I was looking for a different book by Milton Friedman, but this was the only one available at the library. This book lists both Milton & Rose Friedman as the authors, and I initially thought it would probably be too out of date to be of much interest since it was written in the latter part of Ronald Reagan’s first term as President. I plunged ahead and was rewarded. The book is perhaps even more appropriate to discussing government-caused problems than when first published. The message I want to emphasize is that the Friedman’s warn that politicians often campaign against raising taxes but then engage in deficit spending. They explain that a deficit is a “…hidden tax whether it is financed by pieces  of paper or bookkeeping entries called money or…notes or bills or bonds.” We are liable for the deficit, although it might be our children or grandchildren who will eventually have to actually pay the bill. That is a thought that should be frightening to anyone watching what has happened to the federal deficit in the last decade.

I had never read a Friedman book, although I’ve always admired his many Libertarian-based quotes. My favorite, and I don’t have the exact quote in front of me, is “If you put the federal government in charge of the Sahara Desert, in six years we would have a shortage of sand.” I was disappointed that I found only one such pithy quote in the book, but more about that later in the review.

The first message in the book is that government policies can be reversed during the first six to nine months following an election regardless of whether the newly elected leader is left or right. FDR implemented massive government programs with his “New Deal Brain Trust” in a one hundred day special session of Congress.  Reagan and Thatcher were able to initiate big changes shortly after their elections as was the Socialist-leaning Mitterand in France. It is explained that the only effective means of reducing the influence of entrenched groups, those benefitting from the status quo, is to propose changes after being newly elected and not while campaigning. The primary complaint that the Friedman’s had about Reagan’s early days was that his proposals weren’t bold enough. They point out that he would have received no more criticism for more aggressive proposals to cut government programs and eliminating harmful bureaucracies.

There is a wealth of economic history in the book. It shows that federal spending was less than five percent of national income prior to 1930. The New Deal changed the slope of the graph, and it was just under thirty percent by 1980. (I didn’t research what it is now; I’m certain that would be too frightening. There are numerous discussions to follow that could or should have the same parenthetical comment. ) On problem with trying to control federal spending is the enormity of the government. The “Budget in Brief” for 1984 was eighty-six pages, the “Budget” was 615 pages, and the “Appendix” was 1,025 pages. The budget is too enormous for anyone to understand even a tiny portion.

In the discussion of spending the second largest increase was in “…in a class of programs that together can accurately be described as middle-class, or, indeed, upper-class welfare:  Social Security and other government administered retirement and disability programs, plus Medicare.” We should think about federal spending and the deficits created with the advice given by Thomas Jefferson. He characterized “…public debt as the greatest of dangers to be feared…we must not let our rulers load us with public debt.”   The “iron triangle” is described as consisting of direct beneficiaries of a law, the legislative committees and staff, and the bureaucracy administering a law. The iron triangle always resists slowing the growth of government let alone reducing the size of government.

There is an interesting explanation of why bad government programs are seldom if ever scrapped. An unprofitable idea in private enterprise fails and goes bankrupt unless the government can be convinced to provide subsidies. Government bureaucracies have no mechanism”… for terminating unsuccessful experiments; instead, they tend to be expanded in order to bury small failures in a large venture which itself will one day fail.” An example is given of a “Board of Tea-Tasters” that has received government funding since 1897. There was somewhat of a media outcry about the board being archaic and various commentators and public officials lined up to end the board. The board had the support of tea importers and a Congressional committee refused to support the legislation needed to end the funding for the board. “There they sit today, a delightful anachronism, thumbing their noses at President and press, sipping their tea from the public trough, too small a boondoggle to raise an editorialist’s ire, their longevity a testament to bureaucratic chutzpah.”

There is a timely discussion of how government programs contribute to rising unemployment. “One is the growth in government programs that reduce the costs of being unemployed or, in effect, that subsidize persons for not working.” These programs, which are financed by productive activities, “…have a double effect:  they reduce the return from working at the same time that they reduce the cost of not working.” The authors do admit that these programs have “…eased the lot of many persons in economic trouble…But they have their costs.”

Note that I did not discuss all of the major subjects discussed in the book. One subject is the Friedmans’ disapproval of the Federal Reserve. I will say only briefly that they believe that agency is “…not subject to any effective political control” and often fails to “…generate stable monetary growth.”  There is another timely indictment of “jobs bills.” Congress enacted a jobs bill to build highways, bridges, and sewers financed by adding 5 cents to the gasoline tax and offsetting other costs by reducing defense spending. (Does this sound familiar?) Collection of the higher gasoline tax started immediately and taxpayers who employed people had less to spend immediately. There was a reduction in the number of people building defense items. The work on infrastructure would not begin for months because of government regulations on contractual and environmental reviews (to mention two). Government jobs were created and private, productive jobs were eliminated!

I promised I would report on the one “pithy quote” I found in the book. It comes on page 49, and it describes how “One of the authors was at first impressed by the law of bureaucratic inertia during World War II, when as a junior bureaucrat in the U.S. Treasury Department, he helped devise the present withholding tax (something, incidentally, for which the other author has never forgiven him.)”  I think most readers would be interested that the next page of the book describes how the IRS was the chief obstacle to implementing the withholding scheme developed by one author and reviled by the other.

The 1984 book should be read and considered as a warning to what we and our government are doing!