Goolsbee, Friedman, and 1980
Milton Friedman’s Free to Choose t.v. series is now 30 years old. To celebrate, PBS is re-running highlights, followed by new panel discussions. I was just on one of these panels: me, Austan Goolsbee, Amity Shlaes, and Clarence Page. (Pre-recorded; I’ll let you know when the show airs). There was a lot of friendly give-and-take, but there’s one big point I didn’t quite manage to fit in.
Context: Several times during the discussion, Goolsbee reminds us that Friedman’s show aired in 1980. Back then, Goolsbee freely admits, Friedman had a good point. In 1980, government was too big and intrusive. But no longer.
The point I missed my chance to make: If Friedman was right then, he’s right now. Check out Table 15.3. (Update: Broken link fixed). Federal spending as a percent of GDP in 1980: 21.7%. In 2009: 24.7%. Goolsbee emphasized the shift toward Social Security and health spending. But so what? Friedman’s critique is truer than ever. Government continues to spends a ton of money on people who aren’t even poor. Much of this spending – especially health care – is pure waste. And the problem’s only going to get worse.
Goolsbee also emphasized that Social Security and Medicare enjoy strong public support. Right he is. So were most of the programs Friedman attacked back in 1980 – and he explicitly admitted it. Friedman’s point then, and my point now: The public is wrong. Indeed, the public is delusional. It’s crazy to tax everyone to provide “free” pensions and health care for everyone. And it’s logically impossible for benefits to permanently grow faster than GDP.
Goolsbee also argued that government growth isn’t so bad if it’s only temporary. I wish I’d asked him, “And isn’t ‘temporary’ precisely what price controls on energy were supposed to be? If Reagan hadn’t been elected, price controls could easily have been as long-lived as rent control in New York.” I’m afraid the new regulations and spending that the U.S. embraced in 2008 will work the same way. You can call them “temporary,” but unless a staunch ideological opponent somehow gets elected, the new statism here to stay.