President Barack Obama recently promised that his Administration will be “going to bat” for U.S. exporters. A look at his specific recommendations suggests that the country would be better off if he stuck to golf.

For example, President Obama promised improved access to credit to exporters through the Export-Import Bank (Ex-Im Bank), which provides taxpayer-subsidized loans to U.S. exporters. Think of the Ex-Im Bank as Fannie Mae for exporters, with taxpayers holding the bag for bad loans.

Critics argue that Ex-Im Bank subsidies violate international trade rules prohibiting “The provision by governments of export credit guarantee or insurance programmes.” These are the very rules that Americans rely on to keep foreign governments from using unfair trade barriers to block U.S. exports.

None of the export promotion programs proposed by President Obama address the biggest barrier to U.S. exports: record-setting federal spending. Last year’s $1.4 trillion federal budget deficit was financed in part by diverting $469 billion in foreign spending away from U.S. exports and into the purchase of U.S. Treasury bonds and other government securities.

If the government really wants to boost exports, a little spending restraint would be far more effective than the increased number of trade junkets to foreign countries promised by President Obama.

Seven of the eight economies ranked most free in the Index of Economic Freedom were once British colonies or trade posts. It’s no coincidence. Political institutions developed by the British such as representative democracy and rule of law provide a vital base for economic freedom.

Yet the U.K. no longer has the distinction of being ranked in the top ten freest economies. Its economic freedom score has fallen significantly in recent years due to expensive welfare programs that have eroded economic freedom and slowed growth.

The U.K.’s predicament is an ominous warning to other top ranked economies in the Index. Heritage Foundation Senior Visiting Fellow Dr. Robin Harris affirms that “the blunt truth is that in crucial respects, Britain is now failing. The country’s palpable decline from prosperity and security of just two decades ago constitutes an awful, but if intelligently observed, timely and useful warning to America.” We must heed this warning and vigilantly safeguard against policies that endanger our economic freedom.

As for Britain, those political institutions that seem to have had such a positive impact historically on economic freedom have just given the country the opportunity for a fresh start, in the form of a newly-elected government proposing major policy changes. The new budget takes an aggressive stance against runaway spending by slashing and freezing overly generous welfare benefits. For a country accustomed to living in a nanny state, the measures seem harsh and are likely to be unpopular. However, like a diet for someone who has been eating junk food for years, this budget will be uncomfortable but necessary to restore health.

Renee Pirrong is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm

The Greek financial crisis and its spillover effects in Europe provide a scary look at America’s possible economic future if we don’t get our economic house in order.

Underneath the big bailout numbers ($146 billion rescue package for Greece; trillion dollar support for the Euro and European government bonds) are three related economic developments:

1. The Greek government is defaulting on its economic promises to its citizens – Wage concessions and overly generous pensions, work rules and social spending bought votes and support for the government. Now the bills are due and the government can’t pay.

2. European government borrowing is becoming more expensive – Interest rates on Greek debt topped 12 percent during the recent crisis.

3. The value of the Euro is falling, down by about 7 percent against the dollar over the last two weeks – This increases the costs of imports to European citizens and fuels domestic inflation.

In Greece’s case, its economic over-extension is the product of years of heavy government involvement in economic decision-making. When economic policy is driven by political considerations, the line of least resistance is often to spend more now and pay later. Governments can, at least for a little while, avoid the market discipline that keeps private firms’ costs for both labor and capital in line. European labor costs, in particularly, have grown wildly out of line with world norms, and capital costs have failed to account for real risks of sovereign over-spending and default.

The U.S. has historically maintained more separation between government and business, avoiding the politicization of economic decision-making that has characterized European systems. Unfortunately, that wall of separation has all but collapsed under the weight of TARP, the stimulus bill, automotive bailouts, and the health care bill. What took years to develop in Europe seems to be happening in an instant in America.

The Greek crisis is providing a great object lesson for America. If the United States continues to rush down the European economic path, we can expect a default on government promises (Medicare, Social Security, Health care), higher interest rates on U.S. government bonds or even a flight by foreign investors like China to alternative investments, and a drop in the value of the dollar, raising energy and consumer costs and spreading inflation throughout the economy.

As Ebenezer Scrooge asked the ghost of Christmas yet to come: Must these things be? America has two paths, one good and one bad, from which to choose. The good path is to cut government spending, reduce taxes and regulation, and unleash the entrepreneurial energy of Americans. Call this the high growth path. It’s the traditional American way, and the philosophy underpinning the Index of Economic Freedom. The bad alternative is to increase spending, raise taxes, and increase government control of economic decisions. That is a low growth path. It worked in Europe for a while. Not anymore.

In remarks on World Environment Day, the Director-General of the World Trade Organization (WTO), Pascal Lamy, pointed out that, “Trade opening has much to contribute in the fight against climate change and to the protection of the environment.”

Indeed, the most practical improvements in energy efficiency and protecting the environment over the past decades haven’t stemmed from government regulatory mandates. As shown in the analysis of the Index of Economic Freedom, the most progress has been driven by advances in freer trade and economic freedom. These unleash greater economic opportunity and prosperity, generating a virtuous cycle of investment, innovation, and dynamic economic growth. Echoing the same message, the WTO chief further noted:

“The entire world is well aware of the environmental dangers posed to our planet. But the ability of governments to respond to these dangers is tied closely to the resources at their disposal. Countries which have had success in alleviating poverty and raising living standards tend to be more adept at creating the conditions for a cleaner environment.”

Policy efforts aimed at imposing stricter environmental standards through a national or global regulatory body run great risk of being not only fruitless, but also counterproductive. They undercut the economic growth and efficiency indispensable to effective efforts to protect the environment. Such regulations are likely to be little more that feel-good actions! The fundamental flaw of those favoring new government directives is the fallacy that there must be a trade-off between economic growth and environmental protection. They seem to think that to get more of one, you have to have less of the other. The truth is just the opposite: to get more environmental protection you need more growth, not less.

It is encouraging that many Americans see that truth. As a March 2010 Gallup survey reveals, more Americans believe that economic growth should take priority over environmental protection when the two goals collides, with fewer willing to support environmental measures that may have a negative economic impact!

Trade critics charge that free trade damages U.S. firms and workers. It’s true that individuals can experience trade-related job loss. Balanced against that, however, must be the overall gains in U.S. employment and productivity that stem from an open trading environment. Indeed, free trade fosters economic efficiency, which is the basis for dynamic growth and job creation.

In a recent report entitled “Opening Markets, Creating Jobs: Estimated U.S. Employment Effects of Trade with FTA Partners,” the U.S. Chamber of Commerce points out that more than 17 million American jobs depend on trade with U.S. FTA partners, and in 2008 alone, over five million jobs were created by the boost in trade unleashed by the FTAs. Chamber President and CEO Tom Donohue appropriately remarked, “I defy anyone in town to name another budget-neutral government initiative that has generated anything like this number of jobs.”

Unfortunately, in recent years, free trade has become a victim of special interest politics in the U.S. America’s competitiveness, credibility and leadership in global markets are at stake and American workers and firms will prosper more, even in a time of economic slowdown, if the U.S. continues its historical trend towards trade liberalization and openness. Regrettably, Congress, bowing to labor union pressure, has focused on demands for concessions from other nations. Such intransigence has a cost. While America merely talks about trade, the rest of the world actually moves forward with new trade pacts, which push U.S. firms towards the sidelines and take away opportunities for more job creation…

Ambassador Terry Miller had the following interview with Italy’s Istituto Bruno Leoni, a prominent think tank that promotes classical liberal ideas in Italy and in Europe.

The tragic events unfolding in Greece, where at least three people have died in political rioting protesting austerity measures being imposed as part of an EU and IMF financial bailout, is a vivid reminder of the danger when the line between government and commerce is blurred or destroyed.

In a free market economy, individual firms rise and fall, individual banks succeed or fail, and individual employees prosper or struggle, depending on their own effort and ingenuity. Individual failure, while painful, is not a threat to society, and a well functioning free market provides the kind of growth and opportunities that almost always renders such failure a temporary setback on a long-term path to prosperity.

By contrast, in a government controlled economy, every commercial decision can inspire a mass movement, every wage adjustment or hiring decision can cause a demonstration or protest, and every bankruptcy is an excuse for a government bailout.

What we are seeing in Greece is not an aberration. It is rather the logical result of a system in which government has gradually taken over more and more responsibility for economic decision-making. When you are aggrieved at work or in the marketplace, and government is also your boss or your commercial competitor, your only recourse, indeed your proper recourse, is political action to change government’s actions. In a well-functioning democracy, such political action might be confined to the halls of parliament or congress, but no country, including our own, is immune to political action in the streets.

That is the story of Greece. It is a story we would do well to avoid in America.

Economic freedom boosts job growth, as the Heritage Foundation’s 2010 Index of Economic Freedom empirically demonstrates. Now, there is more evidence in a state-level study just released by the Federal Reserve Bank of St. Louis, “Economic Freedom and Employment Growth in the U.S. States.”

The Fed research shows, “states with greater economic freedom – defined as the protection of private property and private markets operating with minimal government interference – experienced greater rates of employment growth.” The authors of the study further note, “Our results suggest that policy-makers concerned with employment should seriously consider the degree to which their own labor market policies, as well as those of the national government, may be limiting economic growth and development in their respective states.”

As analyzed in the 2010 Index, the U.S. economy has quite flexible labor market policies in general, with relatively few labor restrictions in place. The big exceptions relate to union membership. It is not a coincidence that among the states identified as least free in the Fed study are New York, Hawaii and Alaska, the three most heavily unionized workforces in the country. According to “What Unions Do: How Labor Unions Affect Jobs and the Economy,” by Heritage labor policy scholar James Sherk, unionized companies earn profits 15% less than those of comparable non-union firms. Not surprisingly, such companies have trouble competing, and unionized manufacturing jobs fell 75% between 1977 and 2008. By contrast, non-union manufacturing jobs jumped 6% over that same period.

In a time of high unemployment, there is definitely something to note here!

The Obama Administration, the Democratic Congress, and their friends in organized labor are quick to blame unemployment on the trade deficit. Facts don’t support that assessment. The historical record shows a *positive* correlation between aggregate trade deficits and job creation – a trade deficit signifies *more* jobs. That’s because trade deficits go up when prosperity is increasing and job growth is rapid. The dollars Americans spend for foreign goods and services are then recycled into the American economy in the form of foreign investment. When that investment goes into the private sector, it creates even more jobs.

The huge federal deficits threaten to derail this positive feedback loop.

Why? Because the deficits are soaking up increasing amounts of foreign investment. If the capital inflows that are always and necessarily associated with the trade deficit are merely paying off the government’s obligations, there is nothing left over to create jobs.

If you want more jobs, stop Washington from gobbling up all the money and let the surplus of incoming capital do its work.

Watch the following video as our distinguished guests examine the many threats to the dollar and its long-standing international role in the global economy. Nobel Prize winner Robert Mundell has been called the “Father of the Euro” for his advocacy of a common European currency; he is also well-known as the academic founder of supply side economics. Steve Hanke has played an important role in establishing new currency regimes in Argentina, Estonia, Bulgaria, Bosnia-Herzegovina, Ecuador, Lithuania and Montenegro; his most recent book is Zimbabwe: Hyperinflation to Growth. Judy Shelton, a critic of the Federal Reserve System, has written frequent opinion pieces for the Wall Street Journal, and testified before Congress on numerous occasions regarding global finance and monetary developments.