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Milton Friedman...Myths That Conceal Reality · Gil I Am

0:11
Speaker 1: Gives me the great pleasure to present to you today,
0:14
Speaker 1: Professor Milton Friedman, If you're much, I want to talk
0:32
Speaker 1: today about the contrast between myths that are widely believed
0:42
Speaker 1: by the public at large and what I regard as
0:45
Speaker 1: a reality which typically contradicts those myths. As you are
0:51
Speaker 1: all aware, there has been a drastic shift in public
0:57
Speaker 1: attitudes and public opinions in the past fifty years or
1:01
Speaker 1: so with respect to the role of the individual on
1:04
Speaker 1: the one hand, and the role of government and collective
1:07
Speaker 1: institutions on the other. There has been a shift in
1:10
Speaker 1: the philosophy and attitudes of the public from a belief
1:15
Speaker 1: in individual responsibility, a belief in a society in which
1:20
Speaker 1: the role of government was as an umpire, to a
1:25
Speaker 1: belief in a society in which the emphasis is on
1:29
Speaker 1: social responsibility and the role of government as big brother
1:34
Speaker 1: and protector of the individual. As always, when such shifts
1:39
Speaker 1: arise in public opinion, they are largely produced and reinforced
1:46
Speaker 1: by the development of myths about prior experience. Someone once wrote,
1:54
Speaker 1: and I'm not sure who it was, that a myth
1:57
Speaker 1: is like an air mattress. There's nothing in it, but
2:02
Speaker 1: it's wonderfully comfortable, and deflation causes an uncomfortable jolt. Well,
2:10
Speaker 1: my purpose today is to give you that jolt. When
2:16
Speaker 1: myths get established and are adopted, they tend to be
2:20
Speaker 1: so strongly held, they tend to become so much a
2:24
Speaker 1: part of you that when anyone comes along and differs
2:28
Speaker 1: with them and contradicts them, he risks automatically being dismissed
2:33
Speaker 1: as a crackpot. But I shall nonetheless take the risk
2:39
Speaker 1: of being dismissed as a crackpot, because it seems to
2:43
Speaker 1: me so urgent that we deflate these myths, recognize what
2:48
Speaker 1: the reality is, in order to be able to provide
2:51
Speaker 1: a basis for a change in our philosophy, a reversal
2:57
Speaker 1: of the direction of our thought. In my opinion, if
3:00
Speaker 1: we do not do so, if we continue on the
3:03
Speaker 1: road we have been going, if we continue to rely
3:06
Speaker 1: more and more on government and less and less on
3:08
Speaker 1: the individual, we are condemned to a future of tyranny
3:13
Speaker 1: and misery. And therefore it seems to me essential for
3:16
Speaker 1: the future of this country that we recognize these myths
3:20
Speaker 1: for what they are and just our thinking to a
3:26
Speaker 1: correct perception of our present and our pest. I'm encouraged
3:32
Speaker 1: in this venture by another quotation, one which comes from
3:38
Speaker 1: a nineteenth century American humorist by the name of Josh Billings,
3:42
Speaker 1: who wrote somewhere, it ain't what people know that causes trouble.
3:48
Speaker 1: It's what they know that ain't so. And that's when
3:52
Speaker 1: I'm going to devote this talk to to trying to
3:55
Speaker 1: tell you about some things you know that ain't so.
3:59
Speaker 1: I am going to try to cover five myths that
4:02
Speaker 1: are part of your thinking, and if they're not part
4:05
Speaker 1: of your thinking, they will tend to become so after
4:07
Speaker 1: you take your first course in American history. The first
4:13
Speaker 1: of those myths is a robber baron myth, the myth
4:17
Speaker 1: that somehow or other, in the nineteenth century there was
4:21
Speaker 1: an era of rugged, unrestrained individualism, in which heartless monopoly
4:26
Speaker 1: capitalists exploited the poor unmercifully and ground them beneath their heels.
4:33
Speaker 1: The second myth I'm going to talk about is a
4:35
Speaker 1: Great Depression myth, the myth that the Great Depression from
4:39
Speaker 1: nineteen twenty nine until the late thirties was produced by
4:43
Speaker 1: a failure of private enterprise. The third myth I want
4:46
Speaker 1: to talk about is the demand for government service myth,
4:51
Speaker 1: the myth that government has had a step in because
4:55
Speaker 1: of a failure of the private market and a great
4:58
Speaker 1: widespread demand for government services. The fourth myth I'm going
5:04
Speaker 1: to talk about was suggested by mister Eccles and his
5:08
Speaker 1: introduction It's a free lunch myth, the myth that there
5:11
Speaker 1: is such a thing as a free lunch. And the
5:14
Speaker 1: final myth I want to talk about is the robin
5:16
Speaker 1: Hood myth, the myth that somehow or other, government operates
5:20
Speaker 1: by taking money from the rich and giving it to
5:22
Speaker 1: the poor. Let me start with the first of those myths,
5:27
Speaker 1: the robber Baron myth, the myth that in the nineteenth
5:31
Speaker 1: century was a period in which the rich became richer
5:34
Speaker 1: and the poor poorer. That it was a century in
5:37
Speaker 1: which you had a conflict between wall street and the workingman.
5:43
Speaker 1: That it was a period in which, particularly the farmers
5:46
Speaker 1: of the Middle West were being ground beneath the rapacious
5:52
Speaker 1: activities of the wall street financiers, in which there was
5:56
Speaker 1: widespread farm distress and misery. Now, this myth had its
6:00
Speaker 1: origins in the nineteenth century. It produced the widespread greenback
6:06
Speaker 1: movement that you will learn about in your history books.
6:09
Speaker 1: A Party, which at one time reached significant size, a
6:14
Speaker 1: party devoted to the idea that all of the problems
6:17
Speaker 1: of the time could be solved if only the government
6:20
Speaker 1: would print enough of those nice pieces of paper which
6:24
Speaker 1: are laia colored green on the back, in which are
6:26
Speaker 1: called greenbacks. It was a period that also gave rise
6:30
Speaker 1: to the free silver movement, to WILLIAMS Jennings Bryan, the
6:34
Speaker 1: silver tongued orator from North Platt, if I remember rightly
6:38
Speaker 1: from these areas, who gave his famous speech on the
6:43
Speaker 1: Cross the Gold in eighteen ninety six in Chicago at
6:46
Speaker 1: the Democratic Convention, in which he asked whether mankind shall
6:50
Speaker 1: be crucified on across the Gold, a speech which got
6:54
Speaker 1: him the presidential nomination of the Democratic Party, and he
6:58
Speaker 1: subsequently was a nominee of the of the Democratic Party
7:02
Speaker 1: for several subsequent elections, fortunately never elected. That was a myth,
7:11
Speaker 1: what was the reality. The reality is that there is
7:16
Speaker 1: almost no period in human history which saw as rapid
7:21
Speaker 1: and widespread and increase in the well being of the
7:24
Speaker 1: ordinary man as a nineteenth century. That was a period
7:30
Speaker 1: when millions of people from all over the world streamed
7:33
Speaker 1: to these shores. They came here with empty hands, in
7:38
Speaker 1: the hope and the belief that they could make a
7:39
Speaker 1: better life for themselves than their children, and they succeeded.
7:44
Speaker 1: I suspect that most of the people in this room
7:48
Speaker 1: who are American residents and citizens today are descendants of
7:54
Speaker 1: the people who came to these shores in that period.
7:57
Speaker 1: I know, to take the immediate local case, the Eccles
8:01
Speaker 1: family derives from a Scotsman who came to this country
8:08
Speaker 1: in the middle of the nineteenth century. My parents came
8:12
Speaker 1: here in the eighteen nineties from a part of Europe
8:16
Speaker 1: which is today part of the Soviet Union, although at
8:18
Speaker 1: that time it was part of Hungary, and I suspect
8:21
Speaker 1: most of the people in this room have similar background. Now,
8:25
Speaker 1: do you suppose those people kept coming to these shores
8:28
Speaker 1: in order to be exploited? Do you think they came
8:31
Speaker 1: here to be ground under the heels of rapacious monopoly capitalists.
8:35
Speaker 1: Not a bit of it. A few people might have
8:38
Speaker 1: been led here under misapprehension. You conceivably could have had
8:42
Speaker 1: an initial inflow of people who thought they were going
8:46
Speaker 1: to improve their lot and ended up being worse off.
8:50
Speaker 1: But you would not have had a continuing inflow. They
8:52
Speaker 1: would not have sent back to the old country for
8:55
Speaker 1: their relatives and friends. You would not have had a
8:58
Speaker 1: flow of millions upon millions year after year. And of
9:02
Speaker 1: course they were not exploited, they were not ground under
9:05
Speaker 1: the hill. They got jobs. They spread out west to
9:08
Speaker 1: the middle west, to the far west, to where we
9:10
Speaker 1: are now, and they made of what was a desolate
9:14
Speaker 1: country a country that was prosperous and green and productive,
9:19
Speaker 1: and improved their own lot. With respect to agriculture in particular,
9:25
Speaker 1: that was a period when the number of farmers increased.
9:29
Speaker 1: It was a period when the price of farmland rose. Now,
9:34
Speaker 1: of course, then is now every farmer would have liked
9:38
Speaker 1: it better if he had done still better. What happened then,
9:42
Speaker 1: of course, was that the spread of farms, increasing productivity,
9:48
Speaker 1: the development of machinery, the bringing under the plow of
9:53
Speaker 1: productive land led to a great increase in production, which
9:57
Speaker 1: led to a decline in the prices of farm products.
10:00
Speaker 1: So it's true the prices of farm products went down,
10:04
Speaker 1: but that was a sign of success. It was not
10:06
Speaker 1: a sign of failure. And the evidence that it was
10:10
Speaker 1: a sign of success was arise in the price of farmland.
10:15
Speaker 1: After all, if this decline in the price of products
10:19
Speaker 1: had been a sign of failure, if it had been
10:22
Speaker 1: an indication that the farmer was being ground under the
10:24
Speaker 1: heel of Wall Street, why would people have been willing
10:28
Speaker 1: to pay higher and higher prices for the land from
10:30
Speaker 1: which those crops were produced. So the actual story is
10:35
Speaker 1: one of a great growth of productivity and agriculture, a
10:38
Speaker 1: great development of agriculture in this country. If we turned
10:44
Speaker 1: to the to the charge that that was a period
10:50
Speaker 1: of heartlessness, a period in which the rich were willing
10:55
Speaker 1: to say, let the public be damned, as one man
10:59
Speaker 1: was quoted incorrectly as saying, if we turned to that charge,
11:04
Speaker 1: let me call to your attention to the nineteenth century,
11:08
Speaker 1: the period when we came the closest we've ever come
11:11
Speaker 1: to pure unrestrained individualism, a period when government spending, the
11:16
Speaker 1: spending of the federal government in Washington amounted to less
11:21
Speaker 1: than three percent of a national income, when essentially you
11:24
Speaker 1: had no restrictions on immigration and few restrictions on economic activity.
11:29
Speaker 1: Let me point out that that was also the period
11:31
Speaker 1: of the greatest flowering of charitable activity in the United States.
11:37
Speaker 1: That was a period when you had the establishment of
11:40
Speaker 1: so many independent private schools and colleges around the country.
11:44
Speaker 1: It was a period when the private, nonprofit alamotionnary hospitals
11:51
Speaker 1: grew and sprouted in every city in the land. It
11:55
Speaker 1: was a period of the Carnegie Libraries. It was a
11:57
Speaker 1: period of the founding of the Society for the prevent
12:00
Speaker 1: Cruelty to Animals. You name it and you will find
12:04
Speaker 1: that the charitable emotionary activities date back to the period
12:09
Speaker 1: of the nineteenth century. So the robber baron myth is
12:14
Speaker 1: a myth, one that should be deflating. It gets its
12:18
Speaker 1: appeal from a common fallacy, from the fallacy that one
12:24
Speaker 1: man's gain must be another man's loss. Of course, it
12:27
Speaker 1: is true that many men became wealthy during that period.
12:31
Speaker 1: There were robber barons. There always are robber barons. People
12:34
Speaker 1: are people, Some are good, some are bad, some are
12:37
Speaker 1: in between, and of course some people did try to
12:42
Speaker 1: mistreat other people. That is part of the course of history, unfortunately.
12:48
Speaker 1: But the main part of the starting is that the
12:53
Speaker 1: process whereby some people became wealthy was also the process
12:57
Speaker 1: which opened up the country and provided opportunity for millions
13:01
Speaker 1: of other people to have a modest competence, to be
13:04
Speaker 1: able to improve their own lot. It was the robber
13:07
Speaker 1: barons who were instrumental in building the railroads that joined
13:11
Speaker 1: the country together, who are instrumental in developing the industries
13:15
Speaker 1: of this country, and in thereby providing the opportunities for
13:19
Speaker 1: the ordinary man to improve his lot on life. Everybody
13:23
Speaker 1: can benefit. You can have some people become wealthy, not
13:27
Speaker 1: at the expense of other people, but by enabling other
13:31
Speaker 1: people to become wealthy. We had robber barons then, and
13:35
Speaker 1: we have robber barons today. But there's a big difference
13:39
Speaker 1: between the robber barons then and the robber barons today.
13:42
Speaker 1: The robber barons then primarily could get their money only
13:47
Speaker 1: if people freely gave it to them. They got their
13:50
Speaker 1: money by selling a service, and nobody had to buy it,
13:53
Speaker 1: and if people bought it, it was because it was
13:55
Speaker 1: a better service than it was before. The robber barons
13:59
Speaker 1: today are in large part able to get their money
14:02
Speaker 1: by sending a policeman to take the money out of
14:05
Speaker 1: your pocket. Now that's a figurative expression on a literal expression.
14:09
Speaker 1: But how do you become wealthy today? By getting government
14:13
Speaker 1: assistance to mention only one very famous example, by getting
14:20
Speaker 1: government to assign you some TV licenses or by getting
14:30
Speaker 1: anyone of a large variety of other sources of government support.
14:36
Speaker 1: If you look at where modern wealth comes from, it
14:40
Speaker 1: almost always comes from political influence, which enables you to
14:44
Speaker 1: get benefits at the expense of the public at large.
14:48
Speaker 1: Now that is a zero sum game. When the money
14:52
Speaker 1: is transferred from some to others through force and coercion
14:56
Speaker 1: and the taxpayer, then it need not be that the
14:59
Speaker 1: one man's be is also the other man's benefit. Then
15:03
Speaker 1: it can, and often is, that both parties that the
15:08
Speaker 1: party who gains gains at the expense of the party
15:10
Speaker 1: who pays. So robber barons will always be with us.
15:14
Speaker 1: The crucial question is whether we have a form of
15:17
Speaker 1: economic organization in which one robber baron keeps the other
15:23
Speaker 1: robber baron in check, or whether we have a form
15:26
Speaker 1: of economic and political organization in which one robber baron
15:30
Speaker 1: can help the other robber baron at the expense of
15:32
Speaker 1: the public. I want to turn to the second of
15:35
Speaker 1: these myths, the Great Depression myth. There is hardly any
15:39
Speaker 1: view that is more widespreadent then the view that somehow
15:43
Speaker 1: or other, the Great Depression was produced by a failure
15:46
Speaker 1: of private business. That view is held not only by
15:51
Speaker 1: those who are in favor of greater role of government.
15:55
Speaker 1: It is held by almost everybody. I venture to suggest
15:58
Speaker 1: that if you go to any bankers, the peace people
16:00
Speaker 1: who are here today at this banking conference, and if
16:03
Speaker 1: you talk to them, I venture to say nine out
16:05
Speaker 1: of ten of them, if they didn't hadn't heard what
16:09
Speaker 1: I'm going to send, that nine out of ten of
16:14
Speaker 1: them would say, well, of course, the Great Depression was
16:18
Speaker 1: a failure of private business. It was due to an
16:21
Speaker 1: over extension over speculation in the nineteen twenties. Or it
16:25
Speaker 1: was due to an excessive concentration of wealth in the
16:28
Speaker 1: hands of the wealthy at the expense of the poor
16:31
Speaker 1: in the nineteen twenties, or it was due to the
16:33
Speaker 1: spectative investment abroad, or whatnot. But it was a failure
16:37
Speaker 1: of private business, and government had to step in in
16:41
Speaker 1: order to rescue private business from its own failure. Nothing
16:46
Speaker 1: could be farther from the truth. The Great Depression was produced.
16:51
Speaker 1: In my opinion, and I may say this is not
16:54
Speaker 1: a random opinion. I will be glad to refer you
16:57
Speaker 1: to a several hundred page book in which it is documented.
17:01
Speaker 1: I won't tell you who the author is mister Eccles
17:07
Speaker 1: did that it was produced. The Great Depression was produced
17:13
Speaker 1: by a failure of government, by a failure of monetary policy.
17:17
Speaker 1: It was produced by a failure of the federal reserve
17:20
Speaker 1: system to act in accordance with the intentions of those
17:24
Speaker 1: who established it. It was produced by a failure of
17:28
Speaker 1: the Federal reserve system, despite the presence of knowledge on
17:33
Speaker 1: the part of many of the people in the system
17:36
Speaker 1: about the right course of action. It's interesting to speculate
17:40
Speaker 1: for a moment about why this myth is so widespread.
17:44
Speaker 1: The answer is really very simple. In this case, private
17:49
Speaker 1: enterprize has no press agents, the free market has no
17:54
Speaker 1: press agents. The government has a great many press agents,
17:58
Speaker 1: the Federal Reserve has a great many press agents. And
18:02
Speaker 1: the Federal Reserve, of course, would never admit, never proclaim
18:06
Speaker 1: that it produced the Great Depression. On the contrary, and again,
18:10
Speaker 1: I don't mean to be criticizing individuals. We're talking about
18:16
Speaker 1: the way institutions operate. You and I are the same
18:19
Speaker 1: as all the rest of us. We're all the same.
18:22
Speaker 1: The hardest thing in the world is for anybody to
18:24
Speaker 1: admit that he made a mistake. If any one of
18:27
Speaker 1: us makes a mistake. We can always find somebody else
18:30
Speaker 1: to blame. And if you read, as I have, for
18:34
Speaker 1: my sins had to read the annual reports of the
18:38
Speaker 1: Federal Reserve System over a fifty year period, there's only
18:43
Speaker 1: one element of humor that lightens that test, and that
18:47
Speaker 1: is the cyclical fluctuation and the powers of the Federal Reserve.
18:54
Speaker 1: In a good year, when things are good, when the
18:56
Speaker 1: economy is booming, you will read that the Federal Reserve,
19:00
Speaker 1: by its wise policy, by its efficacious management of money,
19:05
Speaker 1: has produced this fine situation. However, let things get bad,
19:11
Speaker 1: and all of a sudden the tone of the annual
19:13
Speaker 1: report is different. Then you discover that despite the best
19:17
Speaker 1: efforts of the Federal Reserve, outside forces combined to produce difficulties.
19:26
Speaker 1: Even at the depth of the depression. In nineteen thirty three,
19:31
Speaker 1: when in the spring of that year, the Federal Reserve System,
19:37
Speaker 1: which had been established in order to prevent banking panics
19:40
Speaker 1: and keep banks from closing, when the Federal Reserve System
19:43
Speaker 1: itself closed its doors and you had a banking holiday
19:47
Speaker 1: for seven days, and when over the previous three years
19:53
Speaker 1: a third of the banks of this country closed their
19:56
Speaker 1: doors and went broke because in my opinion of the
20:01
Speaker 1: poor policy followed by the Federal Reserve System even in
20:05
Speaker 1: nineteen thirty three. If you read the annual report, you
20:07
Speaker 1: will discover how much worse things would have been if
20:09
Speaker 1: the Federal Reserve hadn't behaved so well. Now, as I say,
20:14
Speaker 1: I don't blame the members of the Federal Reserve for that.
20:17
Speaker 1: Any one of us would do the same thing. We
20:18
Speaker 1: have to find somebody to blame. But as an objective's scholar,
20:23
Speaker 1: I can tell you what the facts are. The facts
20:26
Speaker 1: were that from nineteen twenty nine to nineteen thirty three,
20:32
Speaker 1: the total quantity of money in the United States, the
20:35
Speaker 1: amount of currency, the amount of bank deposits, what mister
20:40
Speaker 1: Ecchels referred to as M two. That total amount of
20:43
Speaker 1: money declined by one third. The total number of banks
20:49
Speaker 1: went down by And why did the quantity of money decline?
20:53
Speaker 1: It declined because the Federal Reserve system failed to prevent
20:57
Speaker 1: the decline. The Federal Reserve system could have prevented the
21:00
Speaker 1: decline at all times. There never was a moment during
21:04
Speaker 1: that period when the Federal Reserve did not have the
21:07
Speaker 1: power to prevent the decline in the quantity of money.
21:10
Speaker 1: If it had prevented the decline in the quantity of money,
21:13
Speaker 1: you might still have had a recession, but it would
21:16
Speaker 1: have been a garden variety of recession. It would have
21:18
Speaker 1: been over in the middle of nineteen thirty or early
21:21
Speaker 1: in thirty one at the latest. It would not have
21:23
Speaker 1: been the major catastrophe not only for this country but
21:27
Speaker 1: throughout the rest of the world. The Moreover, this is
21:33
Speaker 1: not only hindsight. At all times, the people at the
21:39
Speaker 1: Federal Reserve Bank of New York and at a number
21:43
Speaker 1: of other banks were pleading with the Federal Reserve Board
21:46
Speaker 1: in Washington to do the right thing. At all times,
21:50
Speaker 1: there were people in Congress who were arguing that the
21:53
Speaker 1: Federal Reserve System should take a different course. At all times,
21:58
Speaker 1: there were outside commentators. One of the Canadian banks was
22:03
Speaker 1: particularly prescient, but there were other commentators who were pointing
22:07
Speaker 1: out the disastrous effects on the American economy of the
22:11
Speaker 1: restrictive policies that the Federal Reserve System was following and
22:15
Speaker 1: which was causing was permitting and facilitating a whole series
22:19
Speaker 1: of bank runs. So the Great Depression was not produced
22:23
Speaker 1: by a failure of business. On the contrary, it was
22:27
Speaker 1: produced by a failure of government, and a failure of
22:30
Speaker 1: government in an area in which responsibility had been assigned
22:35
Speaker 1: to government since the founding of this country. The Constitution
22:39
Speaker 1: of the United States. It gives Congress the power to
22:43
Speaker 1: coin money and set the value thereup. And it was
22:46
Speaker 1: in the management of this fundamental function of government that
22:50
Speaker 1: government failed and produced the Great depression. We have learned
22:55
Speaker 1: from that failure. The Federal Reserve will not fail in
22:58
Speaker 1: the same way again. This time it will fail in
23:01
Speaker 1: a different way. This time it has been failing not
23:08
Speaker 1: by producing a great depression, but by producing an inflation.
23:13
Speaker 1: Because just as you will hear the story that it
23:17
Speaker 1: was business that was responsible for the depression, so you
23:20
Speaker 1: will today hear the story that it is labor and
23:23
Speaker 1: management that are responsible for inflation. It is the same
23:26
Speaker 1: kind of a myth. Inflation is made in one place,
23:30
Speaker 1: in one place only, Washington, d C. And in Washington,
23:34
Speaker 1: d C. The chief source, immediate source of inflation is
23:39
Speaker 1: a Greek temple on Constitution Avenue, in which houses the
23:43
Speaker 1: Federal Reserve Board. An accomplice, and a major accomplice, of course,
23:49
Speaker 1: sits in the halls of Congress in Washington. They are
23:53
Speaker 1: a major accomplice because you tell them to be. The
23:57
Speaker 1: American people have been telling Congress for many year years,
24:01
Speaker 1: spend more money on us, please, But they've been telling us,
24:04
Speaker 1: don't raise our taxes. Congress has been listening. It's been
24:08
Speaker 1: spending more money on you. But on the other hand,
24:11
Speaker 1: it's been very unwilling to raise taxes. As a result,
24:15
Speaker 1: it has imposed inflation as a tax. That's one tax
24:19
Speaker 1: that you don't have to vote for, but you have
24:22
Speaker 1: to pay. Let me turn to the third of the
24:25
Speaker 1: myths I want to cover. This is a myth closely
24:30
Speaker 1: related to the Great Depression myth. It is a myth
24:34
Speaker 1: that somehow or other, the private market has failed to
24:39
Speaker 1: provide certain important services and the government has had to
24:45
Speaker 1: step in in response to an overwhelming public demand in
24:50
Speaker 1: order to provide those services. The reality is very different.
24:55
Speaker 1: The reality is that if you look at every program
24:58
Speaker 1: that the government has adopted in the direction of extending
25:02
Speaker 1: its scope, it took an enormous propaganda campaign by special
25:07
Speaker 1: propaganda groups to get those measures passed. There was no
25:12
Speaker 1: underlying public demand for those measures. On the contrary, the
25:17
Speaker 1: demand had to be created, It had to be developed,
25:20
Speaker 1: it had to be produced and it was created, it
25:23
Speaker 1: was developed, It was produced by people who, sincerely, I'm
25:27
Speaker 1: not questioning their sincerity, who sincerely wanted to see an
25:31
Speaker 1: expansion in the scope of government. Let me take some
25:34
Speaker 1: of the most prominent examples. Let me take the example
25:37
Speaker 1: which today is the greatest sacred cow of them all,
25:42
Speaker 1: social Security. Was there an overwhelming demand for social security
25:47
Speaker 1: in the nineteen thirties when the law was adopted. Far
25:50
Speaker 1: from it, There was no public demand for it. It
25:53
Speaker 1: had to be sold. How was it sold by the
25:57
Speaker 1: slickeest devices of Madison Amnea, by imaginative packaging and deceptive labeling.
26:04
Speaker 1: Social Security was sold as an insurance scheme. It is
26:08
Speaker 1: not an insurance scheme. There is very little relationship to
26:12
Speaker 1: the amount of money any one individual pays and the
26:15
Speaker 1: amount of money he is entitled to receive. Social Security
26:19
Speaker 1: is a combination of a bad tax system with a
26:22
Speaker 1: bad way of distributing welfare. It's got two components, and
26:28
Speaker 1: I have never known anybody, whatever his political or other persuasion,
26:32
Speaker 1: who would defend either components. Separately. If you look at
26:36
Speaker 1: the tax system, who can defend a wage tax, a
26:41
Speaker 1: tax on wages up to a maximum, A tax on work.
26:45
Speaker 1: A tax which discourages employers from hiring people and discourages
26:50
Speaker 1: people from going to work. Then a tax which is
26:54
Speaker 1: borne by the lowest wage groups. It's a regressive tax.
26:58
Speaker 1: You could never in a millions of years Sundays, you
27:04
Speaker 1: could never have gotten such a tax passed as a tax.
27:10
Speaker 1: Look at the benefit arrangements here. You have an arrangement
27:15
Speaker 1: under which the amount of money a person receives does
27:18
Speaker 1: not depend on his poverty or his indigence. It depends
27:21
Speaker 1: on the accident of what industry he worked in. If
27:24
Speaker 1: he happened to work in a covered industry, he gets
27:29
Speaker 1: a benefit. If he happens to work in a non
27:32
Speaker 1: covered industry, he doesn't. If he has only worked a
27:37
Speaker 1: certain number of quarters and not more, no matter how
27:40
Speaker 1: much how indigent he is, he doesn't get anything. If
27:45
Speaker 1: he's sixty five and he decides to continue to work
27:50
Speaker 1: earning more than a modest amount per year, not only
27:53
Speaker 1: doesn't he get a benefit, but to add insult injury,
27:55
Speaker 1: he has to pay taxes on the wages he is
27:58
Speaker 1: receiving in order to finance the benefit he is not receiving.
28:07
Speaker 1: If a man who is sixty five years old has
28:10
Speaker 1: a million dollars in income from property he is and
28:14
Speaker 1: doesn't work, he gets his full Social Security benefit tax free.
28:19
Speaker 1: If the same man goes to work and earns twenty
28:22
Speaker 1: thousand dollars a year, he is in the position I
28:25
Speaker 1: just described. He doesn't get any benefit. Is there anybody
28:28
Speaker 1: who would justify that system of distributing benefits? And I
28:31
Speaker 1: could go on to all the difficulties with it, I've
28:35
Speaker 1: only touched the surface. Note the misleading language. The Social
28:44
Speaker 1: Security system consistently refers to the taxes you pay as
28:48
Speaker 1: a contribution. Now tell me do you regard taxes as contributions.
28:55
Speaker 1: The word contribution denotes voluntary arrangements. If you buy an
28:59
Speaker 1: inshe insurance program, you are contributing freely. If you contribute
29:04
Speaker 1: to the United Way freely, you're contributing freely. But if
29:08
Speaker 1: you pay taxes on your wages as the conditions of
29:11
Speaker 1: being employed, that's a tax. It's not a contribution. Again,
29:16
Speaker 1: it always refers to the payments people get as benefits.
29:20
Speaker 1: They are not benefits, they're subsidies. What you have is
29:24
Speaker 1: a system of subsidizing people on the one hand, and
29:27
Speaker 1: of taxing it. What about the claim that it's insurance
29:30
Speaker 1: that there's a relationship between the two. Well, there is
29:33
Speaker 1: a minor relationship. It is true that on the whole,
29:38
Speaker 1: those people who pay more will receive more other things
29:43
Speaker 1: the same, But every student of the subject has pointed
29:47
Speaker 1: out that the relationship is very small, that most payments
29:51
Speaker 1: are independent of most receipts. Moreover, what you really have
29:56
Speaker 1: is not a system under which people are providing for
29:59
Speaker 1: their own security as a social security system. Will say
30:02
Speaker 1: it as they describe it in their pamphlets. They describe
30:06
Speaker 1: it as a way in which ninety percent of American
30:08
Speaker 1: workers are providing for their own future. That's nonsense. What
30:12
Speaker 1: people today are doing is paying taxes today to pay
30:16
Speaker 1: the subsidies to the people who are receiving benefits today.
30:20
Speaker 1: What you have is a system of taxing the young
30:23
Speaker 1: at any point in time to subsidize the old. Now,
30:26
Speaker 1: there may be nothing wrong with that. For the moment,
30:29
Speaker 1: I'm not discussing that issue. I'm discussing whether social security
30:33
Speaker 1: was a response to a broad scale public demand or
30:36
Speaker 1: whether it had to be sold to the people by
30:39
Speaker 1: the worst devices of Madison Avdey. And the answer is
30:43
Speaker 1: that clearly was the latter. What you have is a
30:46
Speaker 1: system under which people today are being taxed to pay
30:48
Speaker 1: benefits today to the people who are receiving them. So far,
30:55
Speaker 1: those people who have been receiving payments have received much
30:59
Speaker 1: more than the actuarial value of what they paid. That's
31:03
Speaker 1: because you've had a growing working force, You've had higher
31:06
Speaker 1: wages being paid. Wage rates have gone up very rare.
31:10
Speaker 1: I mean, the wage tax has gone up very sharper.
31:13
Speaker 1: But the number of recipients is growing relative to the
31:17
Speaker 1: number of people paying. And that's why Social Security is
31:20
Speaker 1: currently in so much financial trouble. That's why the so
31:24
Speaker 1: called reserve, which is not a reserve at all, the
31:28
Speaker 1: so called reserve has been getting smaller and smaller, and
31:33
Speaker 1: that's why you have all the agitation for Congress to
31:36
Speaker 1: do something to make Social Security again financially responsible again.
31:41
Speaker 1: For the moment, I'm not discussing whether Social Security or
31:44
Speaker 1: the separate parts are good or bad, but only whether
31:47
Speaker 1: it can be regarded as a program adopted in response
31:51
Speaker 1: to a great public demand. Let me take another more
31:54
Speaker 1: recent movement. Consider the imposition on you and me and
31:58
Speaker 1: on our automobiles of all sorts of safety equipment, so
32:03
Speaker 1: called safety equipment nothing to prevent us individually from buying it,
32:08
Speaker 1: but now we are required to buy it by government.
32:11
Speaker 1: Why was there a great public demand? Not at all.
32:15
Speaker 1: There was a man named Ralph Nader. Now maybe he
32:18
Speaker 1: arose in response to a public demand, but if so,
32:22
Speaker 1: it was a public demand for entertainment, not for safety.
32:29
Speaker 1: But Ralph Nader launched a major propaganda campaign, and as
32:34
Speaker 1: a result of this propaganda campaign, as a result of
32:37
Speaker 1: a great selling effort also characterized by misrepresentation. Also, as
32:43
Speaker 1: you know, his original weapon was a book safe unsafe
32:48
Speaker 1: at any price, which damned the Corvair as being an
32:52
Speaker 1: unsafe and a knowingly unsafe car. Later studies have demonstrated
32:58
Speaker 1: that his claim was not justified, but that did not
33:01
Speaker 1: prevent it from having its effect. It did not prevent
33:04
Speaker 1: it from adopting it. But the extent to which this
33:07
Speaker 1: did not result from a great public clamor can be
33:10
Speaker 1: shown by what has happened whenever the agency that was
33:19
Speaker 1: established to administer auto safety regulations has overstepped its bounds.
33:24
Speaker 1: You will recall it a few years ago it tried
33:27
Speaker 1: to impose the requirement of an interlock, that no car
33:30
Speaker 1: could be started unless the seat belts were fastened and
33:34
Speaker 1: that produced such a great public outcry that Congress stepped
33:37
Speaker 1: in and had to be rescinded. You are now having
33:43
Speaker 1: a similar kind of a controversy about the airbag. Or again,
33:47
Speaker 1: let me take a very different example, one which has
33:50
Speaker 1: not yet emerged, fortunately, the drive for national health insurance.
33:55
Speaker 1: Is there a widespread drive for national health insurance? Not
33:59
Speaker 1: so you can notice it. Indeed, the proponents of it
34:03
Speaker 1: have been trying to get it passed year after year,
34:05
Speaker 1: and so far they haven't gotten it passed. As I say, fortunately,
34:09
Speaker 1: because if so called national health insurance were passed, it
34:13
Speaker 1: would bear as little relationship to insurance as social security does.
34:17
Speaker 1: It's not a program for national health insurance at all.
34:20
Speaker 1: It's a program for socialized medicine. It's a program for
34:23
Speaker 1: making physicians government employees. It's a program for creating long
34:31
Speaker 1: waiting lines and inferior medical service. But that isn't the
34:35
Speaker 1: way it's labeled. But the pressure for it is having
34:39
Speaker 1: to be created and built up by propaganda. Or again,
34:43
Speaker 1: let me take another modern version. Has the FDA's been
34:47
Speaker 1: on saccharin been in response to a great public outcry
34:50
Speaker 1: for it? Let me turn to the fourth of my myths.
34:57
Speaker 1: The free lunch myth beif that somehow or other government
35:01
Speaker 1: can spend money at nobody's expense. I don't know how
35:07
Speaker 1: many of you have ever heard of a wonderful description
35:11
Speaker 1: of government that was made by a French economist by
35:14
Speaker 1: the name of Frederick Bostiat about one hundred and fifty
35:17
Speaker 1: years ago. He said, government is a fiction whereby everybody
35:22
Speaker 1: believes that he can live at the expense of everybody else.
35:27
Speaker 1: And that is the free lunch myth, the myth that
35:31
Speaker 1: somehow or other government can provide goods and services can
35:36
Speaker 1: spend money at nobody's expense. Now, the particular form which
35:41
Speaker 1: that myth takes is very specific. It has two parts.
35:49
Speaker 1: One part is a belief that somehow or other you
35:52
Speaker 1: can tax business without consumers or workers or individuals paying
35:58
Speaker 1: for it. Somehow business there is a big source, a
36:02
Speaker 1: big cornucopia out there that can be taxed at no cost.
36:06
Speaker 1: And the other way it form the myth takes is
36:09
Speaker 1: that you can create money at no cost, that if
36:11
Speaker 1: you turn the printing press, if you produce those greenbacks,
36:15
Speaker 1: that will enable people to become richer with nobody becoming poorer. Well,
36:19
Speaker 1: let me look at first problem. Can you tax business,
36:23
Speaker 1: what's business? There's no business to be taxed. There are people.
36:30
Speaker 1: Only people can pay taxes. Can I tax this floor?
36:34
Speaker 1: Can I tax the building? The building can't pay taxes.
36:38
Speaker 1: Only people can pay taxes. So when you talk about
36:41
Speaker 1: a tax on business, it has to be paid by somebody.
36:45
Speaker 1: Either it's paid by the stockholder, or it's paid by
36:50
Speaker 1: the customer, or it's paid by the worker. There's no
36:53
Speaker 1: other way it can come from. There's no there's no ass,
37:01
Speaker 1: no tooth fairy that's going to provide a source by
37:06
Speaker 1: which the government can spend money that doesn't come from somebody.
37:10
Speaker 1: Somebody has to pay. And yet, over and over again
37:16
Speaker 1: you hear the claim, oh, we cannot, we must not
37:19
Speaker 1: increase taxes on individuals, will increase taxes on business. In
37:23
Speaker 1: connection with the current discussion of social security, this fiction arises.
37:29
Speaker 1: There is a fiction that the Social Security tax is
37:33
Speaker 1: half on the individual and half on the employer. It's
37:38
Speaker 1: that that the individual only pays five point seventy five percent.
37:42
Speaker 1: The employer plan plays it pays an equal amount. That's nonsense.
37:47
Speaker 1: That's bookkeeping, that's not economics, that's not reality. The part
37:51
Speaker 1: that the employer pays is part of his wage cost.
37:55
Speaker 1: If an employer considers whether it's worth his while to
37:59
Speaker 1: hire an additional worker, he has to consider as part
38:03
Speaker 1: of his cost not only what he pays to the worker,
38:06
Speaker 1: but also the extra taxes he will have to pay
38:08
Speaker 1: to the government. It makes no difference to the employer
38:12
Speaker 1: at all if he pays the worker a bigger check
38:15
Speaker 1: and the worker pays a larger part of that directly
38:17
Speaker 1: to the government, or he pays a worker a smaller check,
38:21
Speaker 1: but an addition has to send a check to Washington.
38:24
Speaker 1: What matters to him is a total number of dollars
38:27
Speaker 1: it costs him to hire an additional person. So the
38:30
Speaker 1: fact is, the logic is the reason is that the
38:35
Speaker 1: tax on, the so called tax on the employer, is
38:37
Speaker 1: paid by the employee. Now this has always been clear
38:43
Speaker 1: from economic reasoning general economic reasoning, but it has also
38:47
Speaker 1: been subjected to empirical test in a book even from
38:51
Speaker 1: that from that tempo of belief in greater and bigger government,
38:59
Speaker 1: the Brookings and Station in Washington, published a couple of
39:04
Speaker 1: years ago, demonstrated empirically that the tax on the employer
39:10
Speaker 1: was really paid by the employee, that it was shifted
39:13
Speaker 1: to the employee. And it can't be any other way,
39:15
Speaker 1: as you will see if you think about it. So
39:17
Speaker 1: business doesn't pay that tax. And yet despite this, you
39:22
Speaker 1: have the great move in Congress right now in remedying
39:25
Speaker 1: the problem of social security, to impose a larger fraction
39:30
Speaker 1: of the tax on business on the alleged grounds that
39:34
Speaker 1: somehow or other that spares the worker. It doesn't have
39:37
Speaker 1: any such effect. It reduces the incentive to hire people
39:41
Speaker 1: and thus is imposed on the worker. But again, if
39:46
Speaker 1: you look at the taxing corporate profits, the distinction you
39:50
Speaker 1: have to draw is between who writes the check and
39:54
Speaker 1: who fundamentally bears the cost. It may well be that
39:59
Speaker 1: AISI of a corporation writes the check for the tax
40:03
Speaker 1: on profits, so called profits. He writes the check, but
40:07
Speaker 1: who pays it? He doesn't pay it. Here is a
40:10
Speaker 1: poor fellow who may be earning a modest competence. He
40:15
Speaker 1: may be writing a check for ten million dollars That
40:17
Speaker 1: isn't coming out of his hide. Where's that ten million
40:20
Speaker 1: dollars coming from? It has to come from the proceeds
40:26
Speaker 1: of the goods and services which the enterprise sells. And
40:29
Speaker 1: that ten million dollars is ten million dollars less available,
40:33
Speaker 1: either for cutting prices, or for paying out dividends, or
40:38
Speaker 1: for paying wages and salaries. The tax is borne by people,
40:43
Speaker 1: and for this reason I must say I have always
40:45
Speaker 1: myself been strongly in favor of eliminating altogether the tax
40:50
Speaker 1: on corporations. So it's open and above board that you
40:53
Speaker 1: are taxing people, and that you do not conceal that
40:57
Speaker 1: fact by appearing to tax corporation. Well again, with respect
41:01
Speaker 1: to money, can you print money at no cost? It's
41:05
Speaker 1: very cheap to turn out those pieces of paper. But
41:09
Speaker 1: does that get society something for nothing? Not at all.
41:13
Speaker 1: It's simply a different form of taxation. If you print money,
41:18
Speaker 1: people have more money to spend. If they spend, If
41:21
Speaker 1: they spend more money on the same amount of goods,
41:24
Speaker 1: prices go up, and in effect everybody is paying a
41:28
Speaker 1: tax through inflation. Once again, it's only a form of taxation.
41:34
Speaker 1: Let me turn to my final myth, because it is
41:37
Speaker 1: in some ways the most pervasive, the most dangerous, and
41:41
Speaker 1: the most deep seated. That is a robin Hood myth,
41:45
Speaker 1: the myth the government has benefited the poor at the
41:49
Speaker 1: expense of the rich. That's the myth. Those are the
41:56
Speaker 1: terms on which many a governmental program is sold. What
42:00
Speaker 1: is the reality. The reality has been described in an
42:06
Speaker 1: article in the Journal of Law and Economics by my
42:08
Speaker 1: colleague George Stiegler under the title of Director's Law. And
42:14
Speaker 1: Director is the name of Aaron Director, who is a
42:16
Speaker 1: professor at the University of Chicago Law School. And I
42:19
Speaker 1: might also say my brother in law. Director's law is
42:28
Speaker 1: that almost invariably government programs benefit the middle income class
42:34
Speaker 1: at the expense of the very poor and the very rich.
42:39
Speaker 1: Now that may seem to you strange, but let me
42:45
Speaker 1: first explain why it makes logical sense, and second give
42:50
Speaker 1: you some empirical evidence, starting right here at home with
42:54
Speaker 1: higher education and the state financing of higher education. On
43:01
Speaker 1: the logical level, you have an eco political system under
43:06
Speaker 1: which laws are passed by fifty one percent of the
43:10
Speaker 1: people voting one way against forty nine percent of the people. Now,
43:14
Speaker 1: the way to get a law pass therefore, is to
43:16
Speaker 1: form a coalition covering fifty one percent of the people.
43:20
Speaker 1: You might think that you would take the bottom fifty
43:22
Speaker 1: one percent versus the top forty nine percent, But the
43:26
Speaker 1: more you think about it, the more you realize that
43:28
Speaker 1: that's not a very effective way to form a coalition.
43:31
Speaker 1: Why Because those people who are at the bottom tend
43:36
Speaker 1: to be much less skillful in political activity for the
43:40
Speaker 1: very reasons that leave them at the bottom in the
43:43
Speaker 1: economic scale. They are at the bottom of the economic
43:46
Speaker 1: scale because they have low skills, or low abilities, or
43:49
Speaker 1: low entrepreneurial capacities, or have been unfortunate to have been
43:52
Speaker 1: born handicapped, or in groups that are discriminated against. But
43:56
Speaker 1: those same features make them relatively less effective in political activity.
44:01
Speaker 1: Who are the most effective people in political activity those
44:05
Speaker 1: of us in the middle and in the middle classes.
44:08
Speaker 1: Where are the people who are literate. Where are the
44:09
Speaker 1: people who write for the newspapers, Where are the people
44:12
Speaker 1: who mount the hustings, Where are the people who provide
44:15
Speaker 1: the candidates? Well, you might say, why doesn't the coalition
44:18
Speaker 1: come from the top, all the way down fifty one percent? Well,
44:22
Speaker 1: the answer is the g those people at the top,
44:26
Speaker 1: that's the place we can get a lot of money from,
44:29
Speaker 1: and it's worth sacrificing a few votes to get a
44:32
Speaker 1: large fraction of a tax base. And therefore the logically
44:36
Speaker 1: most reasonable coalition is sort of fifty one percent of
44:39
Speaker 1: the people running from the lower middle class through the
44:43
Speaker 1: upper middle class and leaving out the very rich at
44:45
Speaker 1: the top and the very part at the bottom. Now,
44:47
Speaker 1: it doesn't always work that way. Sometimes the very rich
44:51
Speaker 1: are able to use their money to get a effective coalition.
44:55
Speaker 1: But most of the time that's the way it works. Now,
44:58
Speaker 1: let me illustrate it in reality, in the real world.
45:03
Speaker 1: One of my favorite examples is state finance of higher education.
45:09
Speaker 1: This is always sold on the ground of providing opportunities
45:14
Speaker 1: to everybody in the society to get an education. But
45:16
Speaker 1: what are the facts. I doubt that there is any
45:20
Speaker 1: program financed by government in the United States which is
45:26
Speaker 1: as regressive in its impact and its financial impact as
45:30
Speaker 1: the financing of higher schooling. Who are the people who
45:34
Speaker 1: go to school? Who are the people who are attending
45:36
Speaker 1: this university? Mostly people who come from middle, upper middle
45:43
Speaker 1: or lower middle income class families. If there are a
45:47
Speaker 1: few among you who come from lower income families, you
45:51
Speaker 1: are going to be among the middle and upper income classes.
45:55
Speaker 1: You are the richer among the poor. They are the
45:59
Speaker 1: people who go to school. They are the people who
46:01
Speaker 1: get the benefit from it. Your training here will enable
46:05
Speaker 1: you to get higher incomes than you otherwise. Coun who
46:08
Speaker 1: pays for it. Well, you pay for it and your
46:11
Speaker 1: family and friends pay for it, not through tuition. I
46:15
Speaker 1: am told your tuition covers about fifteen percent of the
46:17
Speaker 1: cost of your schooling. The taxpayers pay for it, including
46:22
Speaker 1: the people who don't go to school. Some years ago,
46:27
Speaker 1: there was a study made for the state of California
46:30
Speaker 1: which showed that fifty percent of the students at state
46:34
Speaker 1: supporting institutions of higher education came from the top twenty
46:37
Speaker 1: five percent of the income class, and five percent came
46:41
Speaker 1: from the bottom twenty five percent of the income class.
46:45
Speaker 1: This is a program. When I talk in California and
46:49
Speaker 1: want to be demigogic, I say it's a program to
46:51
Speaker 1: impose taxes on the people in Watts to send the
46:54
Speaker 1: children from Beverly Hills to college. Now you here in
46:59
Speaker 1: Utah know better what the local equivalents of that are.
47:03
Speaker 1: Now I'm not blaming you as individuals. Again, I couldn't
47:07
Speaker 1: do that because I myself am a beneficiary of state
47:10
Speaker 1: support of higher education. I went through a school that
47:14
Speaker 1: has since become a state university, Rutgers University, in the
47:17
Speaker 1: state of New Jersey, on a state scholarship. Now I
47:20
Speaker 1: think I benefited from going to the university, although I know,
47:24
Speaker 1: and I think even maybe the country at large did.
47:27
Speaker 1: Although I know there are many people who disagree with that,
47:32
Speaker 1: But there's no reason why I shouldn't have paid for it.
47:35
Speaker 1: What did the poor citizens in New Jersey game? The
47:38
Speaker 1: day I graduated from college, I left New Jersey and
47:40
Speaker 1: I've hardly ever been back since. There's a strong case
47:48
Speaker 1: to be made that everybody who wants to go to
47:50
Speaker 1: university should have an opportunity to do so, provided he's
47:54
Speaker 1: willing to pay for it. Not necessarily right now. It's
47:58
Speaker 1: highly desirable to have arrangement under which he can borrow
48:01
Speaker 1: now to pay it back later out of a higher
48:03
Speaker 1: income that his education will make possible. But there is
48:08
Speaker 1: no justification for imposing taxes on lower income people to
48:15
Speaker 1: finance the schooling of people who are or will be
48:18
Speaker 1: in the higher income groups. And yet, how much political
48:22
Speaker 1: movement is there to impose full cost tuition on colleges.
48:28
Speaker 1: There is nobody who would have a ghost of a
48:32
Speaker 1: chance of being elected to a legislature or to the
48:35
Speaker 1: state house on that program. It's the hardest thing in
48:39
Speaker 1: the world legislatively to get higher tuitions impost one because
48:44
Speaker 1: the middle class looks after itself because of Director's law. Now,
48:50
Speaker 1: it's true for higher education, is true in every other area.
48:53
Speaker 1: Consider social security. Now, social security is also sold as
48:57
Speaker 1: a program to benefit the poor. What are the facts?
49:01
Speaker 1: Social Security is a program which imposes unduly heavy taxes
49:06
Speaker 1: on the lower income groups in the society to provide
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Speaker 1: higher benefits to upper income groups in the society. How
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Speaker 1: does it work. It's not because of the regressive nature
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Speaker 1: of the wage tax. It's not because of the structure
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Speaker 1: of benefits. It's because of a very simple phenomenon. At
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Speaker 1: what age do younger men from the lower classes go
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Speaker 1: to work? Sixteen seventeen, eighteen nineteen, that's when they start
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Speaker 1: to pay Social Security taxes? At what age are you
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Speaker 1: people going to go to work and start paying Social
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Speaker 1: Security taxes? Some of you may in part time jobs
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Speaker 1: have been doing so, but you will be a full
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Speaker 1: time social Security payers only when you reach your middle twenties,
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Speaker 1: so they will pay taxes for the more years. Then
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Speaker 1: you will pay taxes next, which one is going to
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Speaker 1: receive benefits for longer. Every demographic study has shown that
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Speaker 1: the average expected length to life of a middle and
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Speaker 1: upper income classes is longer than the average length to
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Speaker 1: life of people from the lower income classes. So those
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Speaker 1: poor suckers are going to pay taxes for more years
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Speaker 1: and receive payments for fewer years than you and I will. Now,
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Speaker 1: some of us, by virtue of continuing to work between
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Speaker 1: sixty five and seventy two, will not be in that
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Speaker 1: favored class. But already the fraction of people who work
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Speaker 1: between sixty five and seventy two has been cut to
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Speaker 1: a small part of what it used to be because
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Speaker 1: of the incentive offered by Social Security. And overall there
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Speaker 1: is little doubt therefore, that Social Security is a program
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Speaker 1: which transfers income from low income classes to high income classes.
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Speaker 1: Same thing is true of almost every other social program
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Speaker 1: you can mention. I have often challenged people to find
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Speaker 1: a single governmental program in which the people who pay
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Speaker 1: taxes have higher incomes than those who get the benefits.
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Speaker 1: I know only one, and that's direct relief public assistance,
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Speaker 1: the aid to families that depending children. It's not a
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Speaker 1: good program, it's a terrible program. It's a welfare mess.
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Speaker 1: But so far as I can find out, it's the
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Speaker 1: only program that demonstrably transfers income from higher income classes
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Speaker 1: to lower income classes. And that's why it's such an
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Speaker 1: unpopular program. Director's law shows up in the unpopularity of
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Speaker 1: the welfare mess as well as in the popularity of
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Speaker 1: social security, housing programs and the like. I could go down,
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Speaker 1: agreed many others, but time will not permit. I come
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Speaker 1: to my conclusion that if we are going to look
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Speaker 1: forward to the future to an end of this reduction
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Speaker 1: in our freedom and the growth in centralized government, I
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Speaker 1: think we must begin to dismantle these myths which are
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Speaker 1: so widely accepted by people, which have become an unthinking
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Speaker 1: part of their philosophy and of their beliefs. And I
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Speaker 1: hope that in the course of this hour I have
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Speaker 1: deflated your air mattress and given you an uncomfortable jolt.
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Speaker 1: Thank you,