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Author Topic:   Economist Milton Friedman Dies at 94
jwhop
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Posts: 2787
From: Madeira Beach, FL USA
Registered: Apr 2009

posted November 16, 2006 05:43 PM     Click Here to See the Profile for jwhop     Edit/Delete Message   Reply w/Quote
Flashback: Milton Friedman's Powerful Ideas
Jarret Wollstein, NewsMax.com
Thursday, Nov. 16, 2006


This article originally appeared in the Feb. 2006 issue of NewsMax Magazine.

Luminaries from around the country and the world — including Arnold Schwarzenegger — came together in Los Angeles recently to honor Milton Friedman and his work on the occasion of the 50th anniversary of his revolutionary idea to allow public school students to attend private schools using vouchers.

Friedman is considered the most influential free-market economist in the world, thanks to his lifelong efforts to advance the causes of limited government and individual freedom. His ideas became popularized in 1980 with his widely acclaimed TV series, "Free to Choose." in which he explained basic economics and strongly criticized the destructive effects of taxes and regulation. Millions of people in dozens of countries, including Russia, viewed the series.

NewsMax recently sat down with Friedman to discuss a wide range of subjects, including the state of the U.S. economy, the housing bubble, the future of the dollar and gold prices, reforming public education and what he would do if he were elected president.

Friedman served as an economic adviser to Sen. Barry Goldwater, and presidents Richard Nixon and Ronald Reagan. In 1976, Friedman won the Nobel Prize in economics, and in 1988 Reagan presented him with the nation's highest civilian award, the Presidential Medal of Freedom.

What is the state of the U.S. economy and what are the major challenges it faces?

The U.S. economy is healthy — there is no doubt about that. It is about as healthy as it has ever been.

The past 15 or 20 years has been a truly exceptional period in U.S. history. Throughout that period we've had rapid growth, low inflation, low unemployment, low interest rates. The level of income per capita in the United States today, corrected for inflation, is almost surely higher than it has ever been. And it's been going up.

We have had 10 quarters of between 3.5 percent and 4 percent per year inflated wealth. In terms of the way it is now, there is very little that you can say, except to hope that it stays the same.

Longtime Fed Chairman Alan Greenspan has departed. What's your overall impression of how well he performed during his 18 years running the Fed?

There is no doubt that Alan Greenspan has been far and away the most effective chairman that the Federal Reserve has ever had.

The Federal Reserve was started in 1913. If you take the first 67 years of its performance, it did more harm than good. In the period from 1980 on — that's both Paul Volcker and Greenspan — the situation changed. Inflation was brought down.

From 1983 on we have had very steady, rapid growth. We have had inflation coming down and staying stable. And that has all been, I think, from the better monetary policy provided by the Fed. I think there's no doubt that Greenspan will go down in history as the most effective chairman.

Do you think low interest rates have caused an inflationary bubble in housing prices?

First of all, you never know a bubble until after it's over. I don't know that there's been an inflationary bubble in housing prices. In any event, the business of the Fed is to keep the price level relatively stable, and that it has done.

Housing has been performing very well, and there are many reasons for that. Indeed, one of the reasons housing has been performing well is precisely because of the excellent Federal Reserve policy.

The economy has become stable, people have more confidence that they will remain where they are, that they will have good jobs. That had led to people being more willing to buy homes. That has led to a good market for housing.

We now have an unusual situation in which both the dollar is strong and gold prices are rising very rapidly. What do you see happening with both the dollar and gold in the next few years?

That depends on what happens abroad, and you can't predict that from here. It depends on China, it depends on Great Britain, it depends on the European nations. What you are talking about is the price of the dollar in terms of other currencies, the pound, the euro, the Chinese reminbi. The dollar at the moment is very stable, and I expect it will continue to be stable. But that depends on what other countries do.

I read a recent interview with you in which you said any tax you can get rid of is a good idea. Are Americans overtaxed today? How much would you reduce taxes?

I think the thing to look at is not whether Americans are overtaxed, but is the government overspent? The problem is government spending, and the problem is how do we keep government from spending too much of our income? Right now, federal, state and local governments spend close to 40 percent of the national income. The question is, "Are we getting our money's worth for that?" I don't think we are. I think we are spending too much. The only effective way to keep down government spending is to keep down its allowance. And that's why I am in favor of tax cuts whenever it is possible.

How would you keep down government spending? What would you cut?

By keeping down taxes. Government will spend whatever it takes in taxes, plus as much more as it can get away with, whatever deficit the community will absorb. Fundamentally, the only way to keep down government spending is to keep down the amount of tax revenue it receives.

I saw a very shocking chart the other day that showed that net savings in the United States is now negative. Savings are actually being reduced.

Well, you have to be careful about that, because those statistics on savings don't include everything that people regard as savings. If you own a home and its value has gone up sharply over the years, you think you have more wealth than you had before. That's a substitute for savings. And so if you ask the question "What has been happening to their net worth?" rather than "How much have people been saving?" — you'll find that net worth has been going up.

I know school choice is a subject near and dear to you. What do you think is wrong with schools today in the United States, and what would you do to improve them?

There's no question that schools today in the United States are a socialist enterprise (and) a government monopoly.

Eighty-five percent of American kids go to government schools. And their schools in turn are largely controlled by teacher unions, and they're producing poor results. Roughly a quarter of our youngsters never graduate from high school.

In international competitions, the U.S. invariably rates low, and it rates lower for older ages compared to younger ages, showing that schools aren't performing properly. So what we need to do in order to improve matters is to privatize schooling.

If government were monopolizing the production of automobiles, I don't think you would get very good automobiles. We had that experiment in East Germany.

The reason you have that monopoly right now is because government subsidizes the producer, not the consumer. What the government is really interested in is promoting education. Now, if you are going to subsidize something to get more, you can either subsidize the producers, so they will produce more, or you can subsidize the consumers, so they can buy more.

If you subsidize the producer, you create a monopoly, which is very inefficient, as we do. If you subsidize the consumer, the consumer looks around and tries to find the best product.

So the way to improve education is introduce competition.


What do you say to the argument that by having vouchers, you open the door to government control of private schools?

You have government control of private schools right now because of compulsory-attendance laws.

The government compels students to go to schools. And they have to check the private schools in order to see that they're not fake and they are really providing schooling.

There is a problem that they would become more serious if you had vouchers. On the other hand, vouchers would strengthen the political power of the private schools and the private industries, and give you more political opposition to expansion of controls. But it is true that the possibility of additional controls is a real problem you have to be careful of.

Are the large deficits the United States is now running an economic concern?

The large deficits are not a concern. The large spending is a concern. And that large spending would be a concern, whether it was financed by deficits or by taxes.

You've commented a lot on the war on drugs. What would you do differently?

I would legalize them. I would treat them exactly the same way I treat alcohol and tobacco. Far more people die as a result of alcohol and tobacco than die from heroin and cocaine. And certainly nobody ever dies from marijuana.

One last question. If you were elected president tomorrow, what orders would you issue immediately?

I don't have the slightest idea. I would follow Bill Buckley's example and resign.
http://www.newsmax.com/archives/articles/2006/11/16/134327.shtml?s=lh

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