Milton Friedman - The Social Security Myth

there has been a drastic shift in public attitudes in public opinions in the past 50 years or so with respect to the role of the individual on the one hand and the role of government and collective institutions on the other there has been a shift in the philosophy and attitudes of the public from a belief in individual responsibility from a belief in a society in which the role of government was as an umpire to a belief in a society in which the emphasis is on social responsibility and the role of government as big brother and protector of the individual as always when such shifts arise in public opinion they are largely produced and reinforced by the development of myths about prior experience someone once wrote and I'm not sure who it was that a myth is like an air mattress there's nothing in it but it's wonderfully comfortable and deflation causes an uncomfortable jolt it is a myth that somehow or other the private market has failed to provide certain important services and the government has had to step in in response to an overwhelming public demand in order to provide those services the reality is very different the reality is that if you look at every program that the government has adopted in the direction of extending its scope it took an enormous propaganda campaign by special propaganda groups to get those measures passed there was no underlying public demand for those measures on the contrary the demand had to be created it had to be developed it had to be produced and it was created it was developed it was produced by people who sincerely I'm not questioning their sincerity who sincerely wanted to see an expansion in the scope of government let me take some of the most prominent examples let me take the example which today is the greatest greatest sacred cow of them all social security was there an overwhelming demand for social security in the 1930s when the law was adopted far from it there was no public demand for it it had to be sold how was it so by the slickest Devices of Madison Avenue by imaginative packaging and deceptive labeling Social Security was sold as an insurance scheme it is not an insurance scheme there is very little relationship to the amount of money any one individual pays and the amount of money he is entitled to receive Social Security is a combination of a bad tax system with a bad way of distributing welfare it's got two components and I have never known anybody whatever his political or other persuasion who would defend either component separately if you look at the tax system who can defend a wage tax a tax on wages up to a maximum a tax on work a tax which discourages employers from hiring people and discourages people from going to work then the tax which is borne by the lowest wage groups it's a regressive tax you could never in a in a millions of years Sunday's you could never have gotten such a tax passed as a tax look at the benefit Arrangements here you have an arrangement under which the amount of money a person receives does not depend on his poverty or his indigent it depends on the accident of what industry he worked in if he happened to work in a covered industry he gets a benefit if he happens to work in a non-covered industry he doesn't if he has only worked a certain number of quarters and not more no matter how much how indigent he is he doesn't get anything if he's 65 and he decides to continue to work earning more than a modest amount per year not only doesn't he get a benefit but they had insult injury he has to pay taxes on the wages he is receiving in order to finance the benefit he is not receiving if a man who is 65 years old has a million dollars in income from property he is in time and doesn't work he gets his full Social Security benefit tax-free if the same man goes to work and earns twenty thousand dollars a year he is in the position I just described he doesn't get any benefit is there anybody who would justify that system of distributing benefits and I could go on to all the difficulties with it I've only touched the surface note the misleading language the Social Security system consistently refers to the taxes you pay as a contribution now tell me do you regard taxes as contributions the word contribution denotes voluntary arrangements if you buy an insurance program you are contributing freely if you contribute to the United Way freely you're contributing freely but if you pay taxes on your wages as the conditions of being employed that's a tax it's not a contribution again it always refers to the payments people get as benefits they are not benefits they're subsidies what you have is a system of subsidizing people on the one handed of taxing it what about the claim that it's insurance that there's a relationship between the two well there is a minor relationship it is true that on the whole those people who pay more will receive more other things the same but every student of the subject has pointed out that the relationship is very small that most payments are independent of most receipts moreover what you really have is not a system under which people are providing for their own security as a social security system will say as they describe it in their pamphlets they describe it as a way in which 90% of American workers are providing for their own future that's nonsense what people today are doing is paying taxes today to pay the sum cities to the people who are receiving benefits today what you have is a system of taxing the young at any point in time to subsidize the old now there may be nothing wrong with that for the moment I'm not discussing that issue I'm discussing whether Social Security was a response to a broad scale public demand or whether it had us to be sold to the people by the worst devices of Madison Avenue and the answer is it clearly was the latter what you have is a system under which people today are being taxed to pay benefits today to the people who are receiving you so far those people who have been receiving payments have received much more than the actuarial value of what they pay that's because you've had a growing working force you have had higher wages being paid wage rates have gone up very rare I mean the wage tax has gone up very sharply but the number of recipients is growing relative to the number of people paying and that's why Social Security is currently in so much financial trouble that's why the so called reserve which is not a reserve at all the so called reserve has been getting smaller and smaller and that's why you have all the agitation for Congress to do something to make Social Security again financially responsible again for the moment I'm not discussing whether Social Security or the separate parts are good or bad but only whether it can be regarded as a program adopted in response to a great public demand or again let me take a very different example one which is not yet emerged fortunately the drive for national health insurance is there a widespread drive for national health insurance not so you can notice it indeed the proponents of it have been trying to get it past year after year and so far they haven't gotten it passed as I say fortunately because if so-called national health insurance were passed it would bear as little relationship to insurance as Social Security does it's not a program for national health insurance at all it's a program for socialized medicine it's a program for making physician the government employees it's a program for creating long waiting lines and inferior medical service but that isn't the way it's labeled but the pressure for it is having to be created and built up by propaganda

Channel: LibertyPen

Views: 352,057

Keywords: liberty, economics, reason, justice, laissez-faire, benefits, tax, subsidies, poverty, welfare, indigent, unemployment, wages

Id: rCdgv7n9xCY

Length: 9min 56sec (596 seconds)

Published: Fri Mar 05 2010