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Milton Friedman on Social Security

As these remarks indicate, the Social Security program involves a transfer from the young to the old. To some extent such a transfer has occurred throughout history—the young supporting their parents, or other relatives, in old age. … The difference between Social Security and earlier arrangements is that Social Security is compulsory and impersonal—earlier arrangements were voluntary and personal. Moral responsibility is an individual matter, not a social matter. Children helped their parents out of love or duty. They now contribute to the support of someone else’s parents out of compulsion and fear. The earlier transfers strengthened the bonds of the family; the compulsory transfers weaken them.
Free to Choose
Book, 1980, Ch. 4 “Cradle to Grave”, p. 106
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Milton Friedman, “Free to Choose” (1980), Ch. 4 “Cradle to Grave”, p. 106. https://miltonfriedman.org/quotes/these-remarks-indicate-social-security-program-involves-1980

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  1. Have we not learned from the experience of the past century that private property is the key bulwark of personal freedom? Has that experience not shown how dangerous it is to transfer a larger and larger fraction of the productive assets of the country into the hands of a government bureaucracy?

    Context. From an article on President Clinton’s proposal that the government invest part of the Social Security funds in private equities. Just before, he estimates that had the whole Social Security surplus been invested in stocks since 1937, the trust fund would by the end of 1997 have owned more than half of all domestic corporations, and says the calculation shows how seriously government purchase of private securities would threaten our freedom.

    Social Security Socialism
    Column, 1999, The Wall Street Journal, January 26, 1999; reprinted with minor editorial changes in Hoover Digest 1999 No. 2
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  2. 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 Earth
    Column, 1999, The New York Times, January 11, 1999, as “Social Security Chimeras”; reprinted with minor editorial changes in Hoover Digest 1999 No. 2
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  3. In 1964, Barry Goldwater was much reviled for suggesting that participation in Social Security be voluntary. I thought that was a good idea then; I still think it is. I find it hard to justify requiring 100 percent of the people to adopt a government-prescribed straitjacket to avoid encouraging a few “lower-income individuals to make no provision for their old age deliberately, knowing that they would receive the means-tested amount.”

    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 words he quotes at the end are Martin Feldstein’s second reason for making contributions mandatory: that a means-tested program for the aged might encourage some lower-income individuals to make no provision for old age deliberately.

    The Biggest Ponzi Scheme on Earth
    Column, 1999, The New York Times, January 11, 1999, as “Social Security Chimeras”; reprinted with minor editorial changes in Hoover Digest 1999 No. 2
    Checked against the sourceRead the source

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