Milton Friedman on Regulation, licensing, and bureaucracy
The Rural Electrification Administration was established to bring electricity to farms in the 1930s, when about 80 percent of the farms did not have electricity. When 100 percent of the farms had electricity, the REA shifted to telephone service. Now 100 percent of the farms have telephone service, but the REA goes merrily along. Suppose we abolish the REA, which is just making low-interest loans to concentrated interests, mostly electric and telephone companies. The people of the United States would be better off; they’d save a lot of money that could be used for tax reductions.
Context. From a talk at the banquet celebrating the opening of the Cato Institute’s new building in 1993. He has said that what the country needs is “widespread benefits and concentrated sacrifice,” and gives this as the first of several examples of such free lunches in the federal budget.
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Milton Friedman, “The Real Free Lunch: Markets and Private Property” (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. 55. https://miltonfriedman.org/quotes/rural-electrification-administration-goes-merrily-along-abolish-1993
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The link between the payroll tax and benefit payments is part of a confidence game to convince the public that what the Social Security Administration calls a social insurance program is equivalent to private insurance, in that, in the Administration’s words, “the workers themselves contribute to their own future retirement benefit by making regular payments into a joint fund.” Balderdash. Taxes paid by today’s workers are used to pay today’s retirees. If money is left over, it finances other government spending—though, to maintain the insurance fiction, paper entries are created in a “trust fund” that is simultaneously an asset and a liability of the government. When the benefits that are due exceed the proceeds from payroll taxes, as they will in the not very distant future, the difference will have to be financed by raising taxes, borrowing, creating money, or reducing other government spending. And that is true no matter how large the “trust fund.” The assurance that workers will receive benefits when they retire does not depend on the particular tax used to finance the benefits or on any “trust fund.” It depends solely on the expectation that future Congresses will honor promises made by earlier Congresses—what supporters call “a compact between the generations” and opponents call a Ponzi scheme.
Context. From an article on proposals to replace part of Social Security with individual investment accounts, written while the federal budget was in surplus. The quotation inside the passage is from the Social Security Administration.
The Biggest Ponzi Scheme on EarthColumn, 1999, The New York Times, January 11, 1999, as “Social Security Chimeras”; reprinted with minor editorial changes in Hoover Digest 1999 No. 2Checked against the sourceRead the sourceAnother example illustrates Parkinson’s law in agriculture. In 1945 there were 10 million people, either family or hired workers, employed on farms, and the Department of Agriculture had 80,000 employees. In 1992 there were 3 million people employed on farms, and the Department of Agriculture had 122,000 employees.
Context. From a talk at the banquet celebrating the opening of the Cato Institute’s new building in 1993, in a section on “free lunches in the budget”: programs that could be cut to the benefit of nearly everyone. His previous example was the Rural Electrification Administration, which kept going after every farm had electricity and a telephone.
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. 55Checked against the sourceFind the bookI favor it on economic grounds because it enables the ultimate consumer—the ultimate individual, you and me—to decide how the money should be used. You know, it makes no sense for me to send my money to Washington to have somebody in Washington decide how to use it. I’d rather decide how to use it myself—whether for charity or for welfare or for other purposes. So that’s the first and most important argument. But the political argument for it is that it’s the only way to keep Congress from spending it. … That’s why for a long time now I have been in favor of any tax cut, under any circumstances, in any way, in any form whatsoever.
Context. Asked about the third option for handling the federal budget surplus, tax cuts, and whether he favors it above all. The ellipsis marks a question from Peter Robinson, “Only if Congress doesn’t have the money can it be prevented from spending it?”, and the word “Right.” with which his answer begins.
Friedman on the SurplusInterview, 2001, Interview by Peter Robinson for Uncommon Knowledge, January 17, 2001; adapted in Hoover Digest 2001 No. 2Checked against the sourceRead the transcript
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