Milton Friedman: Can government help the poor?

Note: buy the whole lecture series here.

Is it government's role to help the poor? In this exchange with a young idealist, Milton Friedman in characteristic fashion, shows at least that government creates a perverse system starting with bad schools, limits opportunity through minimum wage laws, and creates dependency via welfare programs.

But let's be honest: people like the young idealist are not going to go away any time soon. Indeed, not all that much has changed since Friedman gave this lecture. So here's a question I'm going to attempt to answer despite any purist instincts I may have. What might government meaningfully do that would minimize damage and help the poor? Where might we find meaningful compromise?

I realize even attempting such is heresy among some classical liberals. But please hold your tomatoes till the end of the set and, remember: Friedman himself engaged in this exercise. Here's a brief list of suggestions, in no particular order:

1. Abolish the welfare state as we know it and subsidize civil society through the tax code. In other words, each person must set aside a certain percentage of his or her income for charities designed to help the poor. The positive aspect of this is that you get competition and experimentation for helping poor people. This experimentation factor is likely to yield far greater methods for aiding folks without making them dependent -- though the dependency problem lingers. Still, many customers will be looking for non-profits that don't create dependency and, instead, show demonstrated results. The downside is that the government would create a perverse army of competing special interests. "Qualified" charities would be politically selected. A bidding war among these charities could mean politicians pick winners and losers to gain political advantage. The poor and taxpayers would lose most in such a bidding war. Still, this could be better than what we have now, i.e. no experimentation and a welfare state monolith.
2. Abolish the welfare state as we know it and simply establish a minimum income. This is similar to Milton Friedman's idea of a negative income tax or Charles Murray's In Our Hands idea. Without too much detail, each person gets a minimum income of, say, $10,000 per year (on a sliding scale, depending on income). There is a degree of dependency in such an arrangement. But there is very little reason to be content with $10,000 per year. You would also get rid of the armies of bureaucrats and reinstill personal responsibility. Such a scheme might better be funded with Georgist (property and common pool resource lease) taxes than, say, income taxes.
3. Require everyone save a certain percentage of income -- including the working poor -- in personal retirement and personal health savings accounts -- a scheme similar to that in Singapore and Chile. This is, of course, illiberal in terms of individual liberty, but if we take some entitlement scheme being given, this may be far preferable to the status quo.
4. Do all the little things that add up: a) significantly lower the minimum wage, b) reduce the tax burden on business, c) shift taxes to consumption or common pool resources/land, d) federalize welfare by pushing taxing authority and welfare to the state or even local level (so you get more experimentation that way).
5. Voucherize schools and healthcare. Increased competition among education and healthcare providers would be a fantastic first step to help the poor. Prices come down and quality goes up. Right now, education is largely a Soviet monolith. Healthcare is unaffordable due to the third party payment aspects of the system. More could be resolved by treating kids and patients as customers, even if they receive vouchers from the government.

Comments

[Joe]

Hello,

I like the way you are thinking, but you've simply created different forms of "force" than those currently causing the problem you are trying to solve.

In that case, I'll leave you with this:

"Whenever we depart from voluntary cooperation and try to do good by using force, the bad moral value of force triumphs over good intentions."

-Milton Friedman