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How Does Americas Economic Freedom Affect Our Unemployment Rate?

The most recent jobs numbers came out a few weeks ago and the U.S. economy dropped another 85,000 jobs in December, bringing the jobs lost total to 3.4 million in 2009 and 2.7 million since the stimulus passed. You want to know why the United States is still shedding tens of thousands of jobs a month? The answer isnt just layoffs. Its the fact that America no longer is the beacon of economic freedom that it once was.

What is economic freedom? Economic freedom refers to the ability of individuals to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself. Studies in the Index of Economic Freedom demonstrate important relationships between economic freedom and job creation, per capita income, economic growth rates, human development, democracy, the elimination of poverty, and environmental protection.

The enormous amount of government spending and intervention in 2008 and 2009 did little to reignite Americas economy, and decreased Americas economic freedom. In February of last year, Americans were told that a stimulus bill was necessary to create jobs and put our economy back on the right path. But since the passage of the $787 billion stimulus bill, unemployment has continued to increase and millions of Americans remain out of work, despite promises to the contrary from our elected officials. Adding more debt to our financial woes did not solve the jobs problem, and instead significantly decreased Americas economic freedom. There are multiple factors which affect a countrys economic freedom government size and regulation, trade restrictions, and labor policies, among the few. And Americas stimulus spending and financial and automotive bailouts only served to restrict the ease in which Americans can invest and work.

Economic freedom is the best stimulant. People arent starting businesses, and existing companies arent expanding or hiring. And the reason is because overregulation, taxes, and uncertainty in the market are hurting economic freedom and discouraging investment the key factor in creating jobs. Data released recently by the Bureau of Labor Statistics in the Job Openings and Labor Turnover Survey (JOLTS) highlight the trend of entrepreneurs and business owners retrenching since the recession began. Smaller profit margins and uncertainty in Washington and the market do not encourage business owners to resume pre-recession hiring levels. This corresponds with a recent NFIB survey finding that small business owners do not plan to increase hiring or investment in the coming months. Until that happens unemployment will remain high.

Talented and ambitious Americans have a long history of success in job creation when given the opportunity. But regulations, massive spending, high taxes, and bailouts hurt Americas economic freedom. To reduce unemployment the government should remove barriers to business success – like high taxes and complex and unnecessary regulations – and lend support to those entrepreneurs eager to invest and hire new employees. That not more stimulus spending holds the key to job creation.

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