In an interview by John Hawkins (16 September 2003) Milton Friedman said:
I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible. The reason I am is because I believe the big problem is not taxes, the big problem is spending. The question is, “How do you hold down government spending?” Government spending now amounts to close to 40% of national income not counting indirect spending through regulation and the like. If you include that, you get up to roughly half. The real danger we face is that number will creep up and up and up. The only effective way I think to hold it down, is to hold down the amount of income the government has. The way to do that is to cut taxes.
(R Row, from front to rear) Milton Friedman, George Shultz, Pres. Ronald Reagan, Arthur Burns, William Simon and Walter Wriston & unknown at a meeting of White House economic advisers.
(Time Life Pictures/Getty Images)
All these liberals are out their wringing their hands about these upcoming cuts in spending, and they want to figure a way to get us to pay more to the government. Milton Friedman shows today in this post why we need to go back to the three essential functions of government that the founding fathers had in mind.
I really enjoy responding to Gene Lyons’ articles. He is very entertaining with his articles and he is a good respresentative of the liberal point of view. Since I am a conservative, it is rare when we agree.
Gene Lyons in his article ”The futility of reasoning with crazy,” April 27, 2011 makes this simple straight forward statement:
Also contrary to Republican mythology, the infamous Bush tax cuts did anything but increase revenue, as tax cuts never do. As Fiscal Times columnist Bruce Bartlett shows, federal revenues dropped from 20.6 percent of GDP in 2000 to 18.5 percent in 2007.
I am starting a new series that breaks down Lyon’s claims and take a look at the cold hard facts and I noticed that today Max Brantley jumped on board with Lyons when he wrote:
She (Ruth Marcus) proceeds to correct Boehner on any number of factual mistakes, including the notion that economic growth doesn’t follow tax increases. See Bill Clinton, for one. And what about the idea that tax increases would increase the debt?
“A tax hike would wreak havoc not only on our economy’s ability to create private-sector jobs, but also on our ability to tackle the national debt.”
During the early 1980s, taxes were cut and public debt ballooned, from 26 percent of GDP in 1980 to 40 percent by 1986. In 1993, taxes were increased (and spending cut); debt as a share of the economy fell, from 49 percent to 33 percent. In 2001 and 2003, taxes were cut. By the time President Obama took office, debt had climbed to 40 percent of GDP.
Michael Griffith in his article “The Facts about Tax Cuts, Revenue and Growth notes: .
Reagan Tax Cuts: In 1994 President Clinton’s own Council of Economic Advisers stated: “It is undeniable that the sharp reduction in taxes in the early 1980s was a strong impetus to economic growth.”
The Reagan tax cuts were followed by a sharp increase in revenue. Total federal revenue, including income tax revenue, rose every year from 1983 to 1988, after a dip in 1982 (due at least in part to the recession of that year–the recession began in December 1980 and ended in November 1982). From 1982 to 1989, i.e., when Reagan budgets were in operation, total federal revenue rose from $618 billion to $991 billion. (And herein by “in operation” I mean in effect for at least 10 months of a given year.)
Let’s look at what happened to federal income tax revenue under Reagan from 1983 to 1989, bearing in mind that Reagan slashed income tax rates across the board:
1983 — $326 billion
1984 — $355 billion
1985 — $396 billion
1986 — $412 billion
1987 — $476 billion
1988 — $496 billion
1989 — $549 billion
Why did the deficit increase under Reagan? The defense dept was built up and Congress increased spending in other areas of the federal government too.
In the 1980s, President Reagan successfully terminated only 12 of the 94 programs he proposed be eliminated. Congress would often block the terminations by negotiating slight reductions and lengthy phaseouts, waiting a few years for the President’s focus to shift elsewhere and then restoring the programs to their original funding.30
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What Brantley and Lyons do not understand is very simple: We have a spending problem in Washington, not a lack of taxs!!!
There is a film series from 1980 that you simply have to check out. Today I have included some comments from Milton Friedman from his Film Series “Free to Choose: Episode 10 How to Stay Free,” which addresses several issues concerning how to control our spending.
Lawrence E. Spivak: Let’s go back to Jefferson. You say cut the functions of central government to the basic functions advocated by Jefferson which was what? Defense against foreign enemies, preserve order at home, and mediate our disputes. Now, can we do that in the complicated, the complex world we live in today, without getting into very serious trouble.
Friedman: Suppose we look at the activities of government in the complex world of today. And ask to what extent has the growth of government arisen because of those complexities? And the answer is, very little indeed. What is the area of government that has grown most rapidly? The taking of money from some people and the giving of it to others. The transfer area. HEW, a budget 1_1/2 times as large as a whole defense budget. That’s the area where government has grown. Now, in that area, the way in which technology has entered has not been by making certain functions of government necessary, but by making it possible for government to do things they couldn’t have done before. Without the modern computers, without modern methods of communication and transportation, it would be utterly impossible to administer the kind of big government we have now. So I would say that the relation between technology and government has been that technology has made possible big government in many areas, but it’s not required it.
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There are so many excuses to raise government spending and taxes but we need to get back to the kind of government the founding fathers had in mind.
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Milton Friedman rightly said back in 1980 that we would much better off with a balanced budget amendment that would force government to live within their means. (Since then Friedman has called for an amendment that would limit the amount the government can tax and tie it to percentage of GNP.)
Friedman: Criminal tax evasion in Britain, laws and regulations defied in the U.S. It’s nothing to celebrate. The hopeful thing is that throughout the free world the public is coming to recognize the dangers of big government and is taking steps to control it. But it will be no easy task to cut government down to size. Today in country after country the strongest special interest has become the entrenched bureaucracy. Whether at the national or at the local level. In addition, each of us gets special benefits from one or another governmental program. The temptation is to try to cut down government at someone else’s expense while retaining our own special privileges. That was a stalemate. The right approach is to tackle head on the explosive growth in government spending. Lets give the government a budget the way each of us has a budget. A movement in this direction is already underway in the U.S. with the many proposals for Constitutional Amendments limiting government spending. Several states have already adopted such an amendment. There is strong pressure for a similar amendment at the federal level. Those amendments would force government to operate within a strict budget. Each special interest would have to compete with other special interests for a larger share of a fixed pie instead of all of them being able to join forces at the expense of the taxpayer.
This is an important step, but it is only a first step. No piece of paper by itself can solve our problems for us.
The Daily Hatch 