Milton Friedman on Government spending and deficits
On economic policy, I have requested the Council of Economic Advisers and the Office of Management and Budget to prepare a series of budgets for coming years that will cut government spending as a fraction of national income, eliminate deficits and reduce taxes. I shall recommend that Congress adopt such a budget policy. In addition, I am recommending to Congress that it limit the discretion of the Federal Reserve System, and instruct it to reduce the rate of monetary growth over the next few years to a level that is commensurate with the real growth of the economy.
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. The first of the policy changes his imagined President announces: lower spending as a share of national income, and a legislated rule for the Federal Reserve.
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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/cut-spending-limit-federal-reserve-1979
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He also said
We Americans are far wealthier today than we were 60 years ago. But we are less free. And we are less secure. When I graduated from high school in 1928, total government spending at all levels in the United States was a little over 10 percent of the national income. Two-thirds of that spending was state and local. … Today, total government spending at all levels is 43 percent of the national income, and two-thirds of that is federal, one-third state and local. The federal portion is 30 percent of national income, or about 10 times what it was in 1928.
Context. From a talk at the banquet celebrating the opening of the Cato Institute’s new building in 1993. He has just said that over the past sixty years the country has been “starving the market that has been working and feeding the market that has been failing”: the economic market, under the incentive of profit, against the political market, under the incentive of power.
The Real Free Lunch: Markets and Private PropertySpeech, 1993, Remarks at the banquet celebrating the opening of the Cato Institute’s new building, Washington, May 6, 1993 (Cato Policy Report, July/August 1993); reprinted in Toward Liberty: The Idea That Is Changing the World, ed. David Boaz (Cato Institute, 2002), p. 57Checked against the sourceFind the bookKeep your eye on one thing and one thing only: how much government is spending, because that is the true tax. Every budget is balanced. There is no such thing as an unbalanced federal budget. You're paying for it. If you're not paying for it in the form of explicit taxes, you're paying for it indirectly in the form of inflation or in the form of borrowing. The thing that you keep your eye on is what government spends. And the real problem is to hold down government spending as a fraction of our income. And if you do that, you can stop worrying about the deficit.
I believe along with Parkinson that government will spend whatever the tax system will raise plus a good deal more. Every step we take to strengthen the tax system, whether by getting people to accept payroll taxes they otherwise would not accept, or by cooperating in enacting higher income taxes and excise taxes or whatnot, fosters a higher level of government spending. That's why I am in favor of cutting taxes under any circumstances, for whatever excuse, for whatever reason.
Context. From a 1978 Policy Review article on the tax-limitation movement, written the day after California voters approved Proposition 13 (the Jarvis-Gann amendment). Its opening reworks his April 1978 Newsweek column “A Progress Report”; the passages quoted from it here are from the later, new part of the argument. Parkinson is C. Northcote Parkinson, the British historian known for “Parkinson’s Law”.
The Limitations of Tax LimitationJournal article, 1978, Policy Review (The Heritage Foundation); reprinted in the Congressional Record, Extensions of Remarks, June 7, 1979, pp. 14069 to 14071, introduced by Representative Hamilton Fish, Jr. of New York as “an article by Dr. Friedman published in Policy Review, the quarterly journal of The Heritage Foundation”, Congressional Record, June 7, 1979, p. 14070Checked against the sourceRead the original
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