Why we should all get our economics education from Milton Friedman

Milton Friedman was a genius.  Not only did he understand economics, but he had a way of conveying complex economic principles in such a simple way that an 8th-grader could grasp them.

Recently, I came across a video from 1978 where Friedman gave his perspective on inflation (1:26:03).  After his presentation, a Q&A period ensued.  At the 1:16:35 mark, a questioner asks, "Part of the twofold cure you suggested tonight was a reduction in government spending.  What areas of government spending would you suggest are most amenable to reduction?"

"Every area..."

"The reason I asked that is, if higher unemployment is a short-term side effect of your inflation cure, then welfare costs are going to go up as a result."

"... I don't think we need to spend more money on welfare.  Not at all.  But if we had a more sensible  welfare system, we would spend less and yet give help where it's really needed.  The welfare system today does not give help where the people really need it.  If you take the total amount of money which the government is now spending on programs labeled as poverty programs to help the poor, and account that to each person it was designated for, it turns out that if they were getting it, they would be amongst the richest people in this country."

Wow!  That's elementary school–level math: divide the money spent by the recipients for a total.

In another video I ran across from 1978, Friedman's student, Thomas Sowell, made the following statement:

I saw some figures recently which said that if you took all the money spent on poverty in the United States and divided it by all the poverty families, you come up with a figure of $32,000/family. Now the average poverty family is apparently not getting the $32,000, and so clearly someone in between the treasury and those families is getting an awful lot of that money.

I was 15 years old in 1978.  I made $2.10/hour working in a kitchen part-time.  If I had worked full-time, that would equate to $4,200/yr.  My dream was to get hired with the fire department: they started at $18,000/yr. (more than four times my full-time income).  I remember thinking I couldn't spend that much money.  Thirty-two thousand dollars a year would be unimaginable riches.

What does that equate to in today's terms?  According to https://smartasset.com/investing/inflation-calculator, 1978 $100 = 2021 $411.  That's a ratio of 1/4.11.  If Thomas Sowell's calculations from 1978 are accurate today, $32,000 x 4.11 = $131,520.

I strongly suspect that's more than your average welfare recipient receives.  I know that Social Security recipients don't appreciate being bundled in with welfare recipients (because they paid into the system their entire lives), but I strongly suspect that very few see that kind of return on their investment. 

I'm a production monkey from a factory in Indiana, not a professional data analyst.  But a cursory search engine query shows that 57% of the federal budget is devoted to entitlement spending (some assessments place it well over 70%).  Social Security; Medicare; Welfare; Medicaid; Unemployment; and other benefits such as WIC (Women, Infants, and Children) and SNAP (food stamps) eclipse other constitutional requirements of government spending.

It would be interesting to see a Thomas Sowell breakdown of how much each individual receives juxtaposed to how much is spent divided by the number of recipients, and see where the remainder winds up.  Inquiring minds want to know.

Mike VanOuse is a Factoryjack and Bible-thumper from Lafayette, Indiana.  More of his blather can be found at http//www.vanouse.com.

Image via Max Pixel.