Milton Friedman discusses the Social Security Myth

As a follow-up to Jay Tea’s piece on Social Security, I would like to share an excellent video of Milton Friedman discussing the major myths of the Social Security system:

As always, Friedman’s direct and easy-to-understand explanations of the intrusions of big government are as thought-provoking as they are infuriating.  Friedman makes several observations:

  • There was no underlying public demand for “the greatest sacred cow of them all,” Social Security.
  • Social Security was sold as an insurance scheme, but there is very little resemblence between Social Security and traditional insurance or pension systems.
  • Social Security is a combination of a regressive payroll tax system and a highly inequitable system for distributing income subsidies.  No one today would defend either system separately.
  • Social Security taxes were sugar-coated as “contributions,” while its subsidies are reclassified as “benefits.”
  • Social Security taxes are not invested in a system that allows workers to save for their own retirement benefits; instead, the Social Security taxes that are collected today are directly applied to benefits paid out today.  The young are taxed to subsidized the old.

And make sure you watch the last minute of the video, where Friedman discusses why national health insurance would also be a disaster – “It would bear as little relationship to insurance as Social Security does … It is a program for creating long waiting lines and inferior medical service.  But that isn’t the way its labeled.”

Folks, this speech was given over 30 years ago.  If only we had prominent people today who were willing to be as honest as Milton Friedman.

Wait … strike that last comment.  Check this out, from the New York Times no less – Some Of Sarah Palin’s Ideas Cross The Political Divide:

She made three interlocking points. First, that the United States is now governed by a “permanent political class,” drawn from both parties, that is increasingly cut off from the concerns of regular people. Second, that these Republicans and Democrats have allied with big business to mutual advantage to create what she called “corporate crony capitalism.” Third, that the real political divide in the United States may no longer be between friends and foes of Big Government, but between friends and foes of vast, remote, unaccountable institutions (both public and private).

… Her second point, about money in politics, helped to explain the first. The permanent class stays in power because it positions itself between two deep troughs: the money spent by the government and the money spent by big companies to secure decisions from government that help them make more money.

“Do you want to know why nothing ever really gets done?” she said, referring to politicians. “It’s because there’s nothing in it for them. They’ve got a lot of mouths to feed — a lot of corporate lobbyists and a lot of special interests that are counting on them to keep the good times and the money rolling along.”

… Ms. Palin’s third point was more striking still: in contrast to the sweeping paeans to capitalism and the free market delivered by the Republican presidential candidates whose ranks she has yet to join, she sought to make a distinction between good capitalists and bad ones. The good ones, in her telling, are those small businesses that take risks and sink and swim in the churning market; the bad ones are well-connected megacorporations that live off bailouts, dodge taxes and profit terrifically while creating no jobs.

One of the consistent themes in Milton Friedman’s writings is the extreme dislike of the free market by Big Business. The “too big to fail” attitude embodied by Big Business pushes companies to seek financial and regulatory help from the government in order to secure their place at the top of the totem pole.  And Big Government advocates are happy to comply because they believe that they are helping to control “runaway capitalism” as well as ensure the fair redistribution of wealth.

It seems to me that Sarah Palin understands Milton Friedman, and in a big way.  Somewhere, I think the old man is smiling.


ADDEDAnd would you believe … from freaking CHRIS MATTHEWS??  “Today, lots of people fortunately make it past 65.  They live into their 80s and 90s. They’re still getting checks. The system doesn’t work that way anymore. It’s not as healthy as it once was. So, how does a Republican deal with the fact it is a Ponzi scheme in the sense that the money that’s paid out every day is coming from people who have paid in that day. It’s not being made somewhere.”

Um, yeah.  Viewers of MSNBC just heard one of their hosts refer to Social Security as a Ponzi scheme.  I think the patina is finally starting to really rub off of the idea of endless, trouble-free taxing and spending.

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