Milton Friedman on Welfare and the negative income tax
Other costly social programs—welfare, job creation, health and so on in endless variety—were enacted for the noblest of motives. Yet, they have repeatedly failed to achieve their intended objectives.
Context. From a 1979 Newsweek column. The column is framed as a daydream: he imagines President Carter giving a televised talk, and everything inside the talk is his own recommendation voiced through that imagined Carter, not anything Carter said. From the imagined talk’s review of what the expansion of federal government since the New Deal had produced, after agriculture and housing.
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Milton Friedman, “What Carter Should Do” (Newsweek, June 18, 1979; reprinted in the Congressional Record, Extensions of Remarks, June 13, 1979, p. 14740, introduced by Representative G. William Whitehurst of Virginia, who cites “the June 18, 1979, issue of Newsweek”, 1979), Congressional Record, June 13, 1979, p. 14740. https://miltonfriedman.org/quotes/costly-social-programs-noblest-motives-failed-1979
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He also said
Social Security, as we call it, is a combination of two separate programs, neither of which would have a chance of being enacted on its own. One program is a program of a flat-rate tax on wages up to a maximum: a regressive tax imposed at one of the worst places in the economic structure, where it introduces a gap between what the worker receives and what it costs the employer. You cannot conceive of that tax being enacted by itself as part of a financing program. The second component is a system of payments of subsidies, which, again, I cannot believe could have been enacted by itself. It is a system in which the amount a person receives depends on a whole variety of circumstances, some of which may be relevant and some of which may not be relevant to what you would like to have a subsidy program do. But you would never enact a subsidy program in which the largest subsidies go to the people who have earned the highest incomes. Yet when you tie the two together you have a sacred cow. I have always said it is one of the greatest marketing miracles of this century.
Context. From an August 1998 interview in Barron’s, reprinted in the Hoover Digest as “Mr. Market.” Asked whether the United States should privatize Social Security as Chile had done.
Mr. MarketInterview, 1998, Interview in Barron’s, August 24, 1998 (the questioner is identified only as Epstein); reprinted in Hoover Digest 1999 No. 1Checked against the sourceRead the transcriptLet me take the example which today is the greatest sacred cow of them all, Social Security. Was there an overwhelming demand for Social Security in the 1930s when the law was adopted? Far from it. There was no public demand for it. It had to be sold. How was it sold? By the slickest devices of Madison Avenue, by imaginative packaging and deceptive labeling. Social Security was sold as an insurance scheme. It is not an insurance scheme. There is very little relationship to the amount of money any one individual pays and the amount of money he is entitled to receive. Social Security is a combination of a bad tax system with a bad way of distributing welfare.
Context. From his 1977 lecture “Myths That Conceal Reality.” Just before, he says that the measures that expanded government were adopted without any underlying public demand; the demand had to be created.
Milton Friedman Speaks - Myths That Conceal RealitySpeech, 1977, at 26:02Checked against the sourceWatch itI favor a negative income tax if and only if it is a substitute for all other welfare programs. I do not favor a negative income tax being tacked on to and in addition to the other programs. As so often happens, you have the problem of how do we get from where we are to where we would like to be? In my ideal world there would be no negative income tax. It would be a world in which the great bulk of people are able to earn their living in the market and in which there are private charitable organizations that help those who cannot. But we are not at that world and we can’t go to that world overnight. We have through our welfare programs essentially assumed responsibility for the lives of a large number of people. It is unconscionable simply to dump them in the street overnight. It is tempting to say you should completely end welfare, period. But you can’t do that.
Context. From an August 1998 interview in Barron’s, reprinted in the Hoover Digest as “Mr. Market.” Asked whether he would still favor a negative income tax that would put an income floor under everyone. The negative income tax, his proposal since the early 1960s, would pay people with low incomes a fraction of the amount by which their income falls short of a set level.
Mr. MarketInterview, 1998, Interview in Barron’s, August 24, 1998 (the questioner is identified only as Epstein); reprinted in Hoover Digest 1999 No. 1Checked against the sourceRead the transcript
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