Who was Milton Friedman and what did he say about Social Security Reform? (Part 2)
I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.
Milton Friedman
Ep. 4 – From Cradle to Grave [1/7]. Milton Friedman’s Free to Choose (1980)
Since the Depression years of the 1930s, there has been almost continuous expansion of governmental efforts to provide for people’s welfare. First, there was a tremendous expansion of public works. The Social Security Act followed close behind. Soon other efforts extended governmental activities in all areas of the welfare sector. Growth of governmental welfare activity continued unabated, and today it has reached truly staggering proportions.
In this series I want to both look closely at who Milton Friedman was and what his views were about Social Security reform. Here is the first portion of an autobiography from Nobelprize.org:
I was born July 31, 1912, in Brooklyn, N.Y., the fourth and last child and first son of Sarah Ethel (Landau) and Jeno Saul Friedman. My parents were born in Carpatho-Ruthenia (then a province of Austria-Hungary; later, part of inter-war Czechoslovakia, and, currently, of the Soviet Union). They emigrated to the U.S. in their teens, meeting in New York. When I was a year old, my parents moved to Rahway, N.J., a small town about 20 miles from New York City. There, my mother ran a small retail “dry goods” store, while my father engaged in a succession of mostly unsuccessful “jobbing” ventures. The family income was small and highly uncertain; financial crisis was a constant companion. Yet there was always enough to eat, and the family atmosphere was warm and supportive.
Along with my sisters, I attended public elementary and secondary schools, graduating from Rahway High School in 1928, just before my 16th birthday. My father died during my senior year in high school, leaving my mother plus two older sisters to support the family. Nonetheless, it was taken for granted that I would attend college, though, also, that I would have to finance myself.
I was awarded a competitive scholarship to Rutgers University (then a relatively small and predominantly private university receiving limited financial assistance from the State of New Jersey, mostly in the form of such scholarship awards). I was graduated from Rutgers in 1932, financing the rest of my college expenses by the usual mixture of waiting on tables, clerking in a retail store, occasional entrepreneurial ventures, and summer earnings. Initially, I specialized in mathematics, intending to become an actuary, and went so far as to take actuarial examinations, passing several but also failing several. Shortly, however, I became interested in economics, and eventually ended with the equivalent of a major in both fields.
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Milton Friedman wrote an excellent article, “Speaking the truth about Social Security Reform,” April 12, 1999, Cato Institute and I will posting portions of that article in the next few days. Milton Friedman, winner of the 1976 Nobel Prize in Economics, was a senior research fellow at the Hoover Institution. Originally published in the New York Times January 11, 1999. Here is the second portion:
Introduction
The journalist Michael Barone recently summed up the conventional wisdom about reforming Social Security. “The content of the reform is fairly clear—individual investment accounts to replace part of the government benefits financed by the payroll tax, later retirement ages, adjusted cost of living increases,” he wrote in the American Enterprise. And, he added, “suddenly the money to pay for the costs of transition is at hand, in the form of a budget surplus.” I have italicized “part” and “costs of transition” because they epitomize key defects in conventional wisdom. Social Security has become less and less attractive as the number of current recipients has grown relative to the number of workers paying taxes, an imbalance that will only get bigger. That explains the widespread support for individual investment accounts. Younger workers, in particular, are skeptical that they will get anything like their money’s worth for the Social Security taxes that they and their employers pay. They believe they would do much better if they could invest the money in their own 401(k)s or the equivalent. But if that is so, why replace only part and not all of government benefits? The standard explanation is that this is not feasible because payroll taxes—or part of them—are needed to pay benefits already committed to present and future retirees. That is how they are now being used, but there is nothing in the nature of things that requires a particular tax to be linked to a particular expenditure. _______________________________________________
If you know anything about me, then you know that in 1980 my political life was forever changed by a man by the name of Milton Friedman. He could take tough questions that I could not answer and provide easy answers backed up with facts. My liberal professors were strong believers in high inheritance taxes.
Milton Friedman shows that this tax does hurt families and our society. The questioner suggests a 100% inheritance tax but that would destroy a society. Liberals try to downplay the harmful effects of the tax by saying it is alright since less than 1% of the USA will be affected, so lets stick it to them despite the harm it causes to family businesses. Milton Friedman shows them how foolish that is!!!
Below are some other posts I did about Milton Friedman’s ideas:
The Daily Hatch 