At the heart of a capitalist economy are voluntary transactions. When two parties voluntarily engage in a transaction, both are made better off and wealth is created. These voluntary actions are the “free” in free markets. The US economy is not a free market economy, unless by free, you mean lots of people get things they don’t pay for.
One variable to look at in determining economic freedom, then, is government spending. By definition, the government engages in involuntary exchange. The government has the ability to forcibly take money from people and unilaterally decide how that money is spent. Involuntary exchange rarely creates wealth. So as the percentage of our economy under the control of the government increases, wealth creation slows. The Soviet Union didn’t collapse because communists got bored ruling over other peoples’ lives; they ran out of money.
The percentage of the US economy that is controlled by government fiat rather than voluntary exchange has been growing over time.
http://www.usgovernmentspending.com/downchart_gs.php?year=1950_2010&chart=F0-total&units=p
Government spending, in dollars, has more than doubled since 2000.
http://www.usgovernmentspending.com/downchart_gs.php?chart=F0-total
Government spending isn’t just increasing, its growth is accelerating. According to this week’s WSJ, the proposed 2010 discretionary spending bills plan to increase spending by 12.1% above 2009 levels. The results of this action are slower long term economic growth and more of our economy controlled by government dictates. Eventually this strategy will come to an end when one of two things happen. Either politicians bankrupt the country (as the communists did in the Soviet Union); or, the American public decides to put politicians in charge who will control government spending. Currently, neither major American political party has any credibility on lowering government spending.
Soon Canada will be the “low” government spending country of the Northern Hemisphere, eh.