Wednesday, October 12, 2011

Milton Friedman on balancing the budget

Milton Friedman, that crazy Tea Party activist (and Nobel Prize winning economist), insisted that balancing the government's budget isn't the real problem. The real fundamental question is, as you can hear at 6:42,
"The real question is, how much are you required to spend, one way or another--directly or indirectly, by taxes, by lending, by inflation--what fraction of your income are you required to devote to have other people spend it, supposedly on your behalf?"
Today it is accepted by virtually everyone that any reasonable person would accept that we need to balance the federal budget by a combination of spending cuts and revenue increases. Of course, that's what normal people must do, so clearly that is what the federal government must do. Thus, to suggest that taxes should not be increased to pay for the federal budget is taken as doctrinaire, the crazed thinking of Tea Party fanatics. Was Milton Friedman, then, simply a fanatic?

As shocking as it sounds to suggest that a great majority of the population is in error, that is unfortunately the case today (as nearly always). The government is not a for-profit business. It is not a household. It does not increase revenue by working harder or by making a better product. If this were how the government increased revenue, I'd be all in favor of it. But let's be clear, that is not what is meant when people so casually suggest "increasing revenue." What is obviously meant is increasing taxes.

Now as Milton Friedman points out in this video, government deficit is already a tax. That money has to be paid off somehow. Make no mistake, when the government spends money, it is always spending your money. The more money the government spends, the more of your money is being spent. In other words, the more the government spends, the less freedom you have.

Unfortunately, conservatives have tried to make the case that we can balance the budget like reasonable businessmen and yet not increase taxes. The government is not a business, and we don't need businessmen running the government. What we need is a government that protects, rather than degrades, our liberty. This can only be done by reducing the amount of money government forces us to spend. Raising taxes is not a morally neutral way of "increasing revenue." It is an immoral act of force, which can only be justified insofar as it is necessary to defend our country and provide a legal system which upholds individual liberty.

There are other options, of course. It is possible, in theory, that the government could charter legitimate businesses, which must play by all the same rules as other businesses in a state of free market competition. From such firms the government could, in theory, generate revenue for various programs it would like to maintain. That is, of course, never how it works in practice. Businesses with government charters almost always get special privileges. But I wanted to mention this, lest anyone think that I am dogmatically opposed to all means of providing public services through the federal government. No, all I am dogmatically opposed to is coercion, which happens every time the government spends your money without asking your permission.

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