Milton Friedman on government spending and deficits
What Friedman said about watching total government spending rather than the deficit, because spending is the real tax.
22 passages in the archive19 checked against the source3 not yet checked
In 1945–46, intellectual opinion was almost entirely collectivist. But practice was free market. Government was spending something like 20–25 percent of national income. But the ideas of people were all for more government. And so from 1945 to 1980, you had a period of galloping socialism.
The Romance of EconomicsInterview, 2006, Interview by Tunku Varadarajan, The Wall Street Journal; reprinted in Hoover Digest 2006 No. 4Checked against the sourceRead the transcriptI 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.
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 originalWhat is called a deficit is a form of taxation. It is a very bad form of taxation, but it is a form of taxation.
Why Government Is the ProblemJournal article, 1993, Hoover Institution Press, Essays in Public Policy no. 39, p. 16Checked against the sourceRead the originalThe true cost of government to the public is not measured by explicit taxes but by government spending. … Essentially every current piece of wealth in the United States has a hidden tax imposed on it because of the future obligation to pay those extra taxes. In effect, what you have are two kinds of taxes: the open, explicit taxes and the hidden taxes. And what's called a deficit is a hidden tax.
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 originalFrom the political point of view, increased spending may initially be designed to be temporary but few things become more permanent than temporary spending. Hence, the economists are in fact calling for a still higher level of government spending yet, in my view, reducing the scope of government is our most important single objective.
Interview with Milton FriedmanInterview, 1992, Federal Reserve Bank of Minneapolis, The Region, Interview by David Levy, June 1, 1992Checked against the sourceRead the transcriptThe first victory came in Tennessee on March 7, 1978, when a 2-to-1 majority approved an amendment to limit the “rate of growth” of state spending to the “estimated rate of growth of the state’s economy.”
A Progress ReportColumn, 1978, Newsweek (April 10, 1978); reprinted in the Congressional Record, Extensions of Remarks, April 4, 1978, pp. 8709 to 8710, introduced by Representative John H. Rousselot of California, who describes it as “his byline article which appeared in the April 10, 1978 issue of Newsweek”, Congressional Record, April 4, 1978, pp. 8709 to 8710Checked against the sourceRead the originalThe issues that will arise will be a continuation of those that have bothered us these past decades. The main ones seem to me to be as follows: 1. The appropriate relation between the level of taxes and the level of expenditures on the average of good and bad years. 2. Criteria for determining the fraction of national income that is appropriately spent through the Federal Government.
Statement to the Subcommittee on Fiscal PolicyTestimony, 1965, Fiscal Policy Issues of the Coming Decade: Statements by Individual Economists and Representatives of Interested Organizations, Subcommittee on Fiscal Policy, Joint Economic Committee, 89th Congress, 1st Session (1965), p. 55Checked against the sourceRead the originalWhy do we have inflation? Because we, the citizens, have demanded it. We have sent a message to Washington. We said, we want you to spend more on roads. We want you to spend more on health. We want you to spend more on education. But don't tax us for it. … And so the difference is paid for by the hidden tax of inflation, which is the only tax that can be imposed on the American people without anybody having to vote for it.
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 itInflation will not be stopped by words, only by actions. At the moment, we have the worst of two worlds. Nominal independence of the Federal Reserve without its effective exercise permits Congress and the President to evade responsibility for the creation of money to finance large government deficits.
Why Inflation PersistsColumn, 1977, Newsweek (October 3, 1977); reprinted in full in the Congressional Record, Extensions of Remarks, September 29, 1977, p. 31684, introduced by Representative Parren J. Mitchell of Maryland, who gives it as appearing “in the October 3, 1977, issue of Newsweek”, Congressional Record, September 29, 1977, p. 31684Checked against the sourceRead the originalJarvis-Gann has many defects. It is loosely drawn. It cuts only the property tax, which is by no means the worst tax. It does nothing to halt the unlegislated rise in taxes produced by inflation. Proposition 1 was a far better measure, and a revised version will be needed even if Jarvis-Gann is passed. Yet I strongly support Jarvis-Gann. It does cut taxes. It does raise obstacles to further increases in government spending. And it will not have the dire consequences its opponents threaten.
A Progress ReportColumn, 1978, Newsweek (April 10, 1978); reprinted in the Congressional Record, Extensions of Remarks, April 4, 1978, pp. 8709 to 8710, introduced by Representative John H. Rousselot of California, who describes it as “his byline article which appeared in the April 10, 1978 issue of Newsweek”, Congressional Record, April 4, 1978, pp. 8709 to 8710Checked against the sourceRead the originalKeep 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.
On a technical level, I believe that there is no persuasive evidence that, given the course of monetary policy and monetary aggregates, federal government deficits have any stimulative effect. They have a stimulative effect only insofar as they are financed by a more rapid increase in the quantity of money than would otherwise occur.
Interview with Milton FriedmanInterview, 1992, Federal Reserve Bank of Minneapolis, The Region, Interview by David Levy, June 1, 1992Checked against the sourceRead the transcriptOne down, 49 to go. That is the present state of the grassroots movement that Ronald Reagan started in California five years ago when he sponsored Proposition 1—a constitutional amendment to limit spending by the state government to a specified, and slowly declining, fraction of the personal income of the residents of California.
A Progress ReportColumn, 1978, Newsweek (April 10, 1978); reprinted in the Congressional Record, Extensions of Remarks, April 4, 1978, pp. 8709 to 8710, introduced by Representative John H. Rousselot of California, who describes it as “his byline article which appeared in the April 10, 1978 issue of Newsweek”, Congressional Record, April 4, 1978, pp. 8709 to 8710Checked against the sourceRead the originalIt is my view that it is desirable for the people to limit their government's budget, to decide how much in total they are willing to pay for their government. Having done this, it is desirable for them to delegate to their elected representatives the difficult task of dividing that budget among competing good proposals.
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. 14069Checked against the sourceRead the originalThat illustrates a general rule: If a private enterprise is a failure, it closes down—unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you to find exceptions.
Why Government Is the ProblemJournal article, 1993, Hoover Institution Press, Essays in Public Policy no. 39, p. 9Checked against the sourceRead the originalI would far rather have total federal spending at $200 billion with a deficit of $100 billion than a balanced budget at $500 billion. The thing we must keep our eye on is what government spends.
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 originalThere's a smokestack on the back of every government program.
The U.S. is still, fortunately, some way from a national health service. However, the rising costs of medical care—as government has expanded its role and bureaucracy has multiplied—presumably reflect an early stage of the process documented by Gammon.
Gammon’s “Black Holes”Column, 1977, Newsweek (1977); reprinted in the Congressional Record, Extensions of Remarks, November 30, 1977, p. 38195, introduced by Representative John Ashbrook of Ohio as “Mr. Friedman’s article on Gammon’s theory of bureaucratic displacement as it appeared in Newsweek.” The reprint gives no issue date, Congressional Record, November 30, 1977, p. 38195Checked against the sourceRead the originalThe vested interests are not some big bad people sitting on money bags; the vested interests are you and me. Each of us is strongly in favor of small measures that will benefit us and each of us is not too strongly opposed to any one small measure that will benefit someone else. We are not going to vote anybody out of office because he imposes a $3 a year burden on us. Consequently, when each measure is considered separately, there is considerable pressure to pass it.
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 originalThat is a widespread myth, that it is possible to spend money with nobody paying for it. You have everybody screaming that we ought to have new, bigger, more generous government programs. Where are we going to raise the money? Tax business. But business corporations can’t pay any taxes. A corporate executive may sign the check, but where does he get the money? From his stockholders or from his customers or from his employees. Unlike the federal government, he doesn’t have a printing press in his basement. So the only way he can pay money to the government is imposing a burden on somebody. Government cannot spend money at nobody’s expense.
Economic Myths and Public OpinionColumn, 1976, The Alternative: An American Spectator, vol. 9Not yet checkedRead the originalThere is no doubt who won the intellectual argument. There is no doubt that the received intellectual opinion of the world today is much less favorable towards central planning and controls than it was in 1947. What's much more dubious is who won the practical argument. The world is more socialist today than it was in 1947. Government spending in almost every Western country is higher today than it was in 1947, as a fraction of income, not simply in dollars.
Commanding Heights: Milton Friedman interviewInterview, 2000, PBS, “Where We Stand Today,” interview conducted October 1, 2000Checked against the sourceRead the transcriptWorld War II affirmed what everybody knew for a long time. If you print enough money and spend it you can create an appearance of activity and prosperity. That's what it confirmed. It did not confirm his theories about how you preserve full employment over a long time.
Commanding Heights: Milton Friedman interviewInterview, 2000, PBS, “On John Maynard Keynes,” interview conducted October 1, 2000Checked against the sourceRead the transcript
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