i know. i'm robert mackenzie and welcome again to the university of chicago, where a group of invited guests are about to see and to discuss a film by milton friedman in his series free to choose. in this film, he examines the welfare system in the united states. this country, like almost every other one, has an elaborate set

of schemes designed to help those in need. now, do they achieve their purpose? whatever the intention? do they work? these are some of the questions that milton friedman asks in this film in his series free to choose. after the second world war. new york city authorities retained rent control, supposedly to help their poorer citizens. the intention triggered this in

the bronx was one result by the fifties. the same authorities were taxing their citizens, including those who live in the bronx and other devastated areas beyond the east river, to subsidize public housing. another idea with good intentions yet poor people are paying for this subsidized apartment for the well-to-do. when government at city or federal level spends our money to help us. strange things happen. the idea that government had to protect us came to be accepted during the terrible years of the depression. capitalism was said to have failed and politicians were looking for a new approach. franklin delano roosevelt was a candidate for the presidency.

he was governor of new york state at the governor's mansion in albany. he met repeatedly with friends and colleagues to try to find some way out of the depression. the problems of the day were to be solved by government action and government spending. the measures that fdr and his associates discussed here derived from a long line of past experience. some of the roots of these measures go back to bismarck's germany at the end of the 19th century, the first modern state to institute old age pensions and other similar measures on the part of government in the early 20th century. great britain followed suit under lloyd george and churchill. it too instituted old age pensions and similar plans. these precursors of the modern welfare state had little effect on practice in the united states, but they did have a very great effect on the intellectuals on the campus.

like those who gathered here with fdr, the people who met here had little personal experience of the horrors of the depression. but they were confident that they had the solution. in their long discussions, as they sat around this fireplace, trying to design programs to meet the problems raised by the worst depression in the history of the united states, they quite naturally drew upon the ideas that were prevalent at the time. the intellectual climate had become one in which it was taken for granted that government had to play a major role in solving the problems, in providing what came later to be called security from cradle to grave. but it was like roosevelt first priority after his election was to deal with massive unemployment as a public works program was started. the government financed projects to build highways, bridges and dams.

the national recovery administration is set up to revitalize industry. roosevelt wanted to see america move into a new era. the social security act was passed and other measures followed. unemployment benefits. welfare payments. distribution of surplus food. with these measures, of course, came rules, regulations and red tape. as familiar today as they were novel then, the government bureaucracy began to grow. and it's been growing ever since. this is just a small part of the social security empire today. their headquarters in baltimore has 16 rooms. this is all these people are dispensing our money with the best possible intentions. but at what cost.

in the 50 years since the albany meetings, we have given government more and more control over our lives and our income. in new york state alone. these government buildings housed 11,000 bureaucrats administering government programs that cost new york taxpayer. $22 billion at the federal level. the department of health education and welfare alone has a budget larger than any government in the world, except only russia and the united states. yet these government measures often do not help the people they are supposed to right? richard brown's daughter, halima, needs constant medical attention. she has a throat defect and has to be connected to a breathing machine so that she'll survive the night. it's expensive treatment, and you might expect the family to qualify for a medicaid grant. no, i don't get it, cause i'm

not eligible for it. i make a few dollars too much, and the salary that i make i can't afford to really live and save anything is out of the question. and i mean, i live we live from payday to payday. i mean, literally from payday to payday. the struggle isn't made any easier by the fact that mr. brown knows that if he gave up his job as an orderly at the harlem hospital, he would qualify for a government handout and he'd be better off financially when the state is brown. there's a it's a terrible pressure on him, but he's proud of the work that he does here. and he's strong enough to resist the pressure of mr. brown. and you're fully dilated. so i'm here to take you to the delivery room. try not to push, please. you want to have a nice, sterile delivery? mr. brown has found out the hard way that welfare programs destroy an individual's independence. we have considered welfare and

we went to see it about apply for welfare. but we were told that we were only eligible for $5 a month and and to receive this $5, we would have to cash in on some savings bonds and that that's not even worth it. but i don't believe in something for nothing anyway. i think a lot of people are capable of working and are willing to work, but it's just the way it's set up. it the mother and the children are better off if the husband isn't working or if the husband is in fear. and this breaks up so many poor families. one of the saddest things is that many of the children whose parents are on welfare will, in their turn end up in the welfare trap when they grow up. in this public housing project in the bronx, new york. three quarters of the families are now receiving welfare

payments. while mr. brown wanted to keep away from this kind of thing for a very good reason, the people who get on welfare lose their human independence and feeling of dignity. they become subject to the dictates and whims of their welfare supervisor who can tell them whether they can live here or there, whether they may put in a telephone, what they may do with their lives. they're treated like children, not like responsible adults, and they're trapped in the system. maybe a job comes up that looks better than welfare, but they're afraid to take it because if they lose it after a few months and maybe six months or nine months before they can get back onto welfare, and as a result, this becomes a self perpetuating cycle rather than simply a temporary state of affairs. things have gone even further elsewhere. this is a huge mistake. a public housing project in manchester, england.

but we're 3000 miles away from the bronx here. but you'd never know. it just by looking around. it looks as if we're in the same place. it's the same kind of flats. same kind of massive housing units. decrepit, even though they were only built seven or eight years ago. vandal is graffiti. the same feeling about the place of people who don't have a great deal and drive and energy because somebody else is taking care of their day to day needs. because the state has deprive them of an incentive to find jobs, to become responsible people, to be the real supports for themselves and their families. for the past seven years, maureen ramsey has had to buy food and clothes for her family out of a government handout for the whole of that time. her husband, steve, hasn't had a job. each week he collects what's known in britain as social security. the government looks after him,

his wife and their children. but accepting welfare payments means accepting the rules of those who hand them out. my opinion, anyway, you feel as they own you. you know there's no other way of putting it. say, i got a job tomorrow because i needed some. well, i know that i've got to go down there and report it because i couldn't go into the job because you'd be looking over your shoulder thinking, well, the social security's coming in. i'm going to be down for it. it's is just hopeless. you can't fight against them. the jobs are not easy, as you only got about 45 pounds a week. don't need a doctor stamp today. you still finished with about 39 pounds. i work. what is it? working. when it used to get the same thing. you know what i mean? like cancer in any sense of it? of course. he's quite right that you may not pay him to get a job now. that's not his fault. and i don't blame him. he's acting sensibly and intelligently for his own

interests and the interest of his family. it's the fault of a system which takes away the incentive from them to get a job. but suppose you were cruel and simply took away the welfare overnight. cut it off. what would happen? he would find a job. what kind of a job? i don't know. it might not be a very nice job. it might not be a very attractive job. but at some wage, at some level of pay, there will always be a job which he could get for himself. it might be also that he would be driven to rely on some private charity. he might have to get soup kitchen help or the equivalent. again, i'm not saying that's desirable or nice or a good thing. it isn't. but as a matter of actual fact as to what would happen, there is little doubt that he would find some way to earn a living. the american government is trying to break the welfare trap. these people are unemployed. they're now being trained at the

taxpayers expense. it may or may not lead to a real job. here we have a vast national welfare system which is diametric opposed to everything that america believes in. because america was founded on a work ethic. has practice the work ethic and has said, this is what we want everybody to do. the opportunity to hold a job. and in america, everyone here has to clock in and do a full day's work. it's an attempt to make it seem like a real job. we're saying a job is a part of the american way of life. and we're going to help you find a job so that you can get a piece of the pie. you can pay taxes. you can become a part of that american dream. when. but the dream isn't working. schemes like this run under the government's corporate sense of education and training act to have a high dropout rate and

many trainees end up back where they began on welfare and. the men and women who administer seta and similar programs. the officials of the department of health, education and welfare aren't dedicated people. their motives aren't good. their achievements are not. the results of these programs have been disappointing. why? i believe that the basic reason is because it is very hard to achieve good objectives through bad means and the means we have been using are bad in two very different respects. in the first place, all of these programs involve some people spending other people's money for objectives that are determined by still a third group of people. nobody spends somebody else's money as carefully as he spends his own. no body has the same dedication to achieving somebody else's

objective that he displays when he pursues his own. beyond this, the programs have a insidious effect on the moral fiber of both the people who administer the programs and the people who are supposedly benefiting from it. for the people who administered it instills in them a feeling of almost godlike power for the people who are supposedly benefiting. it instills a feeling of childlike dependance. there capacity for personal decision making atrophies. the result is that the programs involve a misuse of money. they do not achieve the objectives which it was their intention to achieve. but far more important than this, they tend to rot away the very fabric that holds a decent society together.

the figure, if you think that's overstated in the case. look what agw found when it made a special investigation into the spending of the vast funds it administers. we just got the plan from the public health service on reducing unnecessary beds, giving them. in these reels of tape that record every payment made, every recipient. they found evidence that a staggering seven and a half billion dollars had been lost by fraud, waste and abuse in one year. doctors building. contractors. hospitals, schools. welfare recipients. everyone had been fraudulently dipping into the pot. and the investigation isn't over yet. the inevitable consequence of having a huge part of taxpayers money is that all of us want to get our hands in it.

you can be sure that we'll all be able to find very good reasons why we should be the ones to spend somebody else's money in every one. somebody or other put up a good case for spending taxpayers money to subsidize rents in new york city, including the rents of these apartments. the people who occupy these apartments each pay something like $200 a month, less than the market rent and that subsidy comes out of the taxes of people, most of whom are much poorer than the people who live here in. it's not unusual for this sort of thing to happen when government tries to do good with our money. look at what happened in chicago.

for most visitors, the immediate impression is of a rich, prosperous, bustling city. but like every large city in america, it has its problem areas overcrowded slums, breeding poverty and crime. after world war two, one such area developed in hyde park in the fifties. plans were drawn up to pull down large areas of slum building and to rebuild using government funds under an urban renewal program. it was to be a show project replacing a blighted area with an integrated community who controlled the spending of that government money. it wasn't fact. my own university of chicago,

which felt its very existence threatened by the spread of urban blight and crime. government money was used to tear down an area that contained many small shops, as well as families of low income. once the area was cleared, private money rebuilt it with middle class apartments, townhouses and shopping complexes. the blade had been cleared here, but only to be shifted elsewhere. in many instances, when when government administers large grants, a lot of those funds don't wind up directly serving the people and achieving the objectives that were the intent of the programs. because the the grant has a feed at large government bureaucracy. joe gardener helped to set up an organization of local black people to protect their own interests. previously, the blacks had rioted in the streets to try to get their way. now it was to be done peacefully using government money. when government funds became

available, the woodlawn organization got control. they used them to build the kind of houses they wanted. low rise apartments like these. the bureaucrat planners and architects told them that it was uneconomical that only high rise blocks would work. they were wrong. a lot of people have this this view that the disadvantage, if you will, have no idea of what their problems on how to resolve them, that it takes outside professionals to do that. and we say that's baloney because the outside professional does not feel in his gut. what woman on welfare with six kids living off $100 a month and in the deteriorated building feels she can come up with solutions much better than a bureaucrat. the intentions of this local community group are good. they want to rebuild the community as the community wants. i said, are you pretty pleased

with the work we're doing? but government money always corrupts. look at the number of people rebuilding this garage. it doesn't make sense, except that these are city workers paid for by taxpayers money. well, government funds have allowed the organization to take over a whole area of chicago. they now have their own supermarket. they've built splendid houses for middle class occupiers. very expensive. protected by the latest security systems. all at the taxpayers expense. it's. in a sense, t.w. is rapidly becoming a mini government at this particular point. we have approximately 400 employees. we have an operating budget of in excess of $5 million a year. so we are a large, large and

expanding. their next project is to redevelop this site and that's only the first step in a 20 year plan that will cost $220 million. most of it coming from the taxpayer. in the south bronx. they're very familiar with government protection like the rent controls and made it uneconomic for landlords to maintain their buildings. they've moved out and the vandals have moved in. the south bronx is an area where many of the people are on welfare and where the crime rate is high. but all of this could change. a group of local people has begun to renovate these building to build new homes. they call themselves sweat equity because at first sweat and effort was all they could put into the project. only later did they accept a

small government grant. how long ago did you start working on this building? four months ago. on this building right here. and i take it what you're going to do is gut the whole thing from beginning to end, right? totally gutted. and you'll have to rewire five, four walls and floors and ceilings and everything. worked on a winter work in summer. so when i had a chance to work. how many people have you got working at a good 40 people? how do you keep them working? you know, some of them most want to get tired of it all off and so on. so how do you take an interest? we show them what can be done in future, what will be done in the future, and they get a first. it's kind of hard to prove to somebody that in the next three or four years what will come out of it. they can't see in the long range term. they want to see in the short run. they need money right now. and that in two or three years. sure. so we try to show them that it will happen. it's true. they now accept some government money, but so far they've

managed to retain their original philosophy that the best way to get something done well is to do it yourself. like what we're doing, we're bringing people out of the street to give them something to look forward to. they had their own apartment. they'd be taking care of the area around it. they have a garden. they have something to look forward to. they even get off welfare. we can get them a job. they can drop the welfare and have some self-pride. that's the whole thing about it. self pride. as long as you collect it from the government and sitting back and no worries. we're not sitting back. we're working. we're making that money. come in and putting it into our building. we were building ourselves up as well as the building. some of these people are easy to workers paid for by the taxpayer, but this isn't as useful as it might appear. you ask these fellows, which would they rather have the see

the workers or the money that's being paid to the c to workers? which would you rather have the money paid that your rent at that very expensive help in terms of what these people could use with the money you give these people the amount of money you're paying that see the workers now, i'll bet they'll have twice as much, three times as much work. am i wrong? you're right. is it right that it's a very inefficient way to use their money? the problem is, you've got to be rock or saying the government bureaucrats, they want to decide what to do. they don't want to let you decide what exactly. ask yourself, how did this get place? get built up in the first place? after all, this was a pretty respectable, solid, substantial region when it was first developed. it wasn't done through a government project. it was done by people individually having an incentive to put up these buildings and occupy them. what these people we've been saying here are doing is they're trying to restore that feeling and that attitude. you'll have a far healthier community here if it grows out of the self-help of people like the people we've been talking

to, then if it's a paternalistic venture undertaken by governmental civil servants and bureaucrats who have to plan on a large scale for other people. we must find a way to give everyone caught in the welfare trap the kind of initiative these people have, the best, or should i say the least bad solution i have ever been able to devise is something called the negative income tax. this is the idea that we should get rid of a large part of the welfare bureaucracy and of the demeaning rules. and we should help people who are poor, fundamental by giving them money with a positive income tax, you're entitled to a certain amount of personal exemptions and deductions and above that amount you pay tax. but suppose you have no income under a negative income tax. a fraction of your unused exemptions would be paid to you by the government guaranteeing at least a minimum income if you

earn something, you'd still get a fraction of your unused exemptions and you'd end up better off. as your earnings rose. the supplement to your income would become smaller and smaller until your earnings equal your exemptions. at that point, you'd break even. neither paying tax nor receiving a subsidy. it's not an ideal system. it's not a system we might have like to get into, but it's a system which would have the effect of eliminating the separation of a society into those who receive and those who pay. they separation that tends to destroy the whole social fabric. it would mean that we that we could each of us take advantage of opportunities that opened up without fearing that if by some chance we lost our jobs, it would be a long time before we could get back on assistance. it would be a system that would give all of us an incentive gradually to improve our lives, would perhaps enable us, over

time to work ourselves out of the kind of mess we've gotten ourselves into. a mess we've gotten ourselves into for the very best of motives. but with a very worst of results. we've become increasingly dependent on government. we have surrendered power to government. nobody has taken it from us. it's our doing. the result monumental government spending much of it wasted. little of it going to the people whom we would like to see helped. burdensome taxes. high inflation. a welfare system under which neither those who receive help nor those who pay for it are satisfied. trying to do good with other people's money. simply has not worked.

the discussion is already underway here at the university of chicago. so let's join it. as i looked at the film, i had a growing sense of anger. anger that that position failed to recognize that the system that was being attacked was necessary in our capitalistic free enterprise system, that by its own failure produces poverty and therefore requires governmental intervention in the interests of those people caught in the traps of poverty. so as i sat and looked at the film and as i hear dr. friedman's statement, i was aroused and to the point, as i said, of of anger, because only half the story is told, we are really blaming, again, a victim, this time a system, the welfare system for the failure of other systems to operate in the interest of people. let's get other reactions out of that statement. trying to do good with other people's money simply has not worked. the welfare system is rotting

away. the very fabric of society in terms of my reaction, was just the opposite. my anger was that what had been created in a city where i grew up and the very different conditions during the period of capitalistic failure, during the period when there wasn't this humanity realism and where it was possible for people to live better and to get out of that poverty. now, i think someone living in the very same place where i live would find it much harder to escape from that poverty. because of all these things, buildings were not abandoned like the buildings that we saw in that film when i lived in harlem. the crime rate, the all the things that are blamed upon the failures of the previous method did not exist. i slept out on the fire escapes in harlem. i would defy anybody to do that in any part of new york city today. tradition only in the united states. we have tried to avoid some of the welfare trap. it was referred to by denying eligibility to people who are able bodied and not aged and so on. and we have therefore tried to close the welfare door to a good number of categories within the

poor population. the second point that was emphasized, and i think needs to be put in some perspective, is that some but not all of what we might call welfare programs broadly have this very strong take back of benefits as you earn some more money. and that, i guess, is what i would like to single out as the principle problem identified in the film. but it is not common to any and all welfare programs that one might think of when the family fails, when the private sector fails to create jobs at a fast enough rate. you find that people are unemployed and drift into needing help in order to exist and the welfare system was created in the thirties to do exactly that. when the private sector essentially failed. we have the development of a welfare system. it is not corrupting society. it is taking what society institutions have left behind, the family breaking up the

economy, not expanding fast enough, the health system failing the educational system not doing its job. we have untrained, unskilled people looking for jobs in a highly technical society or jobs that pay so low that people cannot, in fact live in a decent level of humanity. i see the welfare system not corrupting, but in fact taking the remains and attempting to help people live in dignity. so rotting away the fabric of society is not supported except perhaps by you. would you back that phrase? absolutely. you're saying that you're talking about the failures of the other parts of society, what the welfare system and other kinds of governmental programs are doing is paying people to fail. insofar as they fail, they receive the money. insofar as they succeed, even to a moderate extent. the money is taken away. this is even extended into the schools systems where they will give money to schools with low scores insofar as the school improves its education, the money is taken away so that you

are subsidizing people to fail in their own private lives and become more dependent upon the handouts. we have expectations built in today about the quality of life, the quality of job, the level of income for which one expects in return. why? because we look at the level around us that it takes us to have. now, that's not why i may have all sorts of expectations. the question is, what can i do if someone else is subsidizing my expectations? my expectation will be far higher insofar as these. therefore, this study will subsidize my expectations a few years ago. i refuse to work at ucla for the normal full professors salary. why should i? would i get the same money for being at the center for advanced study with no with no duties and no classes? let's look at another proposition in milton's case, the insidious effect on those who receive welfare. they lose their human independence and dignity, are treated like children and so on. now, as a former administrator of a major program, is that a great hazard? that is not a great hazard.

as a matter of fact, that presumes that people get on welfare. stay on welfare, and therefore have the result. that dr. friedman statement issued. the fact of the matter is that in our afdc programs throughout the country in particular, it was is true in new york there is a great turnover of the welfare after zero, about a third of them go off each year. now, if these people were so destroyed by the system when they go off, they weren't going to employment. they wouldn't hold employment. they wouldn't stay off the roads for six months, 18 months, 24 months, as long as they were able to stay off. so there's something wrong with that argument when one looks at people and what they do, people, you know, who are poor are no different from those of us who are not poor. and their motivation for self dependance to self-support and mobility in the economic scale is no different than those without. then the motors we have so that will not let the system you're remember dr. friedman, the

refused to let the system squash them down as it was attempting to do, we turned the policies around. you and i agree completely that the people who are poor and are on welfare rolls are no different. from the rest of us. of course not. they are human beings and they deserve every sympathy and every possibility of making their own way. but the welfare system makes them different. you give them makes it in their interest to be there, to account for them going off the rolls. but it's all figures and figures and you've got to be careful with figures. the fact that a third there's a turnover of a third does not mean that there aren't who are on all the time. people come on, go off. come on, go off. we've got to have the other thing, the latest is dr. friedman, the 34% of the people on afdc you are on for five years or longer. and when one thinks of the purpose of the afdc program, which was the rearing and support of children, dependent children, minor children, i would submit to you that five

years is not a terribly long time for a mother and children to have to be dependent if there is no other source of income. i think the other data we have a program in pennsylvania for essentially all of those who are not taken care of by the afdc program. it's called a general assistance program and they're less than 15% are on more than 18 months. so we have a great turnover. we have essentially young males moving into the welfare system after unemployment compensation and then moving out when a job opportunity comes along. this i you know, i think the notion of of of generations of people on welfare is is a very small minority in the whole system. that doesn't mean that the system, as presently defined and as as a set of programs that we have put together, don't often contradict each other. and i'm the first to agree with with dr. friedman that some of the programs are conflicting. however, i think it is it is overly broad to say that we turn

people into helpless children. i don't remember talking to anyone who's ever been on welfare, who didn't think they were being treated like children while they were on it. of course, i you know, you man must make a difference, a distinction, between the system that was set up to help people and the people who are employed in that system. look at any public welfare system around the country and we no practical fuel train people to work with people. we employ them. ill trained people who are not equipped to be helping people. we said our social workers, they're not social workers. they have neither the skills, the attitude and some of them not even the concern. so i think one has to separate out a conceptual framework of a system designed to help people and what this the country and community puts into that system to implement those programs, to separate the hope from the reality. i separate the skills that are available in order to implement

what the objectives of the program are. i think we have to separate whether we're talking about program objectives or we're talking about how it operates. i would be the first to say that the system that i administered had ill prepared people to do the job that we were set up to do. and i would not say that the system that we set up, i talked to some social welfare figure, people who think that in fact they will so hamstrung by the system that there was very little they could do to help people to get off welfare. that is, to build up skills, get jobs. the web was necessary to get off welfare. they thought it was a system where you have a system that we're stereotyping is one that a great deal. paternalistic interference in individual family's lives. and in fact, isn't this true reduction the caseload is so high for an individual welfare worker that they can't do a lot of interfering in individual family lives. moreover, in the last decade, there's been a real attempt to ease this welfare trap in afdc

by changing the take back rate and by administering work expenses and child care expenses in such a way as to facilitate work by those who may want to do it. so it's it's not quite as harsh a picture as we sometimes get that there is this omniscient welfare worker who's right there in the living room with the family making all the decisions them. i never heard of a government program which was defective in which the people who ran it didn't say if only we had more money to spend on what we're not being able to accomplish with the amount we're spending now. on some of your prescriptions and that film, because it's good ground for discussion. the most drastic one was when you said speaking of an unemployed man, supposing you were cruel and took away welfare from this man, he would find a job in some at some wage that would always be a job he could get. he might need some charity en route, private charity, but he would get a job. now, i want you to react to

those of you before we come back to milton on that. is that a that seems plausible to you may get a job but he may get a job in what we refer to as the underground economy. and that's where a number of our youth are now going to get their jobs. those activities that are illegal and the only opportunity that they have for earning part of a livelihood. i think the other issue is that you have a whole group of people who are the single female head of a household and yes, cut off welfare tomorrow. what will they do? what will be their immediate? at what price to their small children and, to their middle aged children? yes, they'll get a job. in fact, the statistics that women, in fact, are the most successful through the employment program. but what has to supplement that typically is the provision, some kind of daycare arrangement. either the individual woman has to earn enough money to be able to pay privately for her daycare, or in fact, she is, quote, subsidized through this

insidious, corrupting program set of programs run by the federal government, which in fact makes her employable and a taxpayer. it's a it's an interesting notion of trying to get people in a productive mode. it's so it's incredible the way you start the story in the middle, as if there's a predestined amount of poverty, a predestined amount of unemployment, and that the welfare system is not itself in any way responsible. there is a predestined 20% of the bottom half of the population. i have never. well, that's always been true. 20% is the bottom. it's also true that 20% of the bottom population would have to be living on the government and rule by the government. you mentioned, for example, the female head of household. many of those in addition to the grown woman who, has all of the kids are teenage pregnancies. there's not a predestined amount of teenage pregnancy. i grew up in an era when people, and particularly blacks, were a lot poorer than today faced a lot more discrimination than today, and in which the teenage pregnancy rate was a lot lower than today.

i don't believe there was a predestined amount of teenage pregnancy, a predestined amount of husband desertion. the government has done a study of the black family showing that this whole notion that this is the black family has always been disintegrating. that is nonsense. that is these studies go up to 1925. the great bulk of black families were intact. two parent families up through 1925. and going all the way back through the era of slavery. so it is now only within our own time that we suddenly see this inevitable tragedy, which the welfare system says it's going to rush into. so for which it is itself a part. we're talking about a very small group. we're talking about 12% of the families are not intact, are not two parent families at any one mean among welfare recipients, the public at large. we're talking about 12% of the families, 12%. that's right. that's a small number of welfare. we're still talking about a significant component of that bottom 20% that are the bottom 20%, whether they are above the poverty line or below the poverty line, they are still the

bottom 20%. and the issue is, what is the responsibility of the other 80%, if any, toward the program plan to eliminate that being a bottom 20%? no, but it intends to raise the bottom 20%. you're raising them by having more having more illegitimacy, more unemployment. i'm not making them have illegitimate children. i hope that's clear. i think you don't have to do that. you simply subsidize it. we as human being don't have a responsibility. but i hope we have a compassion and an interest in the bottom 20%. and i only want to say to you that the capitalist system, the private enterprise system in the 19th century did a far better job of expressing that sense of compassion and than the governmental welfare programs are today. the 19th century, the period which people denigrate as a high tide of capitalism, was a period of the greatest outpouring of alamo's energy and charitable activity that the world has ever known. and one of the things i hold against the welfare system most seriously is it has destroyed private charitable arrangements, which are far more effective, far more compassionate, far more

person to person in helping people who are really for no fault of their own in disadvantaged situation. i have to disagree with you, though, because i think that the the whole notion of private property was excluded, whole segments of society were excluded from the notion of private property in, the 19th century, namely women, idiots, imbeciles. and so i don't go back to the 19th century and hold it up as any paragon that we would want to replicate today. anyway, i want milton now to come to your major prescription, which i know you don't say is on the agenda for tomorrow, but it lies ahead. that is the negative income tax. and i'm not sure people fully understand how it would work. we can't, i think, go to the details a bit, but i'd like to get a reaction around the panel. first of all, is this a viable approach to the enduring problems of poverty, negative income tax? i think it's an a viable approach to some part of the problems of poverty. it involves, first of all, cash payments rather than in-kind payments, as i understand it

involves payments on a non categorical basis. what do we know? that is to say, it doesn't matter whether you're a female headed family or a male headed family or whether you're young or old, whether you're sick or well. if your income falls below a certain level, you pay some guaranteed income level for people based on family size. and then it has a take back rate, which is modest, i suppose, by definition. now the question is how many things you want to use that program to replace? how many things you want to replace with such a negative income tax program? would you replace everything with? just we clear that point up. would you virtually wipe out the remaining forms of welfare if you got this program going? yes, i would not. but i think its purpose is precisely to provide a transition between where we are now and where we would like to go. because while because i agree with you that given that we've corrupted the people on welfare and gotten them on there, we do have an obligation not to throw them out in the street and put them in the difficult adjustment

you've made. we've got to easily piece it off. but i would want to replace all welfare and let's get reactions to this. we'll come back to you. well, i saw some figures recently which said that if you took all the money spent on poverty in the united states and divide it by all the poverty family, you can't come out with a figure of $32,000 per family. now, the average poverty family apparently is not getting the $32,000. and so clearly someone in between the treasury and those families is getting an awful lot of that money. and i think that if you simply eliminated the middle man, as they say on the commercials, that there'd be an awful lot of benefit both to the poor and to the taxpayer, and to support of of the negative income tax concept and the objective of it. i'd like to point out, however, that administrative play, we have another bureaucracy set up. somebody has to take into account earnings. someone has to decide when to pay back that which they're entitled to. there's a time lag between the paying back, the earning and the

paying back. there are a variety of problems in there that i will be prepared to accept, but i want you to know that government intervention is not going to be eliminated. the issue that i have is where do children come in? what are their rights under a negative income tax and are we by building an a negative income tax, in fact, subsidizing the illegitimacy that tom so was so concerned about. the major reason it is not feasible today to have a negative income tax is because the present welfare bureaucracy would be out of work. they are the major objectors as senator pat and now he's now senator pat moynihan. and then demonstrated in his book on the nixon program the chief obstacle to getting it enacted was a welfare bureaucracy. so that i don't believe these administrative problems, if you got it enacted, would be an all serious. i think the other assumption under the negative income tax and it's one that i'm not sure i can buy, is that everybody has a minimum level of of understanding about how to spend

money. in other words, how to use the marketplace to satisfy the wishes. and and i as an economist could say, yes, we do. we everybody from age 4 to 100 knows how to use money to satisfy wants. and that's that's what they don't they don't they're all reaction problems of people who not going to be able but that's a minority problem and that's a problem for private activity and private charity. one thing is sure they're spending they would be spending their own money and that, however knowledgeable you are about spending money, they would be spending my money, but it would be one stage less bad. right now, the welfare worker is spending mr. a's money to help mr. c and there's a big take off in the middle as tom. so well said. the question is not whether people on welfare, on low incomes can all spend their money effectively. the question is how effectively do they spend it as compared to how effectively the bureaucrats spend it for them. comparing anything to perfection

or to some arbitrary standard, a saddle is nothing. the same thing is true in the education theory. they're saying, would families be able to select schools for their kids under a voucher system, for example? well, the question is, could they possibly do much worse than current bureaucrats are doing? and the public schools as, oh, we're going an education, another program, blah, blah, blah. i'm going to quibble with something you said, tom. about half of the money not going to the poor or something that doesn't. shouldn't lead the viewer to think that all that money is going to the administrators of programs. a lot of what you're talking about goes to recipients for example, social security as a program pays a roughly half of its benefits to people who otherwise would not be poor. unemployment insurance pays about a two thirds of its benefits or so to non-poor persons. and those are, in some definitions of welfare or anti-poverty programs. and that's how statisticians come up with this horrendous sounding discrepancy between the total amount of money spent and the total cash benefits that go to the poor.

one thing that i think is a perfectly valid point, though, because clip supposedly we were not setting up unemployment benefits and social security in order to keep the affluent. affluent. well, this goes back to this big philosophy debate we might have. i think it's easy to oversimplify things and say that all of these programs, including the public, are there to be of help, to the poor and the poor only. but i will say let me mention that the negative income tax has some of impetus in that it would be a way of confining benefit payments to people who are poor. yes. and it would cut out benefits for an awful lot of people who now have expectations that. they're going to get them not in the form of public assistance, but in the form of social insurance, as use the and all that could be made for not disappoint the expectations on which people have built their lives for one generation would not have continued for eternity in order to avoid one generational transition. what are the other hurdles to it getting underway now? you said i don't know how seriously the biggest almost the only hurdle is the welfare bureaucracy. no, no, there there. the biggest immediate group of lobby is that will lobby against

it. the biggest hurdle to getting it over at the moment is that there is no way of construing getting a sensible negative income tax system that will not hurt some people. there will be some people who will get less money than they are now getting under, particularly those in the upper income groups, particularly the affluent who are now being subsidized by the wealthy. and they will make it politically difficult for the people to put it into effect. the attempt is to put a negative income tax in effect, which costs less money is easier to administer, and yet which doesn't pay anybody in the society $1 less than he's now getting. there's no way in which you can construct such a program. but although it's not politically feasible now, the force of history is on its side. it's going to become political. reverend jackson, let's not say that they give the impression that welfare administrators were against negative tax. the fact program for example, as moynihan says, because they would lose their jobs, for

example, many of us were opposed to it because of certain features in that program, a 24 hour, 20 $400 level for a family of four. we were opposed to that. and if one goes down, the congressional record, those who testified will be shown to be saying, yes, we are for concept morally, but we are against this piece. and this piece. if you change that, you have our support. i was in the same position. i first proposed the negative income tax 25 years ago, but i testified against the final version of the nixon plan. why? because the welfare bureaucrats had led them to introduce changes in it which converted it from a decent, satisfactory. well, negative income tax to one which would have been just as bad as what you now have, would have been added on top of everything else. that's it. it's political reality, but political reality changed. and that's the important thing. i want to say one more thing about this. this whole problem we've been talking about, and that is going back to bob lamont's comment.

there is one thing that can be said in favor of the welfare program, unaccustomed as i am to saying anything in favor of it and that is that it is the only social program i know of, which at least on the average, gives money to people who are in lower income classes than those who pay the taxes every other welfare program, not only does a lot of money go to the people who are well off, but on the average the poor are tax based and the well-to-do are subsidized we in the upper income classes have been there clever at conning the poor suckers at the bottom to pay us nice salaries as bureaucrats and to provide us with nice benefits at their expense and at least the welfare program doesn't do that. and what you state with great confidence that it will come. the negative income tax, even though you recognize the hurdles. why are you so sure it will come? because the present system has within it the seeds of its own destruction. there is no way in which a system constructed like the

present. in my opinion, can avoid creating more and more social problems. and something is going to have to be done. nobody has proposed any alternative. so far as i know. there is no effective alternative to the negative income tax and so it gets knocked down and it keeps rising. it gets knocked down and it keeps rising. finally, i raise the question, though, whether in any modern industrial democracy like this one, it's conceivable the system could be run without a fairly elaborate welfare underpinning of some kind. but you feel there's nothing i, i don't think it can be because i think essentially the welfare set of welfare programs reflect the values of this society that if it didn't, there would been revolt long before. now. yes, there are rumblings about cost, and i think that's primarily a function of rapid rates of inflation eroding real income earning power of the middle class taxpayer. but i think on one level, we wanted to give up the

responsibility of caring, the responsibility of day, day, actual caring. and in a technical, modern society like we have the tax system and the government system is probably, as a is isn't viable. i don't think we're going to get out of it. i don't think you're going to see private charities who can take my money that i am free to give or not give. and essentially make a difference in people's lives of any substance on any level. i don't think that has anything to do with the society being modern and technological or industrial. it has to do with an ideology and particularly an etiology that is very strong among academics, intellectuals and in the media. and i think that as time goes on and more and more intelligent ideas replace the kinds of vague visions that dominate today, that the political climate will change. and that's only thing that stands in the way of reform right now. james hudson, i don't think you're going to get rid of the system, but i'm interested in welfare system. i'm interested in tom's vast

statement about accommodations and theories and so forth. we forget that we're talking about people and we may sit in the ivory tower and talk about whether this system will work and is logically or ideologically why it won't work. at the same time, there are masses of people outside who are locked out of the system that you and i are part of. and somehow we have got to make sure those people are taken care of and they're sort of not doing it. of course, means that your safety and safety and the vital vitality of this government and of our country is at stake. the mayor of the city of new york asked me when we had a strike, what would i do if i couldn't get checks out to people when our workers were on strike? and i said to him after the first month chaos, and he said, what do you mean? i said, no man or woman in the street in the city of new york. you include him, mr. mayor will be safe if we cannot take care of people or we leave this discussion and hope you'll join us for the next episode of free to choose.

next week. is it quality every birthright? is it healthy for a nation when the government tries to impose equality on all its citizens? how does that affect the freedoms of individuals? don't miss milton friedman's free to choose next week.