PAY IT BACKWARDS: The Federal Budget Surplus with Milton Friedman
Hoover Institution・23 minutes read
Milton Friedman argues against increased government spending, favoring tax cuts to prevent excessive government spending and allow individuals to allocate their income wisely. He suggests accelerating tax cuts to return surplus money to people before Congress can spend it, advocating for stability in monetary policy, tax cuts, and minimal government spending during economic downturns.
Insights
- Milton Friedman emphasizes the importance of tax cuts over increased government spending or debt repayment to prevent excessive government intervention and allow individuals to make their own economic decisions.
- Despite historical shifts towards government growth, Friedman argues against fiscal stimuli like tax cuts or increased spending during economic slowdowns, advocating for stable monetary policy, tax cuts, and minimal government spending as more effective measures to navigate recessions.
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Recent questions
What is the source of funding for the program?
The John M. Olan Foundation and the Star Foundation.
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Summary
00:00
"Federal Budget Surplus: Options and Implications"
- Funding for the program is provided by the John M. Olan Foundation and the Star Foundation.
- The federal budget has been running surpluses, with a projected surplus of over $280 billion this year.
- Milton Friedman, a Nobel Prize-winning economist, discusses the history of federal budget deficits and surpluses.
- The surplus is attributed to a strong economy and political gridlock preventing excessive spending.
- Options for the surplus include increased government spending, paying down public debt, or tax cuts.
- Arguments for increased spending include Congress's inclination and the need for productive capital.
- Friedman argues against increased spending, stating government spending is adverse to productivity.
- Paying off the debt is economically sensible, but political pressures may lead to spending.
- Friedman favors tax cuts, allowing individuals to decide how to use their money and prevent excessive government spending.
- The historical shift towards government growth began with the Great Depression, changing public attitudes towards government intervention.
16:10
Friedman's Tax Cuts for Economic Stability
- Milton Friedman believes that the government should not dictate how individuals allocate their income between investment and consumption.
- President George W. Bush's plan for the budget surplus includes allocating 25% to tax cuts, 50% to Social Security and Medicare, and the remaining 25% to new spending programs.
- Friedman advocates for reducing taxes not to stimulate the economy but to ensure wise and productive spending by individuals.
- He argues that fiscal stimuli like tax cuts or increased spending won't effectively boost the economy, citing Japan's failed attempts despite multiple fiscal stimulus programs.
- Friedman suggests that the government should accelerate tax cuts to return surplus money to people before Congress can spend it.
- In times of economic slowdown, Friedman advises against Keynesian fiscal stimulus, recommending stability in monetary policy, tax cuts, and minimal government spending to navigate through a recession.
