Milton Friedman on the American Economy (6 of 6)
Uploaded by donotswallow on Aug 9, 2009
THE OPEN MIND
Host: Richard D. Heffner
Guest: Milton Friedman
Title: A Nobel Laureate on the American Economy VTR: 5/31/77
Friedman: And insofar as I can give any assistance, I am delighted to, both because of my general desire to see freedom prosper, and also because I have a very strong personal sympathy and interest in Israel. I am Jewish by origin and culture. I share their values and their belief. I share the admiration which many have had for the miracles that have occurred in Israel. So if I can make any contribution to a more effective policy for preserving Israel, Israel’s freedom and strength, I would certainly be delighted to do so.
HEFFNER: Let’s turn now, in the moments we have remaining, from Israel to our own home. You had a plus and a minus evaluation of these past two years before. In terms of the president’s attitudes as well as actions, how do you, given your approach to the needs of this country, evaluate President Carter?
FRIEDMAN: Well, I have always argued that you will not solve problems by electing the right man to the White House.
HEFFNER: Certainly not by electing the wrong man.
FRIEDMAN: Yes. The only way you will ever solve problems, in my opinion, in moving the direction we want to move, is by making it a political interest of the wrong people to do the right thing.
HEFFNER: Go ahead. Spin that one out, Professor Friedman.
FRIEDMAN: I’m not knocking it. I do not want a dictator. You do not want a dictator. We want a man as president who is responsive to the will of the people. Now, we also want a man who will exercise leadership. We also want a man who will distinguish between a momentary whim of the people and some longer-run will. And we want a man who will stand up for what he believes, but not too far. Not beyond the point where he destroys his country in the process.
Now, as I look at President Carter, I think his political interests have, to a large extent, coincided with many of his personal values. He is a small, has been a small businessman. He comes from the South, he is fiscally prudent. His desire, I’m sure, to move toward a balanced budget is serious, is sincere and honest. And it has been politically prudent to do so, because we have been in the course of a very good expansion. The economy is growing. The real threat is a rise in inflation, not a recession at the moment. It’s in his political interest to try to keep this expansion going as long as he can. So fiscal conservatism in that sense has been both consistent with his principles and politically profitable. However, he wants fiscal conservatism for a different reason than I do. I want fiscal conservatism to reduce the scope of government. He wants it to enable government to exercise greater power in achieving what he considers desirable objectives. He is not a “conservative” in any way whatsoever, so far as I can see, in the sense of being in favor of a small government. He has come out openly in favor of vast expansions in government power. He has come out in favor of a national health insurance program which would, in my opinion, be a medical as well as a social and financial disaster in the United States. His energy program, as I mentioned earlier, is not a program which is designed to give the market greater play; it’s a program for running things through government. He is fundamentally, as so many people have pointed out, an engineer. That’s his background, that’s his training, that’s his disposition.
HEFFNER: You’re saying he’s also a social engineer though.
FRIEDMAN: Of course. He’s an engineer. And he’s in a position…where can he engineer? On the social level. He is a social engineer. And he believes in it. I’m not questioning that. From that point of view, I believe his principles are very undesirable for what we need for the future. Now, how it will work out…
HEFFNER: Now, in terms of what you said, that may work out well.
HEFFNER: In terms of what you said a moment ago, that may work out well.
FREIDMAN: It may. That depends, exactly. That’s why I say that what matters to me is much less what his own beliefs are than what you and the others out there and what the people of this country decide they want their government to do. Let’s not kid ourselves. The government is responsive to the public. This is a democracy. If we have been moving in the direction of collectivism, if we have been destroying the springs of private initiative and private freedom, if we have been restricting ourselves in many areas as we have, it is because the public at large has sent instructions to Washington to do that. Take a simple case. We all bemoan inflation. Inflation is terrible, it’s awful. Nobody likes inflation. Why do we have inflation? Because we the citizens have demanded it. We have sent a message to Washington. We said, “We want you to spend more on roads, we want you to spend more on health, we want you to spend more on education. But don’t tax us for it. We don’t like those damn taxes.” What happens? Congress listens. It votes more expenditures. It doesn’t vote taxes enough to cover them. But after all, the difference has to be paid for somehow. And so the difference is paid for by the hidden tax of inflation, which is the only tax that can be imposed on the American people without anybody having to vote for it. And so that inflation, we’re responsible for the inflation. Other people have been the intermediaries, but we’re ultimately responsible. Well, in the way, whether Mr. Carter’s propensities are a force for good or ill will depend in a very large measure, almost entirely, on what the sentiment of the public is, what is politically feasible, what is politically profitable for him to do. And that’s where the changing attitudes and ideas of the public play such a large role.
HEFFNER: In coming full circle as we end the program, I gather you do feel that you see signs of a changing attitude on the part of the public.
FRIEDMAN: Oh, there’s no doubt about that. Changing attitude on the part of the public, there’s no doubt about their reaction to the New York case. There’s no doubt about their loss of confidence in the ability of government programs to achieve their objective. You know, if you want to get a laugh out of anybody you talk about the post office. And it’s a universally understood thing. When I say when I try to talk against the energy program is to say, “Are you really seriously suggesting that we should turn over the production and distribution of energy to the people who run the post office? That’s what Mr. Carter is proposing.” And that gets a laugh out of people. Why? Because attitudes and views are changing.
HEFFNER: I think we’ll look again maybe two years down the road as to whether they’ve changed in the direction that you want or not. Thank you so much for joining me today, Professor Milton Friedman. It was a very, very great pleasure to talk with you once again.
FRIEDMAN: I’m very glad.
HEFFNER: And thanks, too, to you in the audience. I hope that you will join me again on The Open Mind. Meanwhile, as an old friend used to say, “Good night, and good luck.”