Milton Friedman on Welfare and the negative income tax
I 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.
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Milton Friedman, “Mr. Market” (Interview in Barron’s, August 24, 1998 (the questioner is identified only as Epstein); reprinted in Hoover Digest 1999 No. 1, 1998). https://miltonfriedman.org/quotes/negative-income-tax-only-substitute-all-welfare-1998
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He also said
Our problems have arisen from good people who are trying to do good, but trying to do good in a fundamentally flawed way. The welfare state is in many ways a noble construct, a noble concept. It's the concept that we ought to help our fellow men. … What flaws it is that it's one thing for you to help me out of your pocket. It's another thing for you to help me out of his pocket. And the fundamental flaw of the welfare state, in my opinion, is the idea that you should do good with somebody else's money.
Context. Right after saying that the strategic necessity is a change in the climate of opinion that substitutes a belief in individual responsibility for what he calls the false belief in social responsibility, and that the problems have not come from evil people or a conspiracy.
The Open MindInterview, 1977, The Open Mind, hosted by Richard Heffner, Episode “A Nobel Laureate on the American Economy” (May 3, 1977)Checked against the sourceWatch itA second function that governments have assumed and is appropriate for governments to assume is to help people who are in dire distress. We do have a situation in which individual citizens get into a situation, often through no fault of their own, in which they are in dire difficulty and one of those possible situations may be subject to very high medical expenses, but there is nothing special about that. Another reason for dire distress may be a flood that destroys a town or it may be an earthquake or it may be anything else. And in that sense there can be a role for government in assisting people and the terms ought to be the same, in my opinion, regardless of what is the cause.
Context. From a talk to physicians, published in Private Practice in July 1981, on the trend toward government control of medicine and the prospects for reversing it. Answering what the appropriate role of government in medicine is. The first function he names is enforcing laws against fraud and deception, as in every other field.
The Market and Human FreedomSpeech, 1981, Private Practice (July 1981); reprinted in the Congressional Record, Extensions of Remarks, September 9, 1981, pp. 19996 to 19997, introduced by Representative Larry McDonald of Georgia as “Professor Friedman’s recent article on this subject” in “Private Practice magazine for July 1981”, Congressional Record, September 9, 1981, p. 19997Checked against the sourceRead the originalSocial 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 transcript
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