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Tomorrow marks the 98th birthday of the late economist and the great freedom fighter Milton Friedman. To honor Friedman’s excellent work, please watch the following videos of him explaining free market principles in a simple manner. While Milton Friedman may no longer be with us, his legacy and love for freedom live on.
A government debt is a government claim against personal income and private property – an unpaid tax bill. —Hans F. SennholzStop Excessive Government Spending – Now!
Nobel Laureate Milton Friedman was a great economist. Friedman was also a great observer of the political process – particularly the American scene. Friedman knew that excessive taxes destroyed innovation, personal freedom and economic growth. And, Friedman knew that in order for American to stay great, government spending must be a small fraction of the annual Gross Domestic Product (GDP). Without a doubt, what government spends will ultimately be paid in taxes, increase infllation (which reduces the wealth of everyone) or creaete more debt (which must be paid by confiscating the income or wealth of our children). Friedman knew that spending had to limited and controlled:
Keep your eye on one thing and one thing only: how much government is spending, because that’s the true tax ... If you’re not paying for it in the form of explicit taxes, you’re paying for it indirectly in the form of inflation or in the form of borrowing. The thing you should keep your eye on is what government spends, and the real problem is to hold down government spending as a fraction of our income, and if you do that, you can stop worrying about the debt.
Unfortunately, America must worry about our debt. It's extraordinarily dangerous. Bush II was a prolific spender and America's debt exploded. Over the past four years, during the Obama reign, our federal government has borrowed 40 cents for every dollar spent. Obama, in four years, has increased the debt by 5 trillion dollars, bringing our total debt to 16 trillion dollars. Again, government debt is an unpaid tax bill and must be paid by confiscating money from future workers or from private property.
Excessive government spending/debt is the issue of our time in almost every popularly elected government – Europe and the United States. Government spending plagues Greece, California, Ireland, Illinois, San Bernandino, Harrisburg, the United States of America and nearly every democracy.
Nothing is more important than stopping the insane excessive spending of our government. If our excessive spending is not limited, our children will most likely experience a continuted, anemic, economic growth ending in a terrible, economic distablization. California, Greece, San Bernandio and other jurisdictions are small in comparison to what will eventually occur in America. Again, before the spending/debt tsunami destroys us, America will bumble along with anemic economic growth and high unemployment.
We have many opportunities to control our spending/debt fiasco. Presently, two competently administered and economically vibrant countries have effectively limited government spending/debt to a percentage of Gross Domestic Product. Poland has the fastest growing economy in Europe and constitutionally limited government debt to 60% of GDP. [Read: Does America Need a Constitutionally Defined Debt Limit? ]
Similarly, Switerzerland has limited government spending in relationship to their GDP. Notice, Poland limited their debt to their GDP, while Switerzerland limited spending in relationship to their GDP. Both practices stopped excessive spending in relationship to revenues. Switzerland limits spending to be no higher than the trendline of revenue over a defined period of time. Dan Mitchell of the Cato Institute explains Switzerland's “debt brake” in the Wall Street Journal:
The Swiss debt brake does not require a balanced budget in the traditional sense. Tax receipts, as we know from the American experience, tend to increase rapidly when the economy is doing well and fall off when the economy stumbles. To smooth out the ups and downs, Switzerland's debt brake limits spending growth to average revenue increases over a multiyear period (as calculated by the Swiss Federal Department of Finance).
Additionally, Switzerland law stops politicians from arbitrarily increasing tax. Any new tax increase must be approved by the majority in the nation and a majority of the cantons. Again, Mitchell reports:
The rates can only be changed by a double-majority referendum, which means a majority of voters in a majority of cantons would have to agree.
Poland has a constitutional limit on the ratio of government debt to GDP. When debt exceeds 60% of GDP, spending must be reduced, taxes rates increased or a combination thereof. Switerzerland uses the “debt brake” to limit spending as it is related to a trend line on revenues. Additionally, Switerzerland made it difficult to raise taxes.
The important lesson for America is that excessive spending becomes dangerous debt, which must be paid for by our children and grandchildren. Poland and Switerzerland imposed binding restraints, which stopped excessive spending and fostered vibrant, economic growth.
With the next debt ceiling decision is immediately upon us, it is time for We the People to demand binding limitations on excessive spending. For over a year, FreedomWorks has supported Cut, Cap and Balance, which caps spending at 18% of GDP and requires a balanced budget. An alternative approach could be similar to Poland and force government debt to a GDP ratio below 60% of GDP.
Absolutely essential is binding restraints on spending. As Milton Friedman observed, spending is really taxing:
The thing you should keep your eye on is what government spends, and the real problem is to hold down government spending as a fraction of our income (GDP), and if you do that, you can stop worrying about the debt.
Democracy and Power 104: Future Debt BurdenA government debt is a government claim against personal income and private property – an unpaid tax bill. —Hans F. Sennholz
Ben Domenech, editor of the indispensable morning newsletter, The Transom, has published an excellent "top ten" list, which we are happy to reprint with his permission.
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TEN THINGS EVERYONE SHOULD READ ABOUT HEALTH CARE
[From The Transom, September 10, 2012.]
There is so much to read these days about health care policy and entitlement reform. But we oftentimes lose sight of the longer term debate about these matters, instead focusing on the arguments dictated by the framework of an election cycle and partisan political lines. Suddenly Republican-leaning writers all have very strong opinions about the workability of competitive bidding despite having no interest in it a month ago, while otherwise intelligent Democratic-leaning writers compose complex apologetics structures for IPAB and the individual mandate. Politics often warps policy debates, but this is a particularly egregious case. So let’s step back for a moment and assess things in terms of the past thirty years or so instead of the past two with a list of essays, books, and other items which make up the Ten Things Everyone Should Read About Health Care. I’ve tried to keep things from getting too dry with this list, but you can tell me if I’ve failed.
1. Milton Friedman: “How to Cure Health Care”, The Public Interest, Winter 2001. http://vlt.tc/ght “The tax exemption of employer-provided medical care has two different effects, both of which raise health costs. First, it leads employees to rely on their employer, rather than themselves, to make arrangements for medical care. Yet employees are likely to do a better job of monitoring medical care providers—because it is in their own interest—than is the employer or the insurance company or companies designated by the employer. Second, it leads employees to take a larger fraction of their total remuneration in the form of medical care than they would if spending on medical care had the same tax status as other expenditures.”
2. Max Gammon: “Health and security: report on the public provision for medical care in Great Britain”, St. Michael’s, 1976. http://vlt.tc/ghu Origin of “the theory of bureaucratic displacement.” “In a bureaucratic system, an increase in expenditure will be matched by a fall in production. Such systems act rather like ‘black holes’ in the economic universe, simultaneously sucking in resources and shrinking in terms of ‘emitted production’.” More on Gammon in this report. http://vlt.tc/ghv
3. H.E. Frech, ed.: “Health Care in America: The Political Economy of Hospitals and Health Insurance”, Pacific Research Institute, 1988. http://vlt.tc/ghx Just about everything you could ever need to know concerning the monopsony power of hospital systems and insurers. Additional literature is here.http://vlt.tc/ghw
4. Joseph Bast, Richard Rue, and Stuart Wesbury, Jr.: “Why We Spend Too Much on Health Care”, Heartland Institute, 1992. http://vlt.tc/gi0 “By first bidding up the price of health care with a payment system that encouraged excessive utilization and spending, and then imposing cost-containment measures that led to cost-shifting, government inadvertently increased the cost of health care to other buyers and changed the way care is delivered. In so doing, government has contributed to a process that has priced health care and insurance out of the reach of millions of Americans. Medicare and Medicaid have given the elderly and poor greater access to health care. However, this benefit must be weighed against the costs borne by taxpayers and other health care consumers.”
5. Richard Epstein, “Mortal Peril,” Basic Books, 2000. http://vlt.tc/gi1 Epstein concentrates on the moral and philosophical case against the false promise universal coverage and in favor of a more modest and more private safety net—but his main thrust is against the idea of health care as a natural human right.
6. John C. Goodman, Gerald L. Musgrave, Devon M. Herrick: “Lives at Risk: Single-Payer National Health Insurance Around the World”, Rowman & Littlefield, 2004. http://vlt.tc/gi2 Not just an ideological tract, but an examination of single payer’s failures in a tangible sense, offering an alternative view of how to achieve better quality patient-centered care.
7. Regina Herzlinger, “Who Killed Health Care?: America's $2 Trillion Medical Problem - and the Consumer-Driven Cure”, McGraw-Hill, 2007.http://vlt.tc/gi3 From an interview about the book: http://vlt.tc/gi4 Herzlinger describes “an iron triangle” of “hospitals, the insurers, and the government” protecting a broken system: “The insurers would love for a private health insurance system to remain. I, too, think that's very important, but the easy way for it to remain is to offer just one product. If you offer a lot of products, suddenly you're in actuary land. You're in a real risky business. So they've done a lot to maintain just one product. Hospitals want to control the health care delivery system, and they've become oligopolists or monopolists in many markets, thus obviating price and quality competition, and they've become vertically integrated by hiring physicians and using them. Initially the hospital was a place almost like a hotel or an office, a kind of ancillary place for the doctor. The doctor was the star. But increasingly, the hospitals have won the power struggle, and the physicians are more or less the blue-collar workers. And then the government. Whether Democrat or Republican, power is seductive, and they are actually practicing medicine … by micromanaging the payment system.”
8. David Goldhill, “How American Health Care Killed my Father”, The Atlantic, 2009. http://vlt.tc/gi5 “To achieve maximum coverage at acceptable cost with acceptable quality, health care will need to become subject to the same forces that have boosted efficiency and value throughout the economy. We will need to reduce, rather than expand, the role of insurance; focus the government’s role exclusively on things that only government can do (protect the poor, cover us against true catastrophe, enforce safety standards, and ensure provider competition); overcome our addiction to Ponzi-scheme financing, hidden subsidies, manipulated prices, and undisclosed results; and rely more on ourselves, the consumers, as the ultimate guarantors of good service, reasonable prices, and sensible trade-offs between health-care spending and spending on all the other good things money can buy.”
9. Avik S.A. Roy, “Health Care and the Profit Motive”, National Affairs, 2010.http://vlt.tc/cf5 “To those on the left, America's health-care system is a heartless capitalist jungle: a place where the bottom line is king, and the working poor are exploited. President Obama, for example, has accused insurance companies of holding Americans hostage in exchange for profits, and doctors of cashing in on children's sore throats by needlessly removing their tonsils. The right, meanwhile, sees American health care as an outpost of socialism: The government distorts prices and suppresses innovation, impairing the quality and affordability of care and constraining individual autonomy. Hence Republicans' call for less government involvement in insurance, and their complaints that heavy-handed Medicare rules are the source of our woes. Simply put, liberals believe that health care is treated as a market commodity today but should not be, and conservatives think that health care is not treated as a market commodity but should be.”
10. John C. Goodman, “Priceless” and “Patient Power”, 1993 and 2012. A slight cheat here, as these are two books, but really work as a pair across two decades of work. The old: http://vlt.tc/gi7 The new: http://vlt.tc/gi6 The first chapter of Goodman’s latest is available to read here. http://vlt.tc/gi8
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Ben Domenech, editor of the indispensable morning newsletter, The Transom, has published an excellent "top ten" list, which we are happy to reprint with his permission. + + +
In keeping with the Milton Friedman posts here at FreedomTalks, I thought I'd post this fascinating video.
It's Uncle Milty on Donahue back in the 1970s defending capitalism. More importantly, however, he stands up for the concept which Adam Smith identified so eloquently in An Inquiry into the Nature and Causes of the Wealth of Nations- individuals pursuing their personal interests. This concept, unfortunately, has come to be known as "greed" by the Left.
Friedman dashes this pejorative meaning to the term.
In keeping with the Milton Friedman posts here at FreedomTalks, I thought I'd post this fascinating video. It's Uncle Milty on Donahue back in the 1970s defending capitalism. More importantly, however, he stands up for the concept which Adam Smith identified so eloquently in An Inquiry into the Nature and Causes of the Wealth of Nations- individuals pursuing their personal interests. This concept, unfortunately, has come to be known as "greed" by the Left. Friedman dashes this pejorative meaning to the term.
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