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Cradle to Grave: Part 2

This is part of a series on Milton Friedman’s “Free to Choose.” In my previous post I began to discuss the shift of public perception about the role of government in America from one that merely protects the individuals to one that also provides for the individuals. Although he does not use the term, Friedman considers Social Security to be a Ponzi scheme. He writes that if Social Security were a private company “that engaged in such labeling and advertising would doubtless be severely castigated by the Federal Trade Commission.” It is “Orwellian doublethink” to actually believe that people receive the “benefits” from their own labor during their time in the workforce. The fact that, today, we speak of the “trust fund” running out by the 2030s illustrates this truth. If Social Security was what it advertised itself to be, it would mean that the trust fund is continually replenished from people’s own labor for their own retirement. There would never actually be even the talk of it running out. Yet here we are, having to address that issue. Three other topics that Friedman picks apart are the public assistance programs, housing subsidies and medical care. All three are instances where the government is ultimately doing more harm than good. So why have all of these well-intentioned programs been failures? Friedman points to four ways you can spend money. You can A) spend your own money on yourself, B) spend your money on someone else, C) spend someone else’s money on yourself, and D) spend someone else’s money on someone else. The order of efficiency is A, B, C and D. Watch this clip for Friedman’s explanation: Here’s a nice chart that simplifies the explanation: Spending Money Chart All welfare programs fall into either C or D, the least two efficient of the four categories. But the fact that the bureaucrats and politicians are spending someone else’s money is not even the whole story. “The lure of getting someone else’s money is strong.” It leads to corruption; and if not blatant corruption, they will try and create a way that somehow makes it legal for them to acquire the money. We all know of these instances, many brought to light by the media and many still uncovered. So how do we stop the spending madness? Friedman correctly notes that we cannot abolish these programs overnight. They must be phased out. He suggests two simple ways of doing this. First, combine all welfare programs into a single comprehensive program with cash payouts as income supplement. This is Friedman’s model of a Negative Income Tax, which you can quickly learn about here. The major upside to this proposal is that it would eliminate bureaucracies bar one (the one in charge of dispensing the payouts). There is less corruption because there are no organizations for which the payouts go to, only individuals. It appears as though Friedman understands his proposed model isn’t perfect, but it is more efficient than the current model. Second, phase out Social Security by allowing people to opt out so they can make their own arrangements for retirement. Friedman provides six steps to do this. Some of those steps are to honor the existing payments due to the elderly, repeal the payroll tax, and to cease payments using exclusive funds from laborers (eliminating the SS tax taken from our individual paychecks). Friedman nicely summarizes the severe problems of the welfare system: “They weaken the family; reduce the incentive to work, save, and innovate; reduce the accumulation of capital; and limit our freedom.” The last thing we need are governmental regulations to solve these problems. What we need are the elimination of the initial regulations and the regulations that regulate the regulations.