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Below is a discussion from Milton Friedman on Bill Clinton and Ronald Reagan.

PRESIDENTIAL REPORT CARD: Milton Friedman on the State of the Union

Milton Friedman, Senior Research Fellow, Hoover Institution and Nobel Laureate in Economic Sciences grades the achievements of the Clinton administration and evaluates the programs the President proposed in his 1999 State of the Union address.

Milton Friedman vs Bill Clinton (1999)

Published on May 28, 2012 by BasicEconomics

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ROBINSON Welcome to Uncommon Knowledge, I’m Peter Robinson. Our show today: The State of the Union, or more precisely, The State of the Union According to the Nobel Prize Winning Economist, Milton Friedman. Every year the President of the United States travels from the White House to the House of Representatives to deliver a major televised address, the State of the Union Address. The President outlines for the American people the accomplishments of his administration to date, the challenges the nation still faces, and his programs for meeting those challenges. Now, by the time the President delivers his address, it will have been worked on for many days by the President himself and by a large team of speech-writers. There will have been draft after draft after draft, mark-ups, cross-outs, corrections of all kinds. Yet, when we finally see the address, when we watch the President seem to speak all but flawlessly for thirty, forty minutes or more, delivering a speech that must be many pages in length, we never see him refer to a single sheet of paper. The trick: a machine called a Teleprompter that projects the text of the speech onto a plate of glass in such a way that the President, and he alone, can see it. A trick with mirrors. An illusion. Milton Friedman, perhaps the most influential economist of the last half century, believes that when Bill Clinton gave his own most recent State of the Union Address, the Teleprompter wasn’t the only illusion the speech involved.

ROBINSON Milton Friedman, we are in the sixth year of the Clinton Administration, the nation is at peace, the economy is booming, the federal government has gone from a budget deficit of 290 billion dollars in 1992, the year Bill Clinton was elected, to a surplus of at least 76 billion dollars for this year. Don’t you want to give Bill Clinton an A?

FRIEDMAN (laughs) No, I want to give the economy an A.

ROBINSON Give the economy an A. How much credit does he deserve?

FRIEDMAN Well, there’s only one way in which I believe he deserves some credit. Because you have a Democrat in the White House and Republicans control the Congress, it’s hard to get any laws passed, and that’s been a great advantage. The source of our prosperity in my opinion dates back to Mr. Reagan’s reductions in tax rates…

ROBINSON 1982.

FRIEDMAN …1982, and deregulation during the Reagan Administration, also go down to the 1986 Tax Act which eliminated a lot of interventions, unfortunately which have been creeping back in. And that unleashed a private enterprise boom which we’re still benefitting from.

ROBINSON We’re not in the sixth year of the Clinton expansion, we’re in the seventeenth year of the Reagan boom.

FRIEDMAN Exactly. The Reagan— I won’t call it a boom, because it really hasn’t been a boom, it’s been a very good, healthy expansion.

ROBINSON Steady, sustainable…

FRIEDMAN It’s a boom in the stock market, but so far as the economy is concerned the average rate of growth is not out of line with what it’s been in the past many times.

ROBINSON It’s in line with historical standards.

FRIEDMAN The long-term rate of growth since the Civil War, for example, is in the order of about three to four percent a year, of which one percent is population growth, one-and-a-half to two percent per capita growth, and we’re in about that same range. But it’s been a notable period for other things. It’s been a notable period because we’ve had this expansion at the same time that inflation has been brought down and relatively stable, and for that the credit belongs to the Federal Reserve under the leadership of Alan Greenspan. I think Alan Greenspan deserves more credit for that than anything else.

ROBINSON More credit than he’s being given, or more credit than Bill Clinton’s being given.

FRIEDMAN No, no— oh, Bill Clinton deserves no credit for that. That’s entirely a result of the Fed and its behavior. The Fed has done a lot of bad things in the past, so I’m delighted to be able to give it credit for one good thing, and it’s done very well under Alan Greenspan.

ROBINSON Does the so-to-speak extra-constitutionality of the Fed disturb you?

FRIEDMAN Yes. I have always been in favor of abolishing the Fed, primarily from a political point of view.

ROBINSON And how would you handle the currency, how would you then manage the currency without the Fed?

FRIEDMAN My favorite proposal is to have a fixed amount of what’s called high-powered money and just keep it there.

ROBINSON Just keep the money supply static?

FRIEDMAN Not the money supply. High-powered money…

ROBINSON Which is…

FRIEDMAN …the currency plus the reserves in the banking system that are now deposits in the Fed, under my system you would convert to currency.

ROBINSON So you would eliminate the policy functions of the Fed, but you might keep a few of their statisticians around to keep tabs on the money supply… but that’s a relatively technical and modest…

FRIEDMAN Well, no, you don’t even have to do that. You just have to keep somebody around to make sure that you replace the worn-out notes and keep the stock quantity of money, in the narrow sense of currency, essentially unchanged, or if you want, growing at three percent a year. But some purely mechanical regime. Given that you do have a Fed, it makes a great deal of difference how it performs. I believe that the inflation that we had in the ’70s was primarily the responsibility of the Fed. I believe that the Great Depression of the ’30s was primarily the responsibility of the Fed. So I’m not… it has in the past done a great deal of harm, but as it happens in this last eight years or so it’s been very good and has brought about…

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