Free To Choose - Milton Friedman on The Welfare System (1978) | Thomas Sowell

[Music] after the Second World War New York City authorities retained rent controls supposedly to help their poorer citizens the intentions were good this and the Bronx was one result by the 50s the same authorities were taxing their citizens including those who live in the Bronx and other devastated areas beyond the East River to subsidize public housing another idea with good intentions yet poor people are paying for this subsidized apartments for the well-to-do when government at City or federal level spends our money to help us strange things happen the idea that government had to protect us

came to be accepted during the terrible years of the Depression capitalism was said to have failed and politicians were looking for a new approach Franklin Delano Roosevelt was a candidate for the presidency he was governor of New York State at the governor's mansion in Albany he met repeatedly with friends and colleagues to try to find some way out of the depression the problems of the day were to be solved by government action and government spending the measures that FDR and his associates discussed here derived from a long line of past experience some of the roots

of these measures go back to Bismarck's Germany at the end of the 19th century the first modern state to institute old-age pensions and other similar measures on the part of government in the early 20th century Great Britain followed suit under Lloyd George and Churchill it till instituted old-age pensions and similar plans these precursors of the modern welfare state had little effect on practice in the United States but they did have a very great effect on the intellectuals on the campus like those who gathered here with FDR the people who met here had little personal experience

of the horrors of the depression but they were confident that they had the solution in their long discussions as they sat around this fireplace trying to design programs to meet the problems raised by the worst depression in the history of the United States they quite naturally drew upon the ideas that were prevalent at the time the intellectual climate had become one in which it was taken for granted that government had to play a major role in solving the problems in providing what came later to be called security from cradle to grave Roosevelt's first priority after

his election was to deal with massive unemployment a public works program was started the government financed projects to build highways bridges and dams the National Recovery administration was set up to revitalize industry Roosevelt wanted to see America move into a new era the Social Security Act was passed and other measures followed unemployment benefits welfare payments distribution of surplus food with these measures of course came rules regulations and red tape as familiar today as they were novel then the government bureaucracy began to grow and it's been growing ever since this is just a small part of

the social security Empire today their headquarters in Baltimore has sixteen rooms this size all these people are dispensing our money with the best possible intentions but at what cost in the 50 years since the Albany meetings we have given government more and more control over our lives in our income in New York State alone these government buildings house 11,000 bureaucrats administering government programs that cost New York taxpayers 22 billion dollars at the federal level the Department of Health Education and Welfare alone has a budget larger than any government in the world except only Russia and

the United States yet these government measures often do not help the people they are supposed to richard brown's daughter Halima needs constant medical attention she has a throat defect and has to be connected to a breathing machine so that she'll survive the nights it's expensive treatment and you might expect the family to qualify for a Medicaid grant no I don't get it cuz I'm not eligible for it I make a few dollars too much and the salary that I make I can't afford to really live and save anything else I have a question and I

mean I live we live from payday to payday I mean literally from payday to payday this truncal isn't made any easier by the fact that mr. Brown knows that if he gave up his job as an orderly at the Harlem hospital he would qualify for a government handout and he'd be better off financially it's a terrible pressure on him but he's proud of the work that he does here and he's strong enough to resist the pressure mr. Brown huh and you're fully dilated so I'm here to take you to the delivery room try not to

push please do you want to have a nice sterile delivery mr. Brown has found out the hard way that welfare programs destroy an individual's independent now we've considered welfare we went to see about apply for welfare but we were told that we were only eligible for five dollars a month and and to receive this five dollars we would have to cash in our son savings bonds and that that's not even worth it I don't believe in something for nothing anyway I think a lot of people are capable of working and are willing to work but

it's it's just the way it's set up it's the mother and the children are better off if the husband isn't working or if the husband isn't fair and this breaks up so many poor families one of the saddest things is that many of the children whose parents are on welfare will in their turn end up in the welfare trap when they grow up in this public housing project in the Bronx New York three-quarters of the families are now receiving welfare payments well mr. Brown wanted to keep away from this kind of thing for a very

good reason the people who get on welfare lose their human independence and feeling of dignity they become subject to the dictates and whims of their welfare supervisor who can tell them whether they can live here or there whether they may put in a telephone what they may do with their lives they're treated like children not like responsible adults and they're trapped in the system maybe a job comes up that looks better than welfare but they're afraid to take it because if they lose it after a few months and maybe six months or nine months before

they can get back onto welfare and as a result this becomes a self-perpetuating cycle rather than simply a temporary state of affairs things have gone even further elsewhere this is a human state a public housing project in Manchester England [Applause] well we're 3,000 miles away from the Bronx here but you'd never know it just by looking around it looks as if we're at the same place it's the same kind of flats same kind of massive housing units - crap it even though they were only built seven or eight years ago vandalism graffiti the same feeling

about the place of people who don't have a great deal in Drive and energy because somebody else is taking care of their day-to-day needs because the state has deprived them of an incentive to find jobs to become responsible people to be the real supports of themselves and their families for the past seven years Maureen Ramsay has had to buy food and clothes for her family out of a government handout for the whole of that time her husband Steve hasn't had a job each week he collects what's known in Britain as Social Security the government looks

after him his wife and their children but accepting welfare payments means accepting the rules of those who hand them out my opinion anyway you feel it they own you you know there's no other way of putting it say I got a job tomorrow because I needed something well I know that I got to go down there and report it because I couldn't go into the job because you'd be looking over your shoulder thinking all this tell security is coming in I want to be done for it it still is just hopeless you can't fight against

them the jobs alone are these days hit you only caught about 45 pound a week didn't eat it up to stand below that you still finish over about Tata 9 pound it's well what is he working when he used to get the same thing you know what I mean I can't seen any sense of it of course he's quite right but it may not pay him to get a job now that's not his fault and I don't blame him he's acting sensibly and intelligently for his own interests in the interest of his family it's a

fault of a system which takes away the incentive from him to get a job but suppose you were cruel and simply took away the welfare overnight cut it off what would happen he would find a job what kind of a job I don't know it wouldn't might not be a very nice job it might not be a very attractive job but at some wage at some level of pay there will always be a job which he could get for himself it might be also that he would be driven to rely on some private charity he

might have to get soup kitchen help for the equivalent again I'm not saying that's desirable or nice or a good thing it isn't but as a matter of actual fact as to what would happen there is little doubt that he would find some way to earn a living the American government is trying to break the welfare trap these people were unemployed they're now being trained at the taxpayers expense it may or may not lead to a real job here we have a vast national welfare system which is diametrically opposed to everything that America believes because

America was founded on a work ethic has practice to work ethic and has said this is what we want everybody to do the opportunity to hold a job and in America everyone here has to clock in and do a full day's work it's an attempt to make it seem like a real job we're saying a job as a part of the American Way of life and we're gonna help you find a job so that you can get a piece of the pie you can pay taxes you can become a a part of that American dream

but the dream isn't working schemes like this run under the government's comprehensive education and training act cita have a high dropout rate and many trainees end up back where they began on welfare the men and women who administer Sita and similar programs the officials of the Department of Health Education and Welfare our dedicated people their motives are good their achievements are not the results of these programs have been disappointing why I believe that the basic reason is is because it is very hard to achieve good objectives through bad means and the means we have been

using are bad in two very different respects in the first place all of these programs involve some people spending other people's money our objectives that are determined by still a third group of people nobody spend somebody else's money as carefully as he spends his own nobody has the same dedication to achieving somebody else's objectives that he displays when he pursues his own beyond this the programs have a insidious effect on the moral fiber of both the people to administer the programs and the people who are supposedly benefiting from it for the people who administer it

it instills in them a feeling of almost godlike power for the people who are supposedly benefiting it instills a feeling of childlike dependence their capacity for personal decision-making atrophies the result is that the program's involve a misuse of money they do not achieve the objectives which it was their intention to achieve but far more important than this they tend to rot rot away the very fabric that holds a decent society together if you think that's overstating the case look what hgw found when it made a special investigation into the spending of the vast funds it

administers we just got the plan from the Public Health Service on reduced necessary beds in these reels of tape that record every payment made every recipient they found evidence that a staggering seven and a half billion dollars had been lost by fraud waste and abuse in one year doctor's building contractors hospital schools welfare recipients everyone had been fraudulently dipping into the pot and the investigation isn't over yet the inevitable consequence of having a huge pot of taxpayers money is that all of us want to get our hands in it you can be sure that we'll

all be able to find very good reasons why we should be the ones to spend somebody else's money [Music] somebody or other put up a good case for spending taxpayers money to subsidize rents in New York City including the rents of these apartments the people who occupy these apartments pay something like $200 a month less than the market rent and that subsidy comes out of the taxes of people most of whom are much poorer than the people who live here it's not unusual for this sort of thing to happen when government tries to do good

with our money look at what happened in Chicago for most visitors the immediate impression is of a rich prosperous bustling city [Music] but like every large city in America it has its problem areas overcrowded slums breeding poverty and crime after World War two one such area developed in Hyde Park in the 50s plans were drawn up to pull down large areas of slum building and to rebuild using government funds under an urban renewal program it was to be a show project replacing a blighted area with an integrated community who controlled the spending of that government

money it was in fact my own University of Chicago which felt its very existence threatened by the spread of urban blight and crime government money was used to tear down an area that contained many small shops as well as families of low-income once the area was cleared private money rebuilded with middle-class apartments townhouses and shopping complexes the blight had been cleared here but only to be shifted elsewhere in many instances when when government administers large grants while those funds don't wind up directly serving the people and achieving the objectives that were the intent of the

programs because the the grant has a feed that large government bureaucracy Joe Gardner helped to set up an organization of local black people to protect their own inners previously the blacks had rioted in the streets to try to get their way now it was to be done peacefully using government money when government funds became available the Woodlawn organization got control they used them to build the kind of houses they wanted low-rise apartments like these the bureaucrats planners and architects told them that it was unequal that only high-rise blocks would work they were wrong a lot

of people have this this view that the disadvantaged if you will have no idea of what their problems aren't heart resolving that it takes outside professionals to do that and we say that's baloney because the outside professional does not feel in his gut what a woman on welfare with six kids and living off a hundred dollars a month you know in a deteriorated building fields she can come up with solutions much better than a bureaucrat the intentions of this local community group are good they want to rebuild the community as the community wants the government

money always corrupts look at the number of people rebuilding this garage it doesn't make sense except that these are seated workers paid for by taxpayers money government funds have allowed the organization to take over a whole area of Chicago they now have their own supermarket they built splendid houses for middle-class occupiers very expensive protected by the latest security systems all at the taxpayers expense in a sense twee is rapidly becoming a mini government at this particular point we have approximately 400 employees we have an operating budget of in excess of five million dollars a year

so we are large large and expanding their next project is to redevelop this site and that's only the first step in a 20-year plan that will cause 220 million dollars most of it coming from the taxpayers in the South Bronx they're very familiar with government protection like the rent controls that made it on economic for landlords to maintain their buildings they've moved out and the Vandals have moved in the South Bronx is an area where many of the people are on welfare and where the crime rate is high but all this could change a group

of local people has begun to renovate these buildings to build new homes they call themselves sweat equity because at first sweat and effort was all they could put into the project only later did they accept a small government grant how long ago did you start working on this building four months ago on this building right here and I tell you what you're gonna do is gut the whole thing from beginning there and right totally gutted and you'll have to rewire [Music] ceilings worked on a winter working summer how many people have you gonna work meet

her a good 40 people how do you keep them working okay you know 10 11 most want to get tired of it hold off and so on well how do you like it an interesting we show them what could be done future what will be done in the future and take it take it well at first its kind of hard to prove to somebody that in next 3-4 years what will come out of it they can't see it the long range turn we're gonna see in short they need money right now in that 200 years

sure so we we try to show them that it will happen it's true they now accept some government money but so far they've managed to retain their original philosophy but the best way to get something done well is to do it yourself okay like what we're doing we're bringing people out of the street giving us something to look forward to they had their own apartment they'd be taken care of the area around it they have a garden to have something look forward to they even get off welfare you even give him a job so I

can drop the world fair and have some self pride that's the whole thing about itself crime because long as you collect upon the government and sitting back you got no worries when that sitting back we're working we're making that money come in we're putting it into our building we were building ourselves up as well in the building some of these people are Sita workers paid for by the taxpayers but this isn't as useful as it might appear you ask these fellows which would they rather have the seat of workers or the money that's being paid

to the seat of workers which would you rather have the money paper but that's your it that's very expensive help in terms of what these people could use with the money you give these people the amount of money you're paying that see to workers now bet they'll have twice as much three times as much work am I wrong right oh that's a very inefficient way to use their money the problem is you've got a bureaucracy and the government bureaucrats they want to decide what to do they don't want to let you decide what exactly to

ask yourself how did this get place get built up in the first place after all this was a pretty respectable solid substantial region when it was first developed it wasn't done through a government project it was done by people individually having an incentive to put up these buildings and occupy them what these people we've been seeing here are doing is they're trying to restore that feeling and that attitude you'll have a far healthier community here if it grows out of the self help of people like the people we've been talking to then if it's a

paternalistic venture undertaken by governmental civil servants and bureaucrats who have to plan on a large scale for other people we must find a way to give everyone cut in the welfare trap the kind of initiative these people have the best or should I say the least bad solution I have ever been able to devise is something called the negative income tax this is the idea that we should get rid of a large part of the welfare bureaucracy of the demeaning rules that we should help people who are poor fundamentally by giving the money what's the

positive income tax you're entitled to a certain amount of personal exemptions and deductions and above that amount you pay tax but suppose you have no income under a negative income tax a fraction of your unused exemptions would be paid to you by the government guaranteeing at least a minimum income if you earn something you'd still get a fraction of your unused exemptions and you'd end up better off as your earnings rose the supplement to your income would become smaller and smaller until your earnings equaled your exemptions at that point you'd break even neither paying tax

nor receiving a subsidy it's not an ideal system it's not the system we might have liked to get into but it's a system which would have the effect of eliminating the separation of the society into those who receive and those who pray the separation that tends to destroy the whole social fabric it would mean that week that we could each of us take advantage of opportunities that opened up without fearing that if by some chance we lost our jobs it would be a long time before we could get back on assistance it would be a

system that would give all of us an incentive gradually to improve our lives with perhaps enable us over time to work ourselves out of the kind of mess we've gotten ourselves into a mess we've gotten ourselves into for the very best of motives but with a very worst of results we have become increasingly dependent on government we have surrendered power to government nobody has taken it from us it's our doing the results monumental government spending much of it wasted little of it going to the people whom we would like to see helped burdensome taxes high

inflation a welfare system under which neither those who receive help nor those who pay for it are satisfied trying to do good with other people's money simply has not worked [Music] the discussion is already underway here at the University of Chicago so let's join it as I looked at the film I had a growing sense of anger anger that that position failed to recognize that the system that was being attacked was necessary in our capitalistic free enterprise system that by its own failure produces poverty and therefore requires governmental intervention in the interest of those people

caught in the traps of poverty so as I sat and looked at the film and as I hear dr. Friedman's statement I was aroused to the point as I said of anger because only half the story is told we are really being again a victim this time a system the welfare system for the failure of other systems to operate in the interest of people let's get other reactions out of that statement trying to do good with other people's money simply has not worked the welfare system is rotting away the very fabric of society Tom salt

my reaction was just the opposite for my anger was of what had been created in a city where I grew up under very different conditions during the period of capitalistic failure during the period when there wasn't as humanitarianism and where it was possible for people to live better and to get out of that poverty now I think someone living in the very same place where I live would find it much harder to escape from that poverty because of all these things buildings were not abandoned like the building that we saw in that film when I

lived in Harlem the crime rate there are all the things that are blamed upon the failures and the previous method did not exist I slept out on the fire escapes in Harlem I would defy anybody to do that in any part of New York City today traditionally in the United States we have tried to avoid some of the welfare trap that was referred to by denying eligibility to people who are able-bodied and not aged and so on and we have therefore tried to close the welfare door to good number of categories within the poor population

the second point that was emphasized and I think needs to be put in some perspective is that some but not all of what we might call welfare programs broadly have this very strong tape back of benefits as you earn some more money and that I guess is what I would like to single out as the principle problem identified in the film but it is not common to any and all welfare programs that one might think of when the family fails when the private sector fails to create jobs at a fast enough rate you find that

people are unemployed and drift into needing help in order to exist and the welfare system was created in the 30s to do exactly that when the private sector essentially failed we have the development of a welfare system it is not corrupting society it is taking what society institutions have left behind the family breaking up the economy not expanding fast enough the health system failing the educational system not doing its job we have untrained unskilled people looking for jobs in a highly technical society or jobs that pay so low that people cannot in fact live in

a decent level of humanity I see the welfare system not corrupting but in fact taking the remains and attempting to help people live in dignity so rotting away the fabric of society is not supported except perhaps by you would you back that phrase absolutely you're saying you're talking about the failures of the other parts of society what the welfare system and other kinds of governmental programs are doing is paying people to fail insofar as they fail they receive the money and so far as they succeed even to a moderate extent the money is taken away

this is even extended into the school systems where they will give money to schools with low scores insofar as the school improves its education the money is taken away so that you are subsidizing people to fail in their own lives have become more dependent upon the handouts we have expectations built-in today about the quality of life the quality of job the level of income for which one expects in return why because we look at the level around us that it takes us to have that's not why I may have all sorts of expectations the question

is what can I do if someone else is subsidizing my expectations my expectation will be for hire or in so far as the Center for Advanced Study was subsidizing my expectations a few years ago I refused to work at UCLA for the normal full professor salary why should i when I get the same money from being in the Center for Advanced Study with no hours no duties and no classes let's look at another proposition in milton's case the insidious effect on those who receive welfare they lose their human independence and dignity are treated like children

and so on now doc Thompson as a former administrator of a major program is that a great hazard that is not a great hazard as a matter of fact that presumes that people get on welfare stay on welfare and therefore have the result that dr. Friedman statement issues the fact of the matter is that in our AFDC programs throughout the country in particular it was as true in New York there is a graduate turnover of the welfare AFDC rolls about a third of them go off each year now if these people were so destroyed by

the system when they go off they wouldn't go into employment they wouldn't hold employment they wouldn't stay off the rolls for six months 18 months 24 months as long as they are able to stay off so there's something wrong with that argument when one looks at people and what they do people you know who are poor are no different from those of us who are not poor and their motivation for self dependency self support and mobility in the economic scale is no different than those about than the motives we have so that they will not

let the system you remember dr. Friedman the welfare rights organizations who refused to let the system sculpt them down as it was attempting to do you turn the policies around you and I agree completely but the people who are poor in our on welfare roles are no different from the rest of of course not they are human beings and they deserve every sympathy and every possibility of making their own way but the welfare system makes him different you give him an exit in their inner stupid account for them going off the rolls well nobody figures

or figures and you've got to be careful with figures the fact that 1/3 there's a turnover of 1/3 does not mean that there aren't half war on all the time people come on go off come on go off I believe they ought to have the other things the 34% of the people on AFDC or on for five years or longer and when one thinks of the purpose of the AFDC program which was the rearing and support of children dependent children minor children I would submit to you that five years is not a terribly long time

for a mother and children to have to be dependent if there's no other source of income we have a program in Pennsylvania for essentially all of those who are not taken care of by the AFDC program it's called a general Assistance Program and they're less than 15% are on more than 18 months so we have a great turnover we have essentially young males moving into the welfare system after unemployment compensation and then moving out when a job opportunity comes along this I you know I think the notion of generations of people on welfare is is

a very small minority in the whole system that doesn't mean that the system as presently defined and as the as a set of programs that we have put together don't often contradict each other and I'm the first to agree with with dr. Friedman that some of the programs are conflicting however I think it is it is overly broad to say that we turn people into helpless children I don't remember talking to anyone who's ever been on welfare who didn't think they were being treated like children while they were on it you know you Mun must

make a difference a distinction between the system that was set up to help people and the people who are employed in that system look at any public welfare system around the country and we have know practically few trained people to work with people we employ the ill trained people who are not equipped to be helping people they say they're social workers they're not social workers I have neither the skills the attitudes and some of them not even the concern so I think one has to separate out a conceptual framework of a system designed to help

people and what this the country and community puts into that system to implement those program in separate the hopes from the reality I separate the skills that are available in order to implement what the objectives of the program are and if they have to separate whether we're talking about program objectives are we talking about how it operates I would be the first to say that's a system that I administered had ill-prepared people to do the job that we were set up to do and I would not say that the system that we set up I

focus on social welfare of people who think that in fact they were so hamstrung by the system that there was very little they could do to help people to get off welfare that is to build up skills get jobs the where was necessary to get off welfare they thought there was the system that we're stereotyping is one of a great deal of paternalistic interference in individual families lives and in fact isn't this true Thompson the caseload is so high for an individual welfare worker that they can't do a lot of interfering and individual family lives

moreover in the last decade there's been a real attempt to ease this welfare trap in AFDC by changing the take-back rate and by administering work expenses and childcare expenses in such a way as to facilitate work by those who may want to do it so it's it's not quite as harsh a picture as we sometimes get that that there is this omniscient welfare worker who's right there in the living room with the family making all their decisions for them never heard of a government program which was defective in which the people who ran it didn't

say if only we had more money to spend and what we're not being able to accomplish with the amount some of your prescriptions in that film because he's good ground for discussion the most drastic one was when you said speaking of an unemployed man supposing you were cruel and took away welfare from this man he would find a job and some at some wage that always be a job he could get he might need some charity enroute private charity but he would get a job I want you to react those of you before we come

back to Milton on that is that a picture that seems plausible to you we may get a job that he will get may get a job in what we refer to as the underground economy and that's where a number of our youth are now going to get their jobs those activities that are illegal and the only opportunity they have for earning part of a livelihood I think the other issue is that you have a whole group of people who are the single female head of a household and yes cut off welfare tomorrow what will they

do what will be their immediate response at what price to their small children and to their middle-aged children yes they'll get a job in fact the statistics show that women in fact are the most successful through the Employment Program but what has to supplement that typically is the provision of some kind of daycare arrangement either the individual woman has to earn enough money to be able to pay privately for her daycare or in fact she is quote subsidized through this insidious corrupting program set of programs run by the federal government which in fact makes our

employable in a taxpayer it's a it's an interesting notion of trying to get people in a productive mode Tom so it's incredible the way the way you start the story in the middle as if there's a predestined amount of poverty a predestined amount of unemployment and that the welfare system is not itself in any way responsible predestined 20% of the bottom half of the population I have never that's always been it's also true that 20% of the bottom population does have to be living on the government and ruled by the government Commission for example of

female-headed households many of those additional grown woman who has all all the kids are teenage pregnancies there's not a predestined amount of teenage pregnancy I grew up in an era of when people and particularly blacks were a lot poorer than today faced a lot more discrimination in today and in which the teenage pregnancy rate was a lot lower than today I don't believe there was a predestined amount of teenage pregnancy a predestined amount of husband desertion others Guttman has done a study of the black family showing that this whole notion that this is the black

family has always been disintegrating but that is nonsense that his studies go up in 1925 the great bulk of black families were intact two-parent families up through 1925 and going all the way back through the aro slavery so it is now only within our own time that we suddenly see this inevitable tragedy which the welfare system says it's gonna rush into sound in which it is itself a point for a very small group we're talking about 12% of the families are not intact are not two-parent families at any one you know I'm gonna walk over

sniffing no public at large we're talking about 12 percent of the families 12 percent that's right that's a small number welfare we're still talking about a significant component of the bottom 20 percent that are the bottom 20 percent whether they are above the poverty line or below the poverty line they are still the bottom 20 percent and the issue is what is the responsibility of the other 80% if any does your program plan to eliminate there being a bottom 20% no but it intends to raise the bottom 20% you're raising them by having more by

having more legitimacy more unemployment I'm not making the meat have illegitimate children you don't have to be subsidizes we as human beings don't have a responsibility but I hope we have a compassion and interest in the bottom 20% and I only want to say to you but the capitalist system the private enterprise system in the 19th century did a far better job of expressing that sense of compassion than the governmental welfare programs are today the 19th century the period which people denigrate as a high tide of capitalism had the was a period of the greatest

outpouring of eleemosynary and charitable activity that the world has ever known and one of the things I hold against the welfare system low seriously is that it has destroyed private charitable arrangements which are far more effective far more compassionate far more person-to-person and helping people who are really for no fault of their own in disadvantaged situation I have to disagree with you though because I think that the the whole notion of private property was excluded whole segments of society were excluded from the notion of private property in the 19th century namely women idiots and imbeciles

and so I don't go back to the 19th century and hold it up as any Paragon that we would want to replicate today anyway I want Milton now to come to your major prescription look I know you don't say it's on the agenda for tomorrow but it lies ahead that is the negative income tax and I'm not sure people fully understand how it work we can't I think go to the details of it but I'd like to get a reaction around the panel first of all is this a viable approach to the enduring problems of

poverty negative income tax I think it's a viable approach to some part of the problems of poverty it involves first of all cash payments rather than in-kind payments as I understand it involves payments on a non categorical basis but you be known that is to say it doesn't matter whether you're a female added family or a male headed family or with a young or old you're sick or well if your income falls below a certain level you may some guaranteed income level for people based on family size and then it has a take-back rate which

is modest I suppose by definition now the question is how many things you want to use that program to replace how many things you want to replace with such a negative income tax program would you replace everything with just we Claire that point up would you virtually wipe out the remaining forms of welfare if you got this program going yes I would not but I think its purpose is precisely to provide a transition between where we are now and where we would like to go because while but because I agree with you given that we've

corrupted the people on welfare and gotten them on there we do have an obligation not to throw them out in the street and put them in the difficult adjustment you've made we've got easy okay but I would want to replace all let's get reactions for this we'll come back to well I saw some figures recently which said that if you took all the money spent on poverty in United States and divided by all the poverty family you can't come up with a figure of $32,000 per family now the average poverty family apparently is not getting

the $32,000 and so clearly someone in between the Treasury and those families is getting an awful lot of that money and I think that if you simply eliminated the middleman as they saying that commercials that there'd be an awful lot of benefit both to the poor and to the taxpayers I'm supportive of the negative income tax concept and and the objective of it I like to point out however that administrative ly we have another bureaucracy set up somebody has to take into account earnings someone has to decide when to pay back that which they're entitled

to there's a time lag between the paying back their earning and the paying back there are variety of problems in there that I will be prepared to accept but I want you to know that government intervention is not going to be eliminated the issue that I have is where do children come in what are their rights under a negative income tax and are we by building in a negative income tax in fact subsidizing the illegitimate see that Tom soul is so concerned about the major reason it is not feasible today to have a negative income

tax is because the present welfare bureaucracy would be out of work they are the major objectors as pass senator Patton now he's now a senator Pat Moynihan then demonstrated in his book on the Nixon program the chief obstacle to getting an enacted was a welfare bureaucracy so that I don't believe these administrative problems if you've got it enacted would be at all serious I think the other assumption under the negative income tax and it's one that I'm not sure I can buy is that everybody has a minimum level of understanding about how to spend money

in other words how to use the marketplace to satisfy wishes and and I as an economist could say yes we do we have everybody from age 4 to 100 knows how to use money to satisfy wants and that's that's what they don't they don't there are all sorts of problems of people who are not going to be able to but that's a minority problem that's a problem for private activity in private charity one thing is sure they're spending they would be spending their own money and that however knowledgeable you are about my money but it

would be one stage less bad right now the welfare worker is spending mr. a's money to help mr. city and there's a big take off in the middle as Tom Sowell said the question is not whether people are wealthier on low incomes can all spend their money effectively the question is how effectively do basement it as compared to how effectively the bureaucrats spend it for them comparing anything to perfection or to some arbitrary standard acetyls noting the same thing is true in the education area they're saying would families be able to select select schools with

their kids under a voucher system for example well the question is could they possibly do much worse than the corrupt bureaucrats are doing and yet in the public school system we're going on education in another program I've owned equivalent you said about a half of the money not going to the poor or something that doesn't shouldn't lead the viewer to think that all that money is going to the administrators of programs a lot of what you're talking about goes to non poor recipients for example Social Security as a program pays a roughly half of its

benefits to people who otherwise would not be poor unemployment insurance pays about two-thirds of its benefits or so to non poor persons and those are in some definitions welfare or anti-poverty programs and that's how statisticians come up with this horrendous sounding discrepancy between the total amount of money spent and the total cash benefits that go to the poor I think it's a perfectly valid point though because supposedly we were not setting up unemployment benefits and Social Security in order to keep the affluent affluent well this goes back to this big philosophy debate we might have

I think it's easy to oversimplify things and say that all of these programs including the public schools are there to be up help to the poor and the poor only but I will let me mention that the negative income tax has some of its impetus in that it would be a way of confining benefit payments to people who are yes yes and it would cut out benefits we're an awful lot of people who now have expectations that they're going to get them not in the form of public assistance but in the form of social insurance

as we use the when an Almond could be made for us not disappointing expectations on which people have built their lives for one generation but not a continuing for eternity in order to avoid one generational transition what are the other hurdles to it getting underway now you said I don't know how seriously the biggest and the almost the only hurdle is the welfare bureaucracy no no they're they're the biggest immediate group of lobbyists that will lobby against it yeah the biggest hurdle to getting it over at the moment is that there is no way of

constructing a sensible negative income tax system that will not hurt some people there will be some people who will get less money than they are now getting under particularly those in the upper income groups particularly the affluent who are now being subsidized by the wealthy and they will make it politically difficult for the people to put it into effect that the attempt is to put a negative income tax in effect which costs less money is easier to administer and yet which doesn't play anybody in the society one dollar less than he's now getting there's no

way in which you can construct such a program but although it's not politically feasible now the force of history is on its side it's going to become political food let's not say that they give the impression that welfare administrators were against negative income tax the fat program for example as Moynihan says because they would lose their jobs for example many of us were opposed to it because of certain features in that program a $24 $2,400 level for a family of four these were opposed to that and if one goes down the Congressional Record those who

testified will be shown to be saying yes we're four conceptually but we're against this piece and this piece if you change that you have our support I was in the same position I have first proposed the negative income tax twenty five years ago but I testified against the final version of the Nixon plan why because of welfare bureaucrats had led them to introduce changes in it which converted it from a decent satisfactory well negative income tax to one which would have been just as bad as what you now have would have been added on top

of everything else that's its political reality got political reality changes and that's the important thing I want to say one more thing about this this whole problem that we've been talking about and that is going back to Bob lemons comment there is one thing that can be said in favor of the welfare program unaccustomed as I have to saying anything in favor of it and that is that it is the only social program I know of which at least on the average gives money to people who are in lower income classes than those who pay

the taxes every other welfare program not only does a lot of money go to the people who are well-off but on the average the poor are taxed and the well-to-do are subsidized we in the upper income classes have been very clever at conning the poor suckers at the bottom to pay us nice well salaries as bureaucrats and to provide us with nice benefits at their expense and at least a welfare program doesn't do that and what you said with great confidence that it will come the negative income tax even though you recognize the hurdles why

are you so sure it will come because the present system has within it the seeds of its own destruction there is no way in which a system constructed like the prison in my opinion can avoid creating more and more social problems and something is gonna have to be done nobody has proposed any alternative so far as I know there is no effective alternative to the negative income tax and so it gets knocked down and it keeps rising it gets knocked down yeah but finally raised the question though whether in any modern industrial democracy this one

it's conceivable system to be run without a fairly elaborate welfare underpinning of some kind but to feel I I don't think it can be because I think essentially the welfare set of welfare programs reflect the values of this society that if it didn't there would have been revolt long before now yes there are rumblings about its cost and I think that's primarily a function of rapid rates of inflation eroding real income earning power of the middle-class taxpayer but I think on one level we wanted to give up the responsibility of caring the responsibility of day

to day actual caring and in a technical modern industrial society like we have the tax system and the government system is probably as a isn't viable alternative I don't think we're gonna get out of it I don't think you're going to see private charities who can take my money that I am free to give or not give and essentially make a difference in people's laws of any substance on any level I don't think that has anything to do with the Massiah T being modern technological or industrial they have to do with an ideology and particularly

an ideology that is very strong among academic intellectuals and in the media and I think that as time goes on and more and more intelligent ideas replace the kinds of vague divisions that dominate today that the political climate will change and that's the only thing that stands in the way of reform right now Jim doesn't I don't think you're gonna get rid of the system that I'm interested welfare system I'm interested in Tom's last statement about accommodations and and and theorists and so forth we forget that we're talking about people and we may sit in

the ivory tower and talk about whether this system will work and either logically or ideologically why it won't work at the same time there are masses of people outside or locked out of the system that you and I are part of and somehow we've got to make sure those people are taken care of and the short of not doing it of course means that your safety and my safety and the vital the vitality of this government and of our country is at stake the mayor of the city of New York asked me when we had

a strike what would I do if I couldn't get checks out to people when our workers were on strike and I said to him after the first month chaos needs to what do you mean I said no man or woman in the street of the city of New York you include a mr. mayor we'll be safe if we cannot take care of people or we leave this discussion and hope you'll join us for the next episode of free to choose [Music] next week is equality every American's birthright is it healthy for a nation when the

government tries to impose equality on all its citizens how does that affect the freedoms of individuals don't miss Milton Friedman's free to choose next look [Music] Oh major funding for this program was provided by