Maybe we could all sleep more soundly if the geniuses at the top could just figure out how the whole integer thing works. Sadly, they don’t seem to be able to distinguish arithmetic from magic. Thus, our security, prosperity, and freedom are in greater jeopardy today than they were just a year ago.

The numbers problem starts in the White House. In his State of the Union address, President Obama declared, “I do not accept second place for the United States of America. (Applause.) Too late, Mr. President. You don’t have to worry about America being number two—we’ve already dropped to number eight.

The 2010 Index of Economic Freedom, published by the Wall Street Journal and The Heritage Foundation, ranks the United States as having only the eighth freest economy in the world. That’s two spots lower than last year—and puts us behind Canada for the first time.

Worse, America’s plummeting score dropped us from the ranks of the world’s “free” economies. The U.S. economy is now classified as merely “mostly” free—a category occupied by countries like Botswana and Belgium.

Index Editor Terry Miller finds “[o]ther economies such as Switzerland and Canada are freeing their markets and advancing their economic freedom at a faster pace than the United States. The United States is, in many respects, moving in the opposite direction, simultaneously burdening its economy with increasing government spending, onerous regulations, uncompetitive tax rates, and barriers to trade and investment that stifle entrepreneurship and job creation.” Because of Washington, America’s loss of economic freedom was worst among the world’s 20 major economies.

Now in fairness, President Obama can be blamed for only part of the drop, which reflects economic performance and policy changes over parts of 2008 and 2009. George W. Bush helped (maybe not the right verb) too. Still, the stunning fact is that America’s economic freedom is falling, and falling fast. And the President is acting like it’s not happening or that it doesn’t matter.

But it matters a very great deal. Study after study shows a very strong correlation between economic freedom and prosperity. High levels of economic freedom also correlate highly with many other positives—success in lifting people out of poverty, better health care, environmental improvement… even higher overall quality of life.

Meanwhile, as Washington pursues economic policies that undermine our economic freedom, some top leaders seem intent on eroding the military that battles daily to keep us “The Land of the Free.”

Politico reports that House Speaker Nancy Pelosi wants to freeze defense spending. “Everybody has to make a sacrifice,” the San Francisco Democrat said in an interview conducted as part of Politico’s “Inside Obama’s Washington” video series. Apparently the Speaker, too, has trouble with numbers. Otherwise she’d know that freezing defense spending is “so yesterday.” The Pentagon’s piggy bank is already shrinking.

Yet Pelosi pretends that defense spending is just another fat cash cow. (And she has lots of company in Washington these days.) In fact, the White House has grossly undercut defense spending.

Even as our military fights two wars, defense spending as a share of national expenditures is contracting. During the Cold War, U.S. defense spending averaged 7.5 percent of GDP. Today, we spend less than 4 percent, and that number is going down not up.

As a component of federal spending, defense spending is plunging like a rock off a cliff. It now accounts for less than one-fifth of the federal budget. Today national defense ranks a distant fourth in overall government spending priorities, falling behind the combined cost of Social Security and Medicare, public education, and means-tested welfare assistance.

Moreover, even before Speaker Pelosi’s unhelpful suggestion, the White House was already on track to shrink “core” defense spending even further. Recently, the Congressional Budget Office projected that the Pentagon budget for 2011 through 2028 will be $50 billion less in real dollars than this year’s budget. Bottom line, Obama is cutting the defense budget, both in real dollar terms and as a percent of the economy.

In his nationally televised address, the president proclaimed that the State of the Union is strong. But the numbers tell a different story—one of a weakening America. America’s freedom, prosperity, and security are at significantly greater risk today than just one year ago.

James Jay Carafano is senior research fellow for national security and homeland security in the Douglas and Sarah Allison Center for Foreign Policy Studies at the Heritage Foundation.