The Heritage Foundation and Wall Street Journal have just released their 2012 ranking of nations according to economic freedom, and here are the top ten:

1 Hong Kong; 2 Singapore; 3 Australia; 4 New Zealand; 5 Switzerland; 6 Canada; 7 Chile; 8 Mauritius; 9 Ireland; 10 United States.

While still in there, the United States dropped one place from last year’s 9th, and the nation continues to be further behind Canada, at least according to this index. The United States’ ranking is also vulnerable, since Denmark, which came in at 11th, was behind by a razor-thin margin of 0.1 out of the potential 100 points.

The researchers classify any nation with a score above 80 as “free,” but only the top five nations managed that. Both the United States (76.3) and Canada (79.9) received classifications as “mostly free.”

While the United States remains the nation with the greatest degree of labor freedom, the other news is bleak, to say the least. From the North American press release:

The Index’s editors attributed about half the U.S. decline to increases in government spending and another third to the explosive growth of intrusive regulations, particularly in health care and finance.

The United States now ranks 127th in the world in government spending. Spending by government consumes 42.2 percent of gross domestic product (GDP), and total public debt now is larger than the entire economy. The U.S. tax structure – which leans heavily on taxes on capital and investment that restrict growth – also contributed to the falling scores.

The regulatory burden continues to grow and hinder the economic recovery… More than 70 major rules imposed since 2009 cost Americans nearly $40 billion last year. These factors led to a loss of five full points – the largest U.S. decline in any category. As a result, the U.S. placed 133rd in the world in fiscal freedom.

Perhaps most worrisome, however, is the four tenths of a point drop in the category of freedom from corruption… this stems from both the growing perception of corruption in government bailouts of troubled industries, including automakers and investment houses, and regulatory exemptions granted to politically well-connected companies and special-interest groups…

Restoring the U.S. economy to the status of a ‘free’ economy will require significant policy changes to reduce the size of government, overhaul the tax system and transform costly entitlement programs…