The Heritage Foundation and the Wall Street Journal released their 2012 Index of Economic Freedom. While the United States economy is the largest in the world, it only ranks as the tenth freest--a drop from ninth from 2011’s index. Even in North America, the U.S. trails Canada (ranked sixth globally) for the freest country on the continent.

The United States’ score dropped because of increased regulations and growing government spending. The report comments that these government policies have “discouraged entrepreneurship and dynamic investment within the private sector.” “The U.S. economy is growing but at a subpar rate that is too slow to reduce unemployment or to raise living standards,” writes Wall Street Journal editorial page editor, Paul Gigot.

Here are two suggestions to get the United States going in the right direction and improve its economic freedom. First, Washington must control federal government spending and reform the ever-growing entitlement programs. Second, to reform the out-of-wack regulatory system, Washington must pass the Regulatory Accountability Act and the REINS Act.

Overall, the global economic freedom index fell. “The world economy is recovering, but it faces more government-policy headwinds than it has in decades,” wrote Gigot.

Heritage Foundation president, Ed Feulner notes the importance choices governments face to improve economic freedom:

If leaders instead carry on with ill-guided policies that empower their governments rather than their people, the result is likely, at best, to be economic stagnation and ever-increasing dependence. The alternatives and consequences are clear: openness or protectionism, entrepreneurial dynamism or economic drift, prosperity or impoverishment, freedom or repression.

Here are the top five freest economies going into 2012:

1. Hong Kong
2. Singapore
3. Australia
4. New Zealand
5. Switzerland