We can no longer afford the welfare state (Part 7)

Ep. 4 – From Cradle to Grave [7/7]. Milton Friedman’s Free to Choose (1980)

With the national debt increasing faster than ever we must make the hard decisions to balance the budget now. If we wait another decade to balance the budget then we will surely risk our economic collapse.

The first step is to remove all welfare programs and replace them with the negative income tax program that Milton Friedman first suggested.

Milton Friedman points out that though many government welfare programs are well intentioned, they tend to have pernicious side effects. In Dr. Friedman’s view, perhaps the most serious shortcoming of governmental welfare activities is their tendency to strip away individual independence and dignity. This is because bureaucrats in welfare agencies are placed in positions of tremendous power over welfare recipients, exercising great influence over their lives. In addition, welfare programs tend to be self-perpetuating because they destroy work incentives. Dr. Friedman suggests a negative income tax as a way of helping the poor. The government would pay money to people falling below a certain income level. As they obtained jobs and earned money, they would continue to receive some payments from the government until their outside income reached a certain ceiling. This system would make people better off who sought work and earned income.

Here is a  portion of the trancript of the “Free to Choose” program called “From Cradle to Grave” (program #4 in the 10 part series):


Participants: Robert McKenzie, Moderator; Milton Friedman; James R. Dumpson, Chief Administrator, Human Resources Admin., NYC; Thomas Sowell, Professor of Economics, UCLA; Robert Lampman, Professor of Economics, Institute of Poverty; Helen Bohen O’Bannon, Secretary of Welfare, State of Pennsylvania

FRIEDMAN: __ but political reality changes and that’s the important thing. I want to say one more thing about this, this whole problem that we’ve been talking about. And that is, going back to Bob Lampman’s comment, there is one thing that can be said in favor on the welfare program. Unaccustomed as I am to saying anything in favor of it; and that is, that it is the only social program I know of which at least, on the average, give money to people who are in lower income classes than those who pay the taxes. Every other welfare program, not only does a lot of money go to the people who are well off, but on the average the poor are taxed and the well-to-do are subsidized. We in the upper income classes have been very clever at conning the poor suckers at the bottom to pay us nice salaries as bureaucrats and to provide us with nice benefits at their expense, and at least the welfare program doesn’t do that.

MCKENZIE: And you stated with great confidence that it will come, the negative income tax, even though you recognize the hurdles. Why are you so sure it will come?

FRIEDMAN: Because the present system has within it the seeds of its own destruction. There is no way in which a system constructed like the present, in my opinion, can avoid creating more and more social problems, and something is going to have to be done. Nobody has proposed any alternative, so far as I know, there is no effective alternative to the negative income tax and so it gets knocked down and it keeps rising, it gets knocked down and it keeps rising.

MCKENZIE: He finally raised the question though whether in any modern industrial democracy like this one it’s conceivable system to be run without fairly elaborate welfare underpinning of some kind. What do you feel?

O’BANNON: I don’t think it can be because I think essentially the welfare __ set of welfare programs reflect the values of this society that if it didn’t there would have been revolt long before now. Yes, there are rumblings about its cost, and I think that’s primarily a function of rapid rates of inflation eroding real income earning power of the middle-class taxpayer, but I think on one level we wanted to give up the responsibility of caring, the responsibility of day-to-day actual caring and in a technical, modern, industrial society like we have the tax system and the government system is probably __ is a viable alternative. I don’t think we’re going to get out of it. I don’t think you’re going to see private charities who can take my money that I’m free to give, or not give, and essentially make a difference in people’s lives of any substance on any level.

SOWELL: I don’t think it has anything to do with the society being modern, technological or industrial, it has to do with an ideology and particularly an ideology that is very strong among academic intellectuals or in the media, and I think that as time goes on and more and more intelligent ideas replace the kinds of vague visions that dominate today, that the political climate will change and that’s the only thing that stands in the way of reform right now.

MCKENZIE: Jim Dumpson.

DUMPSON: I don’t think you’re going to get rid of the system but I’m interested __ welfare system, I’m interested in Tom’s last statement about academicians and theories and so forth, we forgot that we’re talking about people and we may sit in the ivory tower and talk about whether this system will work and either logically or illogically why it won’t work, at the same time there are masses of people outside who are locked out of the system that you and I are part of and somehow we’ve got to make sure those people are taken care of and the short of not doing it, of course, means that your safety and my safety and the vitality of this government and of our country is at stake. The Mayor of the city of New York asked me, when we had a strike, what would I do if I couldn’t get checks out to people when our workers were on strike and I said to him, “After the first month _ chaos.” And he said, “What do you mean?” I said, “No man or woman in this city of New York, you included Mr. Mayor, will be safe if we cannot take care of people…”

MCKENZIE: We leave this discussion and hope you’ll join us for the next episode of Free To Choose

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