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.
David R. Henderson
Oct 5 2011 at 11:06pm
Good post, Bryan.
One important correction, though. You write:
If Reagan hadn’t been elected, price controls could easily have been as long-lived as rent control in New York.
That’s unlikely. Jimmy Carter had pushed Congress to remove price controls and they were being phased out in a bill passed in March 1980. The bill gave the President the authority to speed up decontrol. Carter didn’t use it. Reagan did. Reagan got rid of price controls within a month of taking office. Had he done nothing, price controls would have been gone by October 1981 instead of February 1981.
Oct 6 2011 at 7:36am
Goolsbee of course misses the entire point of Free to Choose. Large government, even if it’s programs are popular, even if the spending is for social reasons, will of necessity remove a fraction of each individual’s wealth, freedoms, and opportunities.
Free to Choose is not about utility (although that is one part of the argument) It is about freedom.
Oct 6 2011 at 9:07am
I think the link to Table 15.3 is broken
Oct 6 2011 at 12:56pm
Thank you Bryan. What an outstanding post!
Oct 6 2011 at 2:23pm
You missed your chance for one of his most famous quotes:
“Nothing is so permanent as a temporary government program.”
Friedman anticipated Buchanan and public choice theory by a decade!
Oct 6 2011 at 4:06pm
L’esprit de l’escalier
Oct 17 2011 at 3:50pm
And you don’t think that comparing the peak of that business cycle with the trough of the worst recession since 1933 isn’t, oh I don’t know, completely bogus?
You don’t think it’s more appropriate to compare the 1980 peak (21.7%) with the 2007 peak (19.6%)?
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