Milton Friedman on the proper role of government in the United States
In 2018, the Star Tribune reported:
…that Philip Alston, an independent expert commissioned [by the United Nations] to examine “extreme” poverty, prepared a report on the U.S. that faults “successive administrations” in Washington for failing to uphold treaty commitments to economic and social rights.”
“At the end of the day, however, particularly in a rich country like the United States, the persistence of extreme poverty is a political choice made by those in power,” Alston wrote. “With political will, it could readily be eliminated.”
It isn’t clear that Mr. Alston is right. After all, California, a state whose politicians use every trick of taxing and spending available to fight poverty, has the highest rate of poverty in the United States. From an empirical standpoint, it isn’t obvious that the solution to poverty is for the government to just try harder.
On July 4, 1776, the Second Continental Congress issued its famous Declaration of Independence. In it, the Founding Fathers explained that they were breaking from Britain and setting up their own government in order to protect:
…certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
Notice that the founders said that the pursuit of happiness was a right, not happiness itself. This is probably wise. After all, each of us finds happiness in our own way. As long as my pursuit of happiness does not impede yours, the Declaration of Independence, this great country’s founding document, leaves us free.
There are all too many people like Mr. Alston. They see ills, such as poverty, and proclaim, not only that the government should solve them, but that it can. As a reading of the Declaration of Independence shows, that is not how the government of the United States is conceived. Where ‘happiness’ — defined as some sort of economic ‘equity‘ — is guaranteed by government, experience suggests that it can only be achieved at a terrible cost in personal freedom. The Founders were wise to limit government’s ambitions.
Few political arguments are really new. In the Newsweek article from 1972 reproduced below, the economist Milton Friedman explains how views like Mr. Alston’s have grown in popularity and power and what we must do to return to the vision of government that this country was founded on on this day, 243 years ago.
The battle over a ceiling on Federal spending has spotlighted the major economic problem facing this country in the coming decade: can we halt the growth of Leviathan––to use Hobbes’s expressive term for government? Or will Leviathan crush us?
Until 1930, Federal spending was less than 5 per cent of the national income except during or just after major wars (the War of 1812, the Civil War, World War I). With the same exceptions, local and state governments spent several times as much as the Federal government. For example, in 1930, Federal spending was 4 per cent of national income; state and local spending, 11 per cent. Spending at all levels of government combined thus amounted to roughly 15 per cent of the national income.
The New Deal changed all that. Already by 1936, the final year of FDR’s first term, Federal spending had reached 13 per cent of the national income and had passed state and local spending.
World War II brought an enormous expansion of Federal spending, and the end of the war a sharp reduction. But then the New Deal pattern resumed. By 1950, Federal spending amounted to 17 per cent of national income; by 1960, to 22 per cent; and by now, to more than 26 per cent. State and local spending––over and above Federal grants––has been rising even more rapidly; from 8 per cent of national income in 1950 to nearly 14 per cent today.
In short, active war apart, from 1789 to 1930, residents of the U.S. never spent more than about 15 per cent of their income on the expenses of government. In the past four decades, that fraction has nearly tripled and is now about 40 per cent.
War and defense spending have played an important role in the growth of government, but only a supporting role. During each war, Federal spending rose sharply and so did Federal taxes. After the war, both spending and taxes were reduced, but taxes were reduced less than spending. Instead, following one of Parkinson’s laws, peacetime spending rose to exhaust the revenue. As a result, up to 1930, Federal spending, as a fraction of national income, consists of a series of steps, each higher than the preceding, though lower than an intervening wartime peak.
The New Deal started a new pattern of ever higher spending and taxes for civilian purposes that has continued ever since. The recent increase in total Federal spending has occurred despite a decline in military spending from 12 per cent of national income in 1968 to 8 per cent today. And certainly the recent rapid rise in state and local spending can hardly be blamed on the military.
The plain fact is that governments are now spending an amount approaching half of our national income not because of war or fear of war, not because of the machinations of a military industrial complex, but because of a major change in the past 40 years in the role that we, as citizens, have assigned to the government.
Until 1930, citizens of the U.S. viewed the Federal government primarily as a keeper of the peace and an umpire. Today, we view it as responsible for treating every social and personal ill, as the source from which all blessings flow.
Senator McGovern is riding this wave. His proposals would boost Federal spending from 26 to 31 per cent of national income. Mr. Nixon has expressed great concern about the growth in spending, yet his proposals would only hold the line rather than cut sharply Federal spending as a fraction of national income.
Neither a legislated ceiling nor any other administrative devices designed to improve the budgetary process––welcome though they would be––will halt Leviathan unless we, as citizens, once again change drastically the role that we assign to government.
There is hardly one among us who believes that he is getting his money’s worth for the nearly half of his income that government––Federal, state, and local––spends for him. Yet so long as we simply blame waste and bureaucracy, but continue to believe in the omnipotence and beneficence of government, the trend toward ever bigger government will continue.
That trend will stop only when and if we come to recognize that government is the problem, not the solution; that the general welfare requires that we dethrone the Federal government from its role as Big Brother and restore it to its historic role as keeper of the peace and umpire.
If you want to read more of Friedman’s writings in the inextricable link between personal freedom and economic freedom, try his books Capitalism and Freedom and Free to Choose.