Category Archives: Milton Friedman

“The Failure of Socialism” episode of Free to Choose in 1990 by Milton Friedman (Part 2)

June 7, 2012 – 6:45 am

Milton Friedman: Free To Choose – The Failure Of Socialism With Ronald Reagan (Full)

Published on Mar 19, 2012 by

Milton Friedman’s writings affected me greatly when I first discovered them and I wanted to share with you.

Ronald Reagan introduces this program, and traces a line from Adam Smith’s “The Wealth of Nations” to Milton Friedman’s work, describing Free to Choose as “a survival kit for you, for our nation and for freedom.” Dr. Friedman travels to Hungary and Czechoslovakia to learn how Eastern Europeans are rebuilding their collapsed economies. His conclusion: they must accept the verdict of history that governments create no wealth. Economic freedom is the only source of prosperity. That means free, private markets. Attempts to find a “third way” between socialism and free markets are doomed from the start. If the people of Eastern Europe are given the chance to make their own choices they will achieve a high level of prosperity. Friedman tells us individual stories about how small businesses struggle to survive against the remains of extensive government control. Friedman says, “Everybody knows what needs to be done. The property that is now in the hands of the state, needs to be gotten into the hands of private people who can use it in accordance with their own interests and values.” Eastern Europe has observed the history of free markets in the United States and wants to copy our success. After the documentary, Dr. Friedman talks further about government and the economy with Gary Becker of the University of Chicago and Samuel Bowles of the University of Massachusetts. In a wide-ranging discussion, they disagree about the results of economic controls in countries around the world, with Friedman defending his thesis that the best government role is the smallest one.
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Below is a portion of the transcript of the program and above you will find the complete video of the program:
 

Here is another real success story, this time in Czechoslovakia. Martin was a rock musician. Today he makes documentary films. Some years ago, he did a concert tour of the United States and brought back secondhand recording equipment. The communist government let him bring it back, after paying a hefty import tax, because he said he wanted to record folk music __ something the government was not doing and did not plan to do.

In the past year, since things have opened up, his business has exploded. Along with music and films, he now duplicates video cassettes. He also makes audio cassettes for other Czech producers and has devised his own English language course on tape. He is on his way and many more will follow if the government just gets out of their way. You just can’t keep good people like that down.

The guests at this party aren’t much interested in self-driving entrepreneurs like Martin. High powered business executives from North America and West Europe __ they are interested in bigger game. They are here to do business and make good profits for their firms. They’ll do it by arranging joint ventures between their western companies and government enterprises. To succeed, they have to get on the right side of the politicians and the bureaucrats who are in charge. It is large scale lobbying, very much in the western manner. The danger is that in the process, local government bureaucrats and big foreign business will end up freezing out local entrepreneurs.

Friedman: The assets of Hungary belong to the people of Hungary. I do not believe they should be sold. You are a citizen of Hungary, who owns the state enterprises?

Unknown: Okay, the society as a whole.

Friedman: Not the society, the people.

Unknown: Well, give it to the people.

Friedman: In finance ministries all over Eastern Europe, the talk is all about privatization, but rhetoric is one thing __ action sometimes very different.

One example is in Prague where Vacla Klouse, the finance minister, is desperately trying to free the Czech economy.

Vacla Klouse: The people who were the reformers at that time were done after the Russian invasion, they were fired from their jobs and they return to politics with their own extremely obsolete ideas, and now they are trying . . .

Friedman: But he is up against political planners that aren’t ready to give up control. They are all anticommunists, all in favor of markets, but many are still beguiled by the idea of market socialism. A third way between capitalism and socialism, Klouse and I believe that is a mirage __ that a third way will take Czechoslovakia straight to the third world. It must either move directly to a pure free market, or it will get stuck just as Yugoslavia has.

Klouse: . . . I think intellectuals tend to underestimate the intelligence of the ordinary people . . .

Friedman: Poland and Hungary have exactly the same problem. Some, like Klouse, want to move to free markets right away. Others still hanker after socialist control of the markets.

Klouse: . . . use the word naive citizens. They are the interventionist economies and the other, so this is my speech in the parliament . . . . . .

Friedman: Political power is limited, but economic power is not limited and you can have, if you have one millionaire, you can have another millionaire, another millionaire, without anybody else being worse off. In fact, everybody else will be better off. It seems to me again, the people understand that. I can’t believe that your ordinary people here don’t. They know overnight you can make a change if you could only get the government off the back of the people.

Where are we headed __ we are heading all the way up here __ we’ll get there. Let’s not get any more gas than we need to. What is it? It is about $1.00 a liter which makes it about $4.00 a gallon of gas.

In these countries, the hardest problem is to transform their heavy industries. This is Novahoota, a vast collection of steel mills in Poland and a disaster in every sense. It is inefficient, costly, and above all, a major polluter. The best thing to do with places like this would be to bulldoze them, but that is almost impossible. They are too well shielded by special interests: the unions, the bureaucrats, and all the other political interests on the fringes.

The communists socialize the means of production. They tried to run everything from the center. It didn’t work. It was a mess and a failure. We in the United States, on the other hand, have been socializing the fruits of production. That is, the government has been taking money from some people, the people who produce the goods and services, and giving it to other people who do not produce goods and services. The end result is likely to be the same loss of incentive and organization if we carry it too far. That is one lesson we should learn from these countries.

A year ago, the cornucopia of fruits and vegetables and other things in this street market were simply not obtainable. It is one of the first signs of the flowering of enterprise under the new regime. This market is in Krakow, Poland. Goods are readily available now, only because the government eliminated price controls allowing the market to set the prices. Like a miracle, overnight the stalls had goods for sale. This gentleman sells bulbs and seeds. He is happy in the market, but many traders would like to set up in stores and develop on a larger scale. At the moment, they can’t. The stores are all owned by the state. The traders are stymied unless and until the stores become private property. When they do, the market will get another boost.

This youngster is 16. He is still in high school, but this is Saturday and he is in the market selling jeans from Thailand, making a little money for himself. He is studying to be a gardener. But when I asked him what he was going to do when he left school, he had no hesitation __ he was going to be a businessman. There is the hope of Poland.

Everybody knows what needs to be done. The property that is now in the hands of the state need to be gotten into the hands of the private people who can use it in accordance with their own interests and values. The problem is how to do it. Now that you have some degree of political freedom, there is an awful fight going on about who is going to get what share of the total pie. Everybody wants a little bigger piece. It is a political mine field, but unless that mine field can be gotten through, the game is up. It will be a failure. If it can be gotten through, then you will have an opportunity for these resources to be used the right way for the right things.

We in the West know only too well how hard it is to get the government out of something once they have been in it. Here in Poland they have been in it for 50 years and in a much bigger way than the United States. So they have a real job on their hands.

It would be silly of us, on the basis of a brief trip, to try to judge how successful these countries will be in doing what no country has yet been able to do __ transform a totalitarian state into a prosperous, free society. If this experiment is successful, it will not only transform Eastern Europe __ it will also offer an invaluable blueprint for the economic development of many poor countries.

You know, nothing is more striking than the wide differences in the standard of life of people who live in different parts of the world. Why? Not because of race or religion or culture or natural resources. After all, the Chinese who live in Hong Kong and in Taiwan are of the same race and background as those who live in Red China, yet their standards of living are vastly different. The same thing is true of East Germany and West Germany; of South Korea and North Korea; of Japan before the major restoration and Japan after the major restoration. The real explanation are the economic institutions that they adopt __free private markets versus central planning.

The countries of Eastern Europe have finally overthrown their communist masters who foisted central control on them. They have the rare opportunity to write on a clean slate; to create the institutions of private property and free markets that are the only ones that have ever achieved widespread prosperity and human freedom. We in the United States, on the basis of our experience of the last 10 years, know how hard it is to cut a government down to size. We hope they succeed better than we did. If they do, we will learn as much from them as they have learned from our example.

By Everette Hatcher III | Also posted in President Obama | Comments (0)

“The Failure of Socialism” episode of Free to Choose in 1990 by Milton Friedman (Part 1)

June 4, 2012 – 1:59 pm

Milton Friedman: Free To Choose – The Failure Of Socialism With Ronald Reagan (Full)

Published on Mar 19, 2012 by

Milton Friedman’s writings affected me greatly when I first discovered them and I wanted to share with you. We must not head down the path of socialism like Greece has done.

Ronald Reagan introduces this program, and traces a line from Adam Smith’s “The Wealth of Nations” to Milton Friedman’s work, describing Free to Choose as “a survival kit for you, for our nation and for freedom.” Dr. Friedman travels to Hungary and Czechoslovakia to learn how Eastern Europeans are rebuilding their collapsed economies. His conclusion: they must accept the verdict of history that governments create no wealth. Economic freedom is the only source of prosperity. That means free, private markets. Attempts to find a “third way” between socialism and free markets are doomed from the start. If the people of Eastern Europe are given the chance to make their own choices they will achieve a high level of prosperity. Friedman tells us individual stories about how small businesses struggle to survive against the remains of extensive government control. Friedman says, “Everybody knows what needs to be done. The property that is now in the hands of the state, needs to be gotten into the hands of private people who can use it in accordance with their own interests and values.” Eastern Europe has observed the history of free markets in the United States and wants to copy our success. After the documentary, Dr. Friedman talks further about government and the economy with Gary Becker of the University of Chicago and Samuel Bowles of the University of Massachusetts. In a wide-ranging discussion, they disagree about the results of economic controls in countries around the world, with Friedman defending his thesis that the best government role is the smallest one.
___________
Below is a portion of the transcript of the program and above you will find the complete video of the program:
 

Ronald Reagan: In 1980, a friend of mine did something of rare importance that some historians might miss. Dr. Milton Friedman, a scientist, a careful thinker, and a great teacher first presented his TV series Free to Choose. His TV series was about choices, risks, freedom, equality, and making a better future for all of us.

In 1976, the 200th birth of our nation, Milton Friedman won the Nobel Peace Prize in economics. Two hundred years earlier, in the same year as the Declaration of Independence, Adam Smith, the Scotsman, published a book entitled The Wealth Of Nations. The United States was the first country to apply the ideas in Adam Smith’s book. Those ideas have led to our prosperity and given us our freedom.

In Free to Choose, Milton Friedman shows us how those ideas can help us today. In this program, Milton and his wife Rose, take us on a brief tour of Eastern Europe. They wanted to see if the Czechs, Hungarians and Poles were taking the steps needed to achieve prosperity and a lasting freedom. In fact, a member of the Polish Parliament has said that Milton Friedman’s Free to Choose was a major influence on the Polish drive for freedom.

I find it exciting to watch the rebirth of freedom in Eastern Europe. Being free to choose should be every person’s birthright. Everywhere in the world, and especially here in the United States, we need to keep government on the sidelines. Let the people develop their own skills, solve their own problems, better their own lives. I don’t think it is an exaggeration to call Milton Friedman’s Free to Choose, a survival kit for you, for our nation and for freedom.

Friedman: Those are the parliament buildings. This is the river Danube and I am in Budapest, the capitol of Hungary. Over there somewhere is Czechoslovakia, over there Poland, and farther away yet, the Soviet Union. Socialist states that started out with the very best of intentions, intending only to improve the lots of their citizens, they all ended up making the people poor, miserable and into slaves. And every one of them has been learning that lesson that socialism is a failure. They are all trying to move in the direction of a free, private market.

What happened here in Eastern Europe was a major event. The first time in history that the totalitarian countries decided to move toward free markets. Will they succeed? That is a question that brought my wife Rose and me here. As economists, we wanted to witness the most exciting experiment in political and economic organization that is likely to occur in our lifetime.

In the center of Prague, there is a famous cafe, a relic from the days when Czechoslovakia was one of the wealthiest countries in the world. Today, we find only faded elegance, a pale echo of a productive past that was created by market incentives. What happened? Communist central control __ that is what happened. The same culture, the same people, the same resources who wanted different outcomes of vastly lower standard of living, the result of substituting orders from the top for incentives from below. Who says economic institutions don’t matter?

A year ago, right outside that cafe, hundreds of thousands of Czechs massed in Wensisloss Square to demand their freedom. This is where it all happened. In three days they got political freedom. The hopes were high. They thought economic miracles would follow quickly. Yet now it is a year later and almost nothing has happened. Political freedom can be achieved rapidly; economic freedom and prosperity is a very different thing. That’s what is beginning to dawn on these people. In reality they are not yet free. They are still the victims of thousands of controls the communists put in place.

If the newly elected governments are going to keep the support of the people, they must give them real freedom and they’ve got to do it fast. That was the secret of Margaret Thatcher’s success in England. She had a well worked out program and she put it into effect right after coming into office. It was the secret of Ronald Reagan’s program. On the other hand, Manahem Began in Israel came in without any plans whatsoever, and he ended up a failure. If Czechoslovakia is going to achieve the objectives of its revolution, it must move rapidly to put into effect the economic institutions which alone can convert political freedom into economic and human freedom. Those institutions are the institutions of free, private markets.

There are examples all over the place of both the opportunities and the problems. Yuri Malick wants to publish a magazine for people who are trying to set up their own private businesses in Czechoslovakia. He runs it from his living room. It’s a small family enterprise. The magazine is packed with information for would-be businessmen on how to thread their way through the jungle of bureaucratic regulations that still exist. The irony is that some of those very regulations are preventing him from getting his business off the ground. For a start, he needs to obtain 15 separate government licenses before he can distribute the magazine. After nearly a year, he still hasn’t got them. He has had to come here again and again to this government licensing bureau to try to persuade a bureaucrat to allow him to do business.

Yet again, it’s not his lucky day. Yuri Malick doesn’t give in easily, but things are not looking too hopeful. The man he has got to see is not available and no one else is interested in his problem. The Cheque government owns all the newsstands, the book shops, the nationwide distribution system which is controlled from here. There is one way, and only one way, to put an end to all this nonsense, the government must get out of business and stay out. It must transfer these assets into private hands.

These are the kinds of forms you have to fill out in this country in a place like that if you want to start a business or get anything done. But if you think that only happens here, tell me when was the last time you stood in line to get a driver’s license or a registration plate, or do you know anybody in Britain, France, Germany or the United States who has built a house sometime in the last 10 years. Ask him what he went through.

By Everette Hatcher III | Also posted in Ronald Reagan | Comments (0)

Milton Friedman addressed the belief that inflation can cure unemployment, implicit in the Obama administration’s spending blowout “Friedman Friday”

June 1, 2012 – 6:42 am

Ep. 9 – How to Cure Inflation [1/7]. Milton Friedman’s Free to Choose (1980)

Cochrane’s Kinky Curves

Posted by Jim Powell

The doctrine that inflation can cure unemployment, implicit in the Obama administration’s spending blowout, goes way back.

The modern version originated with William Phillips, a New Zealand-born economist who, in 1958, wrote a paper modestly titled “The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861‑1957.”  Phillips suggested that when inflation went up, unemployment went down. Keynesian economists Paul Samuelson and Robert Solow popularized Phillips’ idea as a reason to ratchet up government spending and inflate the money supply.  That’s what the Kennedy and Johnson administrations did during the 1960s.

In 1967, Milton Friedman expressed a skeptical view about what had come to be known as the Phillips Curve, launching an extended debate.  Then in 1973, President Richard Nixon, who had famously declared “I am now a Keynesian,” leaned hard on Fed Chairman Arthur Burns to inflate the money supply and drive down unemployment, hopefully to improve Nixon’s prospects for re-election.  Well, as those of us who were around back then recall, both inflation and unemployment went up!  This was a bit of a problem for Phillips Curve aficionados.

As if the stubborn stagflation of the 1970s wasn’t bad enough, subsequent efforts by new Fed Chairman Paul Volcker and President Ronald Reagan to stop inflation cold delivered another hammer blow against the Phillips Curve: both inflation and unemployment went down!

Now fast-forward to January 2009: President Obama levitated the Phillips Curve from the dead when he repeatedly declared that it was urgent to enact his $825 billion stimulus bill so unemployment would go down.  But both spending and unemployment went up!  It became harder to deny that the stimulus spending flopped, though the New York Times’ Keynesian columnist Paul Krugman tried valiantly.  He claimed stimulus spending flopped because Obama didn’t spend enough.  Accordingly, several weeks ago, Obama proposed still more stimulus spending to fight unemployment, and he begged people to support it: “If you love me, pass this bill!”

There shouldn’t have been any surprise about Obama’s flop, since the underlying idea – the Phillips Curve – proved to be a dud long ago.  This would be a good time to review experience with the Phillips Curve.

Thankfully, Cato Adjunct Scholar John H. Cochrane, the AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago Booth School of Business, has done just that.  He focused on the period from 1966 to the present.  That year, President Lyndon Johnson was going full bore, promoting runaway spending on new entitlement programs and on the Vietnam war simultaneously, and inflation reared its ugly head.

Cochrane charted what happened year-by-year to inflation and unemployment.  The result wasn’t a nice smooth curve dreamed about by Keynesians.  Rather, there was a kinky curve.  One year, inflation went up, and unemployment went down.  Next year, inflation went up again, and unemployment went up.  Then when inflation went down, unemployment went up again.  On and on as if we followed a drunk stumbling around a street.  Since a single chart would have become an unreadable tangle if it tried to cover the entire 45-year period, Cochrane developed two charts, 1966-1984 and 1985-2011.  Clearly, what we see is a random relationship between inflation and unemployment, that makes the Phillips Curve worthless as a policy tool.

The charts appear in an insightful article Cochrane wrote, published in the Fall 2011 National Affairs.  The article is important quite apart from the Phillips Curve charts.  Although the prevailing view seems to be that high inflation is most likely to occur if and when the Fed increases the money supply, Cochrane warns high inflation could occur as a consequence of soaring government debt.  Such inflation would amount to a default.  It would be triggered by a run on dollar-denominated assets, if and when investors conclude that the government cannot pay its debts.  Runs occur without warning, often after a succession of events have undermined investor confidence.

By Everette Hatcher III | Also posted in Cato Institute | Tagged , , , | Comments (0)

Open letter to President Obama (Part 85)

May 31, 2012 – 7:31 am

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

It seems that government was in control of the desert then we would have a shortage of sand as Milton Friedman used to quip.

You Keep Using the Word ‘Affordable.’ I Do Not Think It Means What You Think It Means.

Posted by Michael F. Cannon

The federal government gave a $10 million “affordability” prize to a giant corporation for manufacturing a $50 lightbulb. The Washington Post:

The U.S. government last year announced a $10 million award…for any manufacturer that could create a “green” but affordable light bulb.

Energy Secretary Steven Chu said the prize would spur industry to offer the costly bulbs…at prices “affordable for American families.”…

Now the winning bulb is on the market.

The price is $50.

Retailers said the bulb, made by Philips, is likely to be too pricey to have broad appeal. Similar LED bulbs are less than half the cost.

This is the same federal government that refers to ObamaCare, which costs more than $6 trillion, as the “Affordable Care Act.”

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

Religious Liberty: Obamacare’s First Casualty

Uploaded by on Feb 22, 2012

http://blog.heritage.org/2012/02/22/morning-bell-religious-liberty-under-attack/ | The controversy over the Obama Administration’s anti-conscience mandate and the fight for religious liberty only serves to highlight the inherent flaws in Obamacare. This conflict is a natural result of the centralization laid out under Obamacare and will only continue until the law is repealed in full.

By Everette Hatcher III | Also posted in Cato Institute, Healthcare, President Obama | Comments (0)

Milton Friedman discusses Reagan and Reagan discusses Friedman “Friedman Friday”

May 25, 2012 – 6:55 am

Uploaded by on Aug 19, 2009

Nobel Laureate Dr. Milton Friedman discusses the principles of Ronald Reagan during this talk for students at Young America’s Foundation’s 25th annual National Conservative Student Conference

MILTON FRIEDMAN ON RONALD REAGAN

In Friday’s WSJ, Milton Friedman reflectedon Ronald Reagan’s legacy. (The link should work for a few more days.)

I first realized what a truly extraordinary person he was in early 1973 when I spent an unforgettable day with him barnstorming across California to promote his Proposition 1 — an amendment to the state constitution that would set a limit to the amount the state could spend in any year. We flew in a small private plane from place to place and at each stop held a press conference. In between, Gov. Reagan talked freely about his life and views. By the time we returned to our final press interview in Los Angeles, I was able to give an enthusiastic yes to a reporter’s question whether I would support Reagan for president. And, I may say, I have never been disappointed since.

As a good social scientist, Frieman also has data. It doesn’t make Bush I look too good, but it does bust the myth–popular among some libertarians–that Reagan did nothing real to shrink government.
 

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Image Detail

 Milton Friedman and Ronald Reagan
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By Everette Hatcher III | Also posted in Ronald Reagan | Comments (0)

Milton Friedman: The free market price system promotes cooperation and harmony among those with no common interest

May 23, 2012 – 10:47 am

Milton Friedman’s illustration of a pencil makes the point in a clear way.

Milton Friedman – Lesson of the Pencil

Uploaded by on Nov 13, 2009

Milton Friedman uses a pencil to illustrate how the free market price system promotes cooperation and harmony among those with no common interest.

_____________

November 21, 2006

Milton Friedman 1912-2006

Milton Friedman’s book “Free to Choose”, co-authored with his wife Rose, was among the first tracts I’ve read on the topic. I don’t remember exactly when I read it, probably in college. I would not be able to explain well the intracacies of monetarist policies and its alternatives, but Friedman’s simple message about free markets has always stuck with me.

He summed up the workings and the benefits of free markets with a simple idea: a pencil. Here is Friedman in his own words, taken from a transcript of a TV version of “Free to Choose”:

“Look at this lead pencil, there is not a single person in the world who could make this pencil. Remarkable statement? Not at all. The wood from which it’s made, for all I know, comes from a tree that was cut down in the State of Washington. To cut down that tree, it took a saw. To make the saw, it took steel. To make the steel, it took iron ore.

“This black center, we call it lead but it’s really compressed graphite, I am not sure where it comes from but I think it comes from some mines in South America. This red top up here, the eraser, a bit of rubber, probably comes from Malaya, where the rubber tree isn’t even native. It was imported from South America by some businessman with the help of the British government. This brass feral – I haven’t the slightest idea where it came from or the yellow paint or the paint that made the black lines – or the glue that holds it together.

“Literally thousands of people cooperated to make this pencil. People who don’t speak the same language; who practice different religions; who might hate one another if they ever met. When you go down to the store and buy this pencil, you are, in effect, trading a few minutes of your time for a few seconds of the time of all of those thousands of people. What brought them together and induced them to cooperate to make this pencil? There was no Commissar sending out orders from some central office. It was the magic of the price system – the impersonal operation of prices that brought them together and got them to cooperate to make this pencil so that you could have it for a trifling sum.

“That is why the operation of the free market is so essential. Not only to promote productive efficiency, but even more, to foster harmony and peace among the peoples of the world.”

By Everette Hatcher III | Also posted in Current Events | Comments (1)

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

May 22, 2012 – 7:06 am

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):

DISCUSSION

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

By Everette Hatcher III | Also posted in spending out of control | Comments (0)

We can no longer afford the welfare state (Part 6)

May 21, 2012 – 5:56 am

Ep. 4 – From Cradle to Grave [6/7]. 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):

DISCUSSION

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

LAMPMAN: I think it’s a viable approach to some part of the problems of poverty. It involves, first of all, cash payments rather than in kind payments as I understand it? It involves payments on a non-categorical basis.

MCKENZIE: What do you mean non-categorical?

LAMPMAN: That is to say, it doesn’t matter whether you’re a female-headed family or a male-headed family or whether you’re young or old, you’re sick or well.

MCKENZIE: If your income falls below a certain level you __

LAMPMAN: Pay some guaranteed income level for people based on family size and then it has a take-back rate which is modest, I suppose, by definition. Now, the question is: How many things you want to use that program to replace? How many things you want to replace with such a negative income tax program.

MCKENZIE: Would you replace everything with it __ just __ we clear that point up. Would you virtually wipe out the remaining forms of welfare if you got this program going?

FRIEDMAN: Yes, I would not __ I think its purpose is precisely to provide a transition between where we are now and where we would like to go because while __ because I agree with you, that given that we’ve corrupted the people on welfare and gotten them on there. We do have an obligation not to throw them out in the street and put them in the difficult adjustment you’ve made. We’ve got to ease the __

MCKENZIE: Yeah. Okay. Right.

FRIEDMAN: __ ease it off __

MCKENZIE: Sure. Yeah.

FRIEDMAN: __ and so __ but I would want to replace all __

MCKENZIE: Yeah. Okay.

FRIEDMAN: __ present welfare programs.

MCKENZIE: Let’s get reactions to this and then we’ll come back to you.

SOWELL: Well, I saw some figures recently which said that if you took all the money spent on poverty in the United States and divided it by all the poverty families you’d come out with a figure of $32,000 per family. Now, the average poverty family is apparently not getting the $32,000 and so clearly someone in between the treasury and those families is getting an awful lot of that money and I think if you simply eliminated the middle man, as they say in the commercials, that there’d be an awful lot of benefit both to the poor and to the taxpayers.

DUMPSON: I’m supportive of the negative income tax concept and the objective of it. I’d like to point out, however, that administratively we have another bureaucracy set up. Somebody has to take into account earnings. Someone has to decide when to pay back that which they’re entitled to. There’s a time lag between the paying back __ the earning and the paying back. There are a variety of problems in there that I will be prepared to accept but I want you to know that government intervention is not going to be eliminated.

O’BANNON: The issue that I have is: Where do children come in? What are their rights under a negative income tax? And are we, by building in a negative income tax, in fact subsidizing the illegitimacy that Tom Sowell is so concerned about?

FRIEDMAN: The major reason it is not feasible today to have a negative income tax is because the present welfare bureaucracy would be out of work. They are the major objectors and as Senator Pat __ he’s now a senator, Pat Moynihan demonstrated in his book on the Nixon program, the chief obstacle to getting it enacted was the welfare bureaucracy. So that I don’t believe these administrative problems, if you got it enacted, would be at all serious.

O’BANNON: I think the other assumption under the negative income tax, and it’s one that I’m not sure I can buy, is that everybody has a minimum level of understanding about how to spend money. In other words, how to use the marketplace to satisfy wishes. And I, as an economist, would say, yes, we do. We __ everybody from age four to a hundred knows how to use money to satisfy wants and that’s the __

FRIEDMAN: But they don’t. They don’t. There are all sorts of problems of people who are not going to be able to. But that’s a minority problem. That’s a problem for private activity and private charity. One thing is sure: They’re spending __ they would be spending their own money and that however knowledgeable you are about money __

O’BANNON: They would be spending my money.

FRIEDMAN: They would be spending my money, but it would be one stage less then. Right now, the welfare worker is spending Mr. A’s money to help Mr. C. And there’s a big takeoff in the middle as Tom Sowell said.

SOWELL: The question is not whether the people on welfare or low incomes can all spend their money effectively; the question is: How effectively do they spend it as compared to how effectively the bureaucrats spend it for them. Comparing anything to perfection or to some arbitrary standard settles nothing. The same thing is true in the education area. They’re saying “Would families be able to spend their __ select schools for their kids under a voucher system,” for example. Well, the question is: Could they possibly do much worse than the current bureaucrats are doing in the public school system.

O’BANNON: Oh __

MCKENZIE: We’ve run on education on another program. Bob Lampman.

(Laughing)

LAMPMAN: I want to quibble with something you said, Tom, about half of the money not going to the poor or something. That doesn’t __ shouldn’t leave the viewer to think that all the money is going to the administrators of programs. A lot of what you are talking about goes to non-poor recipients. For example, social security, as a program, pays a roughly half of its benefits to people who otherwise would not be poor. Unemployment insurance pays about two-thirds of its benefits or so to non-poor persons. And those are, in some definitions, welfare or anti-poverty programs and that’s how statisticians come up with this horrendous sounding discrepancy between the total amount of money spent and the total cash benefits that go to the poor.

SOWELL: Well, I think, I think it’s a perfectly valid point though, because supposedly we were not setting up unemployment benefits and social security in order to keep the affluent.

LAMPMAN: Well, this goes back to its big philosophy, debate we might have. I think that it’s easy to oversimplify things and say that all these programs, including the public schools are there to be a help to the poor and poor only.

FRIEDMAN: Yeah, but I was saying __

LAMPMAN: But let me mention that the negative income tax has some of its impetus in that it would be a way of confining benefit payments to people who are __

SOWELL: Yes. Yes.

LAMPMAN: __ and it would cut out benefits for an awful lot of people who now have expectations that they’re going to get them, not in the form of public assistance, but in the form of social insurance as we use the term.

SOWELL: Well, in order to be made for not disappointing the expectations on which people have built their lives for one generation, but not of continuing for eternity in order to avoid one generation of transition.

MCKENZIE: What are the other hurdles toward getting underway. Now, you said, I don’t know how seriously, the biggest almost the only hurdle is the welfare bureaucracy.

FRIEDMAN: No. Now, there’d be the biggest immediate group of lobbyists that will lobby against it.

MCKENZIE: Yep.

FRIEDMAN: The biggest hurdle in getting it over at the moment is that there is no way of constructing a sensible negative income tax system that will not hurt some people. There will be some people who will get less money than they are now getting under __ particularly those in the upper income groups. Particularly the affluent who are now being subsidized by the welfare and they, will make it politically difficult for the people to put it into effect. The attempt is to put a negative income tax in effect which costs less money, is easier to administer, and yet which doesn’t pay anybody in the society one dollar less than he’s now getting. There’s no way in which you can construct such a program. But, although it’s not politically feasible now, the force of history is on its side, it’s going to become political __

MCKENZIE: Dr. James Dumpson.

DUMPSON: Let’s not say that the __ give the impression that welfare administrators were against negative income tax, the fat program for example, as Moynihan says, because they would lose their jobs, for example. Many of us were opposed to it because of certain features in that program: A $24 __ $2,400 level for a family of four. We were opposed to that. And if one goes down the Congressional record, those who testified, will be shown to be saying, “Yes, we’re for it conceptually. But we’re against this piece and this piece, if you change that you’ll have our support.”

FRIEDMAN: I was in the same position. I first proposed the negative income tax twenty-five years ago but I testified against the final version of the Nixon plan. Why? Because the welfare bureaucrats had led them to introduce changes in it which converted it from a decent satisfactory negative income tax to one which would have been just as bad as what you have now. Would have been added on top of everything else.

O’BANNON: Cold reality.

FRIEDMAN: It’s political reality __

O’BANNON: That’s right.

By Everette Hatcher III | Also posted in spending out of control | Comments (0)

We can no longer afford the welfare state (Part 5)

May 18, 2012 – 5:18 am

Ep. 4 – From Cradle to Grave [5/7]. 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):

DISCUSSION

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

O’BANNON: I think the other __ we have a program in Pennsylvania for essentially all of those who are not taken care of by the AFDC program. It’s called the General Assistance Program. And there less than 15 percent are on more than eighteen months. So we have a great turnover. We have essentially young males moving into the welfare system after unemployment compensation, and then moving out when a job opportunity comes along. This, you know, I think the notion of generations of people on welfare is a very small minority in the whole system. That doesn’t mean that the system as presently defined and as the set of programs that we have put together don’t often contradict each other and I’m the first to agree with Dr. Friedman that some of the programs are conflicting. However, I think it is overly broad to say that we turn people into helpless children.

SOWELL: I don’t remember talking to anyone who’s ever been on welfare who didn’t think they were being treated like children while they were on it.

DUMPSON: Of course, I think, you know, you __ one must make a difference, a distinction between a system that was set up to help people and the people who are employed in that system. Look at any public welfare system around the country and we have no, practically few trained people who to work with people. We employ them ill-trained, people who are not equipped to be helping people. We say they’re social workers. They’re not social workers, they have neither the skills, the attitudes, and some of them not even the concerns; so I think one has to separate how a conceptual framework of a system designed to help people and what the country and community puts into that system to implement those programs.

SOWELL: You mean to separate the hopes from the reality.

DUMPSON: I separate the skills that are available in order to implement what the objectives of the program are. I think we have to separate whether we are talking about program objectives, or we’re talking about how it operates. I would be the first to say that the system that I administered had ill-prepared people to do the job that we were set up to do, and I would not say that the system that we set up __

SOWELL: I talked to some social welfare people who think that in fact they were so hamstrung by the system that there was very little they could do to help people to get off welfare; that is to build up skills at jobs, do whatever was necessary to get off welfare. They felt it was the system.

MCKENZIE: Bob Lampman, your comment.

LAMPMAN: The system that we’re stereotyping is one of a great deal of paternalistic interference in individual family’s lives and in fact isn’t it true, Mr. Dumpson, that case load is so high for an individual welfare worker that they can’t do a lot of interfering in individual family lives. Moreover, in the last decade there’s been a real attempt to ease this welfare trap in AFDC by changing the take-back rate and by administering work expenses and child care expenses in such a way as to facilitate work by those who may want to do it; so it’s not quite as harsh a picture as we sometimes get that there is this omniscient welfare worker who’s right there in the living room with the family making all their decisions for them.

FRIEDMAN: I’ve never heard of a government program which was defective in which the people who ran it didn’t say, “If only we had more money to spend on what we’re not being able to accomplish with the amount we’re spending now.”

MCKENZIE: Milton, we’re going to move along now to some of your prescriptions in that film because I think it’s good ground for discussion. The most drastic one was when you said, speaking of an unemployed man, “Supposing you were cruel and took away welfare from this man, he would find a job at some wage, there’d always be a job he could get; he might need some charity on route, private charity, but he would get a job.” Now, I want you to react, those of you, before we come back to Milton on that. Is that a picture that seems plausible to you?

DUMPSON: He may get a job, and he may get a job in what we refer to as the underground economy, and that’s where a number of our youth are now going to get their jobs. Those activities that are illegal, the only opportunities they have for earning their part of a livelihood.

O’BANNON: I think the other issue is that you have a whole group of people who are the single, female head of the household; and yes, cut off welfare tomorrow: What will they do? What will be their immediate response? At what price to their small children and to their middle-aged children? Yes, they’ll get a job, in fact the statistics show that women, in fact, are the most successful through the employment program. But what has to supplement that typically is the provision of some kind of day care arrangement. Either the individual woman has to earn enough money to be able to pay privately for her day care, or in fact, she is quote “subsidized” through this insidious, corrupting program, set of programs, run by the federal government which, in fact, makes her employable and a taxpayer. It’s an interesting notion of trying to get people in a productive mode.

MCKENZIE: Tom Sowell.

SOWELL: It’s incredible the way you start the story in the middle as if there’s a predestined amount of poverty, a predestined amount of unemployment and that the welfare system is not itself in any way responsible for that __

O’BANNON: There is a predestined 20 percent of the bottom half of the population.

SOWELL: I have never __ well, that’s always been true __

(Everyone speaking at once)

O’BANNON: There’s going to be 20 percent at the bottom.

SOWELL: It’s also true that 20 percent of the bottom population doesn’t have to be living on the government and ruled by the government. You mentioned, for example, a female head of household. Many of those, in addition to the grown woman who has all the kids, are teenage pregnancies. There’s not a predestined amount of teenaged pregnancies. I grew up in an era when people, and particularly blacks, were a lot poorer than today, faced a lot more discrimination than today, and in which teenage pregnancy rate was a lot lower than today. I don’t believe there is a predestined amount of teenage pregnancy. A predestined amount of husband desertion. Gutman has done a study of a black family showing that this whole notion that the black family has always been disintegrating, that is nonsense. His studies go up to 1925, the great bulk of black families were intact two-parent families up to 1925 and going all the way back through the era of slavery, so it is now, only within our own time, that we suddenly see this inevitable tragedy which the welfare system says it’s going to rush in to solve.

O’BANNON: We’re talking to Tom about __

SOWELL: To which it is itself a point __

O’BANNON: We’re talking about a very small group. We’re talking about twelve percent of the families are not intact. Are not two-parent families at any one period __

SOWELL: Do you mean __ among welfare recipients __

O’BANNON: No.

SOWELL: __ or the public at large?

O’BANNON: Among the public at large. We’re talking about twelve percent of the families; twelve percent.

SOWELL: That’s right.

O’BANNON: That’s a small number. But __

SOWELL: We’ve got to build on welfare.

O’BANNON: We’re still talking about a significant component of the bottom twenty percent that are the bottom twenty percent. Whether they are above the poverty line or below the poverty line; they are still the bottom twenty percent. And the issue is: What is the responsibility of the other eighty percent; if any, towards those others?

SOWELL: There’s no program plan to eliminate there being a bottom twenty percent?

O’BANNON: No. But it intends to raise the bottom twenty percent so __

SOWELL: We’re raising them by having more __ by having more illegitimacy, more unemployment, by having __

O’BANNON: I’m not making them be __ have illegitimate children. I hope that’s clear.

SOWELL: Oh, I_I__ you don’t have to do that. You simply subsidize it.

FRIEDMAN: We, as human beings, don’t have a responsibility; but I hope we have a compassion and an interest in the bottom twenty percent. And I only want to say to you that the capitalist system, the private enterprise system in the 19th century did a far better job of expressing that sense of compassion than the governmental welfare programs are today. The 19th century, the period which people denigrate as the high tide of capitalism was the period of the greatest outpouring of Ella Mosner in charitable activity that the world has ever known. And one of the things I hold against the welfare system, most seriously, is that it has destroyed private charitable arrangements which are far more effective, far more compassionate, far more person-to-person in helping people who are really, for no fault of their own, in disadvantaged situations.

O’BANNON: I have to disagree with you though, because I think that the whole notion of private property was excluded, whole segments of society were excluded from the notion of private property in the 19th century; namely, women, idiots and imbeciles. And so, I don’t go back to the 19th century and hold it up as any paragon that we would want to replicate today.

MCKENZIE: Anyway. I want Milton now to come to your major prescription, which I know you don’t say is on the agenda for tomorrow, but it lies ahead; that is, the negative income tax. And I’m not sure people fully understand how it would work. We can’t, I think, go to the details of it, but I’d like to get a reaction around the panel first of all, is this a viable approach to the enduring problems of poverty? Negative income tax.

By Everette Hatcher III | Also posted in spending out of control | Comments (0)

We can no longer afford the welfare state (Part 4)

May 17, 2012 – 6:13 am

 Ep. 4 – From Cradle to Grave [4/7]. 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):

DISCUSSION

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

MCKENZIE: The discussion’s already underway here at the University of Chicago, so let’s join it.

DUMPSON: As I looked at the film, I had a growing sense of anger. Anger that that position failed to recognize that the system that was being attacked was necessary in our capitalistic, free enterprise system that by its own failure produces poverty, and therefore requires governmental intervention in the interest of those people caught in the traps of poverty. So, as I sat and looked at the film, and as I hear Dr. Friedman’s statement, I was aroused to the point, as I said, of anger because only half the story is told. We are really blaming again a victim, this time a system, the welfare system, for the failure of other systems to operate in the interest of people.

MCKENZIE: Let’s get other reactions now to that statement: “Trying to do good with other people’s money simply has not worked, the welfare system is rotting away the very fabric of society.” Tom Sowell.

SOWELL: My reaction was just the opposite from __ my anger was at what had been created in the city where I grew up, under very different conditions, during the period of capitalistic failure, during the period when there wasn’t this humanitarianism, and when it was possible for people to live better and to get out of that poverty. Now, I think someone who lived in the very same place where I lived would find it much harder to escape from that poverty because of all these things. Buildings were not abandoned like the buildings that we saw in that film when I lived in Harlem. The crime rate __ they’re all things that are blamed upon the failures of the previous method did not exist. I slept out on the fire escapes in Harlem. I would defy anybody to do that in any part of New York City today.

LAMPMAN: Traditionally in the United States we have tried to avoid some of the welfare trap that was referred to by denying eligibility to people who are able-bodied and not aged and so on. And we’ve therefore tried to close the welfare door to a good number of categories within the poor population. The second point that was emphasized and I think needs to be put in some perspective is that some, but not all, of what we might call welfare programs broadly, have this very strong take-back of benefits as you earn some more money and that I guess is what I would like to single out as the principal problem identified in the film but it is not common to any and all welfare programs that one might think of.

O’BANNON: When the family fails, when the private sector fails to create jobs at a fast enough rate you find that people are unemployed and drift into needing help in order to exist and the welfare system was created in the ’30’s to do exactly that. When the private sector, essentially, failed we have the development of a welfare system, and it’s not corrupting society, it is taking what society _ institutions have left behind: The family breaking up, the economy not expanding fast enough, the health system failing, the educational system not doing its job. We have untrained, unskilled people looking for jobs in a highly technical society or jobs that pay so low that people cannot in fact live at a decent level of humanity. I see the welfare system not corrupting, but in fact taking the remains and attempting to help people live in dignity.

MCKENZIE: So rotting away the fabric of society is not supported __ except perhaps by you, would you back that phrase or so.

SOWELL: Absolutely. You’re saying __ you’re talking about the failures of the other parts of society. What the welfare system and other kinds of governmental programs are doing is paying people to fail insofar as they fail they receive the money; insofar as they succeed, even to a moderate extent, the money is taken away. This is even extended into the school systems where they will give money to schools with low scores; insofar as the school improves its education the money is taken away, so that you are subsidizing people to fail in their own private lives and become more dependent upon the handouts.

O’BANNON: We have expectations built in today about the quality of life, the quality of jobs, the level if income for which one expects in return. Why? Because we look at the level around us that it takes us to have __

SOWELL: No, that’s not why. That’s not why. I may have all sorts of expectations, the question is: What can I do? If someone else is subsidizing my expectations, my expectations would be far higher. But insofar as the Center for Advanced Study was subsidizing my expectations a few years ago, I refused to work at UCLA for the normal full professor’s salary. Why should I when I can get the same money for being at the Center for Advanced Study with no hours, no duties and no classes.

MCKENZIE: Let’s look at another proposition in Milton’s case. The insidious effect on those who receive welfare. They lose their independence and dignity, are treated like children, and so on. Now, Dr. Dumpson, as a former Administrator of a major program, is that a great hazard?

DUMPSON: That is not a great hazard. As a matter of fact, that presumes that people get on welfare, stay on welfare, and therefore have the result that Dr. Friedman’s statement issues. The fact of the matter is that in our AFDC program throughout the country and particularly was this true in New York, there is a graduate __ a turnover of the welfare AFDC roles _ about a third of them go off each year. Now, if these people were so destroyed by the system, when they go off they wouldn’t go into employment, they wouldn’t hold employment, they wouldn’t stay off the roles for six months, eighteen months, twenty-four months, as long as they are able to stay off. So, there’s something wrong with that argument when one looks at people and what they do. People, you know, who are poor are no different from those of us who are not poor and their motivation for self-dependency, self-support and mobility in the economic scale is no different that those of __ than the motives we have, so that they will not let the system __ you remember, Dr. Friedman, the welfare rights organization who refused to let the system squash them down as it was attempting to do. We turned the policies around.

FRIEDMAN: You and I agree completely, that the people who are poor and are on welfare roles are no different from the rest of us. Of course not. They are human beings and they deserve every sympathy and every possibility of making their own way, but the welfare system makes them different.

DUMPSON: But you give them __

FRIEDMAN: It makes it in their interest to be different.

MCKENZIE: How do you account for them going off the roles, Milton?

FRIEDMAN: Oh, but figures are figures and you’ve got to be careful with figures. The fact that a third, there’s a turnover of a third does not mean that there aren’t half who are on all the time. People come on, go off; come on, go off. We’ve got to have the other figures __

DUMPSON: The latest statistic, Dr. Friedman, is that __

FRIEDMAN: __ fraction __

DUMPSON: __ 34 percent of the people on AFDC are on for five years or longer and when one thinks of the purpose of the AFDC program, which was the rearing and support of children, dependent children, minor children, I would submit to you that five years is not a terribly long time for a mother and children to have to be dependent if there’s no other source of income.

By Everette Hatcher III | Also posted in spending out of control | Comments (0)