, and crippled growth.
    I
    magine another city. Angry young have-nots riot in the streets because the rising taxes on labor and capital formation have caused capital flight, economic contraction, high unemployment, and no means of assimilating into productive society through hard work. Newspapers decry crippling globalization as other nations prosper under policy regimes based on economic freedom.

    Is this Paris in 2006 or New York circa 2025?

    Ultimately, global financial markets, not CSPAN cameras and public opinion polls, will judge U.S. economic policy. Capital and investments will flow to nations with sound economic policies, because freedom works.

    Matt Kibbe is the president of FreedomWorks.