1 00:00:00,400 --> 00:00:04,480 Speaker 1: The Michael Berry Show. Hope you enjoy the Saturday podcast. 2 00:00:04,519 --> 00:00:06,880 Speaker 1: We started doing that. If you don't know the story, 3 00:00:06,920 --> 00:00:10,119 Speaker 1: I'll tell you. We had folks who said, you know, 4 00:00:10,280 --> 00:00:12,480 Speaker 1: we listened to you once sometimes twice a day. We 5 00:00:12,520 --> 00:00:15,600 Speaker 1: do two different shows during the weekday and on Saturday. 6 00:00:15,960 --> 00:00:18,560 Speaker 1: I like to get more Michael Berry Show. So Jim 7 00:00:18,640 --> 00:00:21,320 Speaker 1: Mudd said, you know what, we can do this and 8 00:00:21,360 --> 00:00:23,960 Speaker 1: it'll give us an opportunity to air some things that 9 00:00:24,000 --> 00:00:27,160 Speaker 1: we talk about constantly and can't put on the show, 10 00:00:27,800 --> 00:00:31,120 Speaker 1: and that is longer form content. And the reason for 11 00:00:31,200 --> 00:00:35,120 Speaker 1: that is our segments are about nine minutes each. In 12 00:00:35,159 --> 00:00:37,240 Speaker 1: a nine minute segment with an intro and an outro, 13 00:00:37,800 --> 00:00:39,760 Speaker 1: we have to constantly be going in and out. We 14 00:00:39,800 --> 00:00:42,320 Speaker 1: can't help that. That's the business. The industry has to 15 00:00:42,320 --> 00:00:46,080 Speaker 1: pay the bills, and us we're one of the bills. 16 00:00:46,560 --> 00:00:49,360 Speaker 1: So what happens when we have something that needs to flow? 17 00:00:49,920 --> 00:00:53,160 Speaker 1: And if we have a thirty minute speech at Milton 18 00:00:53,200 --> 00:00:56,040 Speaker 1: Friedman Game nineteen seventy nine, it's one of our favorites, 19 00:00:56,720 --> 00:00:59,279 Speaker 1: we can't what do we cut that into four different segments? 20 00:01:00,160 --> 00:01:02,320 Speaker 1: We wouldn't be able to retain your attention if we 21 00:01:02,400 --> 00:01:05,440 Speaker 1: did that. So The Saturday Podcast Gets gives us an 22 00:01:05,440 --> 00:01:11,520 Speaker 1: opportunity to amplify speeches, interviews and the like that we 23 00:01:11,600 --> 00:01:14,760 Speaker 1: particularly really like, and this is one of those that 24 00:01:15,080 --> 00:01:19,280 Speaker 1: qualifies that we really really like. You may not have 25 00:01:19,280 --> 00:01:22,119 Speaker 1: studied economics in school, You may not have even been 26 00:01:22,120 --> 00:01:24,600 Speaker 1: a great student. You may not have realized that you 27 00:01:24,600 --> 00:01:27,120 Speaker 1: would ever care about any of this stuff, but now 28 00:01:27,160 --> 00:01:31,120 Speaker 1: you do, and it's never too late to learn. So 29 00:01:31,840 --> 00:01:34,080 Speaker 1: ask yourself as I say them, how many of these 30 00:01:34,080 --> 00:01:38,360 Speaker 1: have you heard of before? The robber baron myth, the 31 00:01:38,400 --> 00:01:44,120 Speaker 1: Great Depression myth and really what caused it? The demand 32 00:01:44,360 --> 00:01:51,680 Speaker 1: driven government myth, the free lunch myth, and finally the 33 00:01:51,760 --> 00:01:55,600 Speaker 1: robin hood myth. No matter how many you knew, even 34 00:01:55,640 --> 00:01:58,120 Speaker 1: if that's zero, even you've never heard of those, you've 35 00:01:58,120 --> 00:02:01,680 Speaker 1: probably heard the free lunch myth. Hopefully you will walk 36 00:02:01,720 --> 00:02:05,080 Speaker 1: away from this podcast knowing a great deal more and 37 00:02:05,120 --> 00:02:07,920 Speaker 1: when you finished this podcast, just a reminder, I do 38 00:02:07,960 --> 00:02:10,960 Speaker 1: love to hear from you. Go to Michael Berryshow dot 39 00:02:11,000 --> 00:02:14,440 Speaker 1: com Michael Berryshow dot com. You can send me an 40 00:02:14,440 --> 00:02:16,760 Speaker 1: email where you are when you listen what you'd like 41 00:02:16,800 --> 00:02:19,080 Speaker 1: more of. You can send me links to things you like. 42 00:02:19,200 --> 00:02:21,200 Speaker 1: Just make sure to explain it. I can't just click 43 00:02:21,240 --> 00:02:23,080 Speaker 1: on something and spend ten minutes trying to figure out 44 00:02:23,120 --> 00:02:24,600 Speaker 1: if it's something I might be able to use or not. 45 00:02:25,000 --> 00:02:26,960 Speaker 1: So explain what it is and why you sent it. 46 00:02:27,000 --> 00:02:28,960 Speaker 1: And if there's a part in a two hour speech 47 00:02:28,960 --> 00:02:31,040 Speaker 1: that I need to hear thirty eight minutes in, tell 48 00:02:31,080 --> 00:02:33,080 Speaker 1: me that as well. I do love to hear from you. 49 00:02:33,160 --> 00:02:34,840 Speaker 1: Now enjoy the podcast. 50 00:02:34,960 --> 00:02:36,480 Speaker 2: I want to talk today. 51 00:02:38,160 --> 00:02:45,519 Speaker 3: About the contrast between myths that are widely believed by 52 00:02:45,560 --> 00:02:48,520 Speaker 3: the public at large and what I regard as a 53 00:02:48,560 --> 00:02:57,160 Speaker 3: reality which typically contradicts those myths. As you are all aware, 54 00:02:56,960 --> 00:03:01,200 Speaker 3: there has been a drastic shift in public attitudes and 55 00:03:01,240 --> 00:03:05,880 Speaker 3: public opinions in the past fifty years or so with 56 00:03:05,960 --> 00:03:08,480 Speaker 3: respect to the role of the individual on the one hand, 57 00:03:08,960 --> 00:03:12,119 Speaker 3: and the role of government and collective institutions on the other. 58 00:03:13,240 --> 00:03:15,880 Speaker 3: There has been a shift in the philosophy and attitudes 59 00:03:15,880 --> 00:03:22,320 Speaker 3: of the public from a belief in individual responsibility, a 60 00:03:22,360 --> 00:03:25,200 Speaker 3: belief in a society in which the role of government 61 00:03:26,120 --> 00:03:30,359 Speaker 3: was as an umpire, to a belief in a society 62 00:03:30,440 --> 00:03:35,000 Speaker 3: in which the emphasis is on social responsibility and the 63 00:03:35,120 --> 00:03:38,880 Speaker 3: role of government as big brother and protector of the 64 00:03:38,920 --> 00:03:44,720 Speaker 3: individual as always When such shifts arise in public opinion, 65 00:03:45,800 --> 00:03:50,640 Speaker 3: they are largely produced and reinforced by the development of 66 00:03:50,920 --> 00:03:58,000 Speaker 3: myths about prior experience. Someone once wrote, and I'm not 67 00:03:58,040 --> 00:04:01,320 Speaker 3: sure who it was, that I'm the myth is like 68 00:04:01,360 --> 00:04:06,760 Speaker 3: an air mattress. There's nothing in it, but it's wonderfully comfortable, 69 00:04:07,400 --> 00:04:14,480 Speaker 3: and deflation causes an uncomfortable jolt. Well, my purpose today 70 00:04:14,760 --> 00:04:21,400 Speaker 3: is to give you that jolt. When myths get established 71 00:04:21,480 --> 00:04:25,440 Speaker 3: and are adopted, they tend to be so strongly held, 72 00:04:26,000 --> 00:04:28,000 Speaker 3: they tend to become so much a part of you 73 00:04:29,400 --> 00:04:32,359 Speaker 3: that when anyone comes along and differs with them and 74 00:04:32,400 --> 00:04:38,080 Speaker 3: contradicts them, he risks automatically being dismissed as a crackpot. 75 00:04:40,120 --> 00:04:43,920 Speaker 3: But I shall nonetheless take the risk of being dismissed 76 00:04:43,960 --> 00:04:47,200 Speaker 3: as a crackpot, because it seems to me so urgent 77 00:04:48,240 --> 00:04:52,279 Speaker 3: that we deflate these myths, recognize what the reality is, 78 00:04:52,839 --> 00:04:56,000 Speaker 3: in order to be able to provide a basis for 79 00:04:56,080 --> 00:05:00,920 Speaker 3: a change in our philosophy, a reverse of the. 80 00:05:00,800 --> 00:05:01,960 Speaker 2: Direction of our thought. 81 00:05:02,839 --> 00:05:05,440 Speaker 3: In my opinion, if we do not do so, if 82 00:05:05,440 --> 00:05:08,240 Speaker 3: we continue on the road we have been going, if 83 00:05:08,279 --> 00:05:10,800 Speaker 3: we continue to rely more and more on government and 84 00:05:10,880 --> 00:05:14,640 Speaker 3: less and less on the individual, we are condemned to 85 00:05:14,760 --> 00:05:19,120 Speaker 3: a future of tyranny and misery, and therefore it seems 86 00:05:19,120 --> 00:05:21,719 Speaker 3: to me essential for the future of this country that 87 00:05:21,839 --> 00:05:27,720 Speaker 3: we recognize these myths for what they are and just 88 00:05:28,000 --> 00:05:32,000 Speaker 3: our thinking to a correct perception of our present and 89 00:05:32,040 --> 00:05:33,039 Speaker 3: our pest. 90 00:05:34,360 --> 00:05:36,880 Speaker 2: I'm encouraged in this. 91 00:05:36,880 --> 00:05:42,359 Speaker 3: Venture by another quotation, one which comes from a nineteenth 92 00:05:42,360 --> 00:05:47,120 Speaker 3: century American humorist by the name of Josh Billings, who wrote, somewhere, 93 00:05:48,640 --> 00:05:52,080 Speaker 3: it ain't what people know that causes trouble. It's what 94 00:05:52,120 --> 00:05:56,640 Speaker 3: they know that ain't so. And that's when I'm going 95 00:05:56,680 --> 00:05:58,680 Speaker 3: to devote this talk to to trying to tell you 96 00:05:58,720 --> 00:06:03,080 Speaker 3: about some things you know that ain't so. I am 97 00:06:03,120 --> 00:06:06,640 Speaker 3: going to try to cover five myths that are part 98 00:06:06,680 --> 00:06:09,200 Speaker 3: of your thinking, and if they're not part of your thinking, 99 00:06:09,200 --> 00:06:11,760 Speaker 3: they will tend to become so after you take your 100 00:06:11,760 --> 00:06:17,240 Speaker 3: first course in American history. The first of those myths 101 00:06:17,400 --> 00:06:22,039 Speaker 3: is a robber Baron myth, the myth that, somehow or other, 102 00:06:22,080 --> 00:06:26,320 Speaker 3: in the nineteenth century, there was an era of rugged, 103 00:06:26,440 --> 00:06:32,560 Speaker 3: unrestrained individualism, in which heartless monopoly capitalists exploited the poor 104 00:06:32,640 --> 00:06:37,479 Speaker 3: unmercifully and ground them beneath their heels. The second myth 105 00:06:37,520 --> 00:06:39,800 Speaker 3: I'm going to talk about is a great depression myth, 106 00:06:40,560 --> 00:06:44,240 Speaker 3: the myth that the Great Depression from nineteen twenty nine 107 00:06:44,320 --> 00:06:47,240 Speaker 3: until the late thirties was produced by a failure of 108 00:06:47,279 --> 00:06:50,960 Speaker 3: private enterprise. The third myth I want to talk about 109 00:06:51,640 --> 00:06:56,000 Speaker 3: is the demand for government service myth, the myth the 110 00:06:56,040 --> 00:06:59,880 Speaker 3: government has had a step in because of a failure 111 00:06:59,880 --> 00:07:03,000 Speaker 3: of the private market and a great widespread demand for 112 00:07:03,080 --> 00:07:08,279 Speaker 3: government services. The fourth myth I'm going to talk about 113 00:07:08,960 --> 00:07:12,320 Speaker 3: was suggested by mister Eccles and his introduction, It's a 114 00:07:12,360 --> 00:07:15,200 Speaker 3: free lunch myth, the myth that there is such a 115 00:07:15,200 --> 00:07:18,120 Speaker 3: thing as a free lunch. And the final myth I 116 00:07:18,160 --> 00:07:21,120 Speaker 3: want to talk about is the robin hood myth, the 117 00:07:21,160 --> 00:07:24,760 Speaker 3: myth that somehow or other, government operates by taking money 118 00:07:24,760 --> 00:07:29,200 Speaker 3: from the rich and giving it to the poor. Let 119 00:07:29,200 --> 00:07:31,600 Speaker 3: me start with the first of those myths, the robber 120 00:07:31,640 --> 00:07:35,800 Speaker 3: baron myth, the myth that in the nineteenth century was 121 00:07:35,840 --> 00:07:38,000 Speaker 3: a period in which the rich became richer and the 122 00:07:38,040 --> 00:07:41,760 Speaker 3: poor poorer. That it was a century in which you 123 00:07:41,920 --> 00:07:46,480 Speaker 3: had a conflict between wall street and the workingman. That 124 00:07:46,560 --> 00:07:49,960 Speaker 3: it was a period in which, particularly the farmers of 125 00:07:50,000 --> 00:07:56,320 Speaker 3: the Middle West were being ground beneath the rapacious activities 126 00:07:56,360 --> 00:08:00,240 Speaker 3: of the Wall Street financiers, in which there was whites, red, 127 00:08:00,320 --> 00:08:04,400 Speaker 3: farm distress and misery. Now this myth had its origins 128 00:08:04,400 --> 00:08:10,000 Speaker 3: in the nineteenth century. It produced the widespread greenback movement 129 00:08:10,040 --> 00:08:12,640 Speaker 3: that you will learn about in your history books, a 130 00:08:12,680 --> 00:08:18,360 Speaker 3: party which at one time reached significant size, a party 131 00:08:18,400 --> 00:08:21,240 Speaker 3: devoted to the idea that all of the problems of 132 00:08:21,280 --> 00:08:24,440 Speaker 3: the time could be solved if only the government would 133 00:08:24,440 --> 00:08:27,720 Speaker 3: print enough of those nice pieces of paper which are 134 00:08:27,760 --> 00:08:30,160 Speaker 3: lay of colored green on the back, in which are 135 00:08:30,160 --> 00:08:34,200 Speaker 3: called greenbacks. It was a period that also gave rise 136 00:08:34,240 --> 00:08:37,720 Speaker 3: to the free silver movement to WILLIAMS Jennings Bryan, the 137 00:08:37,760 --> 00:08:41,640 Speaker 3: silver tongued orator from North Platt, if I remember rightly 138 00:08:41,720 --> 00:08:47,000 Speaker 3: from these areas, who gave his famous speech on the 139 00:08:47,080 --> 00:08:49,880 Speaker 3: Cross the Gold in eighteen ninety six in Chicago at 140 00:08:49,880 --> 00:08:53,440 Speaker 3: the Democratic Convention, in which he asked whether mankind shall 141 00:08:53,440 --> 00:08:57,520 Speaker 3: be crucified on across the gold, a speech which got 142 00:08:57,600 --> 00:09:01,280 Speaker 3: him the presidential nomination of the Democratic Party, and he 143 00:09:01,360 --> 00:09:04,560 Speaker 3: subsequently was a nominee of the President of the Democratic 144 00:09:04,600 --> 00:09:13,800 Speaker 3: Party for several subsequent elections, fortunately never elected. That was 145 00:09:13,840 --> 00:09:19,320 Speaker 3: a myth. What was the reality. The reality is that 146 00:09:19,400 --> 00:09:24,360 Speaker 3: there is almost no period in human history which saw 147 00:09:24,440 --> 00:09:27,560 Speaker 3: as rapid and widespread and increase in the well being 148 00:09:27,600 --> 00:09:32,520 Speaker 3: of the ordinary man as the nineteenth century. That was 149 00:09:32,559 --> 00:09:35,760 Speaker 3: a period when millions of people from all over the 150 00:09:35,800 --> 00:09:40,600 Speaker 3: world streamed to these shores. They came here with empty hands, 151 00:09:41,280 --> 00:09:43,040 Speaker 3: in the hope and the belief that they could make 152 00:09:43,080 --> 00:09:46,440 Speaker 3: a better life for themselves than their children, and they succeeded. 153 00:09:47,360 --> 00:09:51,440 Speaker 3: I suspect that most of the people in this room 154 00:09:51,640 --> 00:09:57,240 Speaker 3: who are American residents and citizens today are descendants of 155 00:09:57,280 --> 00:09:59,960 Speaker 3: the people who came to these shores in that period. 156 00:10:01,080 --> 00:10:05,200 Speaker 3: I know, to take the immediate local case. The Eccles 157 00:10:05,240 --> 00:10:12,000 Speaker 3: family derives from a Scotsman who came to this country 158 00:10:12,040 --> 00:10:16,160 Speaker 3: in the middle of the nineteenth century. My parents came 159 00:10:16,200 --> 00:10:19,160 Speaker 3: here in the eighteen nineties from a part of Europe 160 00:10:19,520 --> 00:10:21,959 Speaker 3: which is today part of the Soviet Union, although at 161 00:10:21,960 --> 00:10:24,880 Speaker 3: that time it was part of Hungary, and I suspect 162 00:10:24,920 --> 00:10:28,559 Speaker 3: most of the people in this room have similar background. Now, 163 00:10:28,600 --> 00:10:31,480 Speaker 3: do you suppose those people kept coming to these shores 164 00:10:31,480 --> 00:10:34,360 Speaker 3: in order to be exploited? Do you think they came 165 00:10:34,400 --> 00:10:38,160 Speaker 3: here to be ground under the heels of rapacious monopoly capitalists, 166 00:10:38,600 --> 00:10:41,520 Speaker 3: not a bit of it. A few people might have 167 00:10:41,559 --> 00:10:45,800 Speaker 3: been led here under misapprehension. You conceivably could have had 168 00:10:45,800 --> 00:10:49,800 Speaker 3: an initial inflow of people who thought they were going 169 00:10:49,840 --> 00:10:53,079 Speaker 3: to improve their lot and ended up being worse off. 170 00:10:53,320 --> 00:10:55,440 Speaker 2: But you would not have had a continuing inflow. 171 00:10:55,880 --> 00:10:58,120 Speaker 3: They would not have sent back to the old country 172 00:10:58,120 --> 00:11:02,079 Speaker 3: for their relative and friends. You would not have had 173 00:11:02,080 --> 00:11:05,520 Speaker 3: a flow of millions upon millions year after year. And 174 00:11:05,640 --> 00:11:08,120 Speaker 3: of course they were not exploited, They were not ground 175 00:11:08,200 --> 00:11:11,520 Speaker 3: under the hill. They got jobs. They spread out west 176 00:11:11,840 --> 00:11:13,760 Speaker 3: to the middle west, to the far west, to where 177 00:11:13,760 --> 00:11:16,719 Speaker 3: we are now, and they made of what was a 178 00:11:16,800 --> 00:11:22,480 Speaker 3: desolate country a country that was prosperous and green and productive, 179 00:11:23,120 --> 00:11:28,160 Speaker 3: and improved their own lot. With respect to agriculture in particular, 180 00:11:29,000 --> 00:11:31,600 Speaker 3: that was a period when the number of farmers increased. 181 00:11:32,360 --> 00:11:37,360 Speaker 3: It was a period when the price of farmland rose. Now, 182 00:11:37,400 --> 00:11:41,800 Speaker 3: of course, then is now every farmer would have liked 183 00:11:41,840 --> 00:11:45,840 Speaker 3: it better if he had done still better. What happened then, 184 00:11:46,160 --> 00:11:51,760 Speaker 3: of course, was that the spread of farms, increasing productivity, 185 00:11:51,920 --> 00:11:56,160 Speaker 3: the development of machinery, the bringing under the plow of 186 00:11:56,360 --> 00:12:00,520 Speaker 3: productive land led to a great increase in production, which 187 00:12:00,600 --> 00:12:03,240 Speaker 3: led to a decline in the prices of farm products. 188 00:12:04,240 --> 00:12:05,760 Speaker 2: So it's true the prices of. 189 00:12:05,679 --> 00:12:09,160 Speaker 3: Farm products went down, but that was a sign of success. 190 00:12:09,559 --> 00:12:12,640 Speaker 3: It was not a sign of failure. And the evidence 191 00:12:13,320 --> 00:12:16,160 Speaker 3: that it was a sign of success was a rise 192 00:12:16,200 --> 00:12:20,760 Speaker 3: in the price of farmland. After all, if this decline 193 00:12:20,800 --> 00:12:24,560 Speaker 3: and the price of products had been a sign of failure, 194 00:12:25,000 --> 00:12:27,120 Speaker 3: if it had been an indication that the farmer was 195 00:12:27,160 --> 00:12:31,080 Speaker 3: being ground under the heel of Wall Street, why would 196 00:12:31,080 --> 00:12:33,400 Speaker 3: people have been willing to pay higher and higher prices 197 00:12:33,440 --> 00:12:36,480 Speaker 3: for the land from which those crops were produced. So 198 00:12:36,600 --> 00:12:40,360 Speaker 3: the actual story is one of a great growth of 199 00:12:40,400 --> 00:12:47,080 Speaker 3: productivity and agriculture, of great development of agriculture in this country. 200 00:12:47,640 --> 00:12:52,520 Speaker 3: If we turned to the to the charge that that 201 00:12:52,720 --> 00:12:57,320 Speaker 3: was a period of heartlessness, a period in which the 202 00:12:57,520 --> 00:13:01,000 Speaker 3: rich were willing to say, let the public be damned, 203 00:13:01,520 --> 00:13:07,120 Speaker 3: as one man was quoted incorrectly as saying, if we 204 00:13:07,160 --> 00:13:09,480 Speaker 3: turned to that charge, let me call your attention to 205 00:13:09,520 --> 00:13:13,760 Speaker 3: the nineteenth century, the period when we came the closest 206 00:13:13,800 --> 00:13:18,760 Speaker 3: we've ever come to pure unrestrained individualism, a period when 207 00:13:18,800 --> 00:13:23,120 Speaker 3: government spending, the spending of the federal government in Washington 208 00:13:23,520 --> 00:13:26,040 Speaker 3: amounted to less than three percent of a national income, 209 00:13:26,800 --> 00:13:30,640 Speaker 3: when essentially you had no restrictions on immigration and few 210 00:13:30,720 --> 00:13:34,000 Speaker 3: restrictions on economic activity. Let me point out that that 211 00:13:34,120 --> 00:13:37,719 Speaker 3: was also the period of the greatest flowering of charitable 212 00:13:37,760 --> 00:13:40,280 Speaker 3: activity in the United States. 213 00:13:40,840 --> 00:13:42,679 Speaker 2: That was a period when you. 214 00:13:42,679 --> 00:13:45,640 Speaker 3: Had the establishment of so many independent private schools and 215 00:13:45,679 --> 00:13:50,520 Speaker 3: colleges around the country. It was a period when the private, 216 00:13:51,200 --> 00:13:57,200 Speaker 3: nonprofit alamosnary hospitals grew and sprouted in every city in 217 00:13:57,240 --> 00:14:00,679 Speaker 3: the land. It was a period of the Carnegie life. 218 00:14:00,800 --> 00:14:02,880 Speaker 3: It was a period of the founding of the Society 219 00:14:02,880 --> 00:14:05,959 Speaker 3: for the Prevention of cruelly to animals. You name it, 220 00:14:06,600 --> 00:14:11,040 Speaker 3: and you will find that the charitable emotionary activities date 221 00:14:11,120 --> 00:14:14,840 Speaker 3: back to the period of the nineteenth century. So the 222 00:14:14,960 --> 00:14:19,680 Speaker 3: robber baron myth is a myth, one that should be deflating. 223 00:14:20,480 --> 00:14:25,680 Speaker 3: It gets its appeal from a common fallacy, from the 224 00:14:25,720 --> 00:14:29,600 Speaker 3: fallacy that one man's gain must be another man's loss. 225 00:14:30,360 --> 00:14:33,720 Speaker 3: Of course, it is true that many men became wealthy 226 00:14:33,800 --> 00:14:34,480 Speaker 3: during that period. 227 00:14:34,520 --> 00:14:36,880 Speaker 2: There were robber barons. There always are robber barons. 228 00:14:37,560 --> 00:14:40,880 Speaker 3: People are people, some are good, some are bad, some 229 00:14:41,000 --> 00:14:45,760 Speaker 3: are in between, and of course some people did try 230 00:14:46,000 --> 00:14:48,840 Speaker 3: to mistreat other people. That is part of the course 231 00:14:49,120 --> 00:14:55,000 Speaker 3: of history unfortunately. But the main part of the starting 232 00:14:56,000 --> 00:14:59,240 Speaker 3: is that the process whereby some people became wealthy was 233 00:14:59,320 --> 00:15:02,680 Speaker 3: also the prom which opened up the country and provided 234 00:15:02,720 --> 00:15:07,400 Speaker 3: opportunities for millions of other people to have a modest competence, 235 00:15:07,400 --> 00:15:09,360 Speaker 3: to be able to improve their own lot. 236 00:15:10,280 --> 00:15:11,440 Speaker 2: It was the robber. 237 00:15:11,080 --> 00:15:15,280 Speaker 3: Barons who were instrumental in building the railroads that joined 238 00:15:15,280 --> 00:15:19,000 Speaker 3: the country together, who are instrumental in developing the industries 239 00:15:19,040 --> 00:15:22,800 Speaker 3: of this country, and in thereby providing the opportunities for 240 00:15:22,840 --> 00:15:25,760 Speaker 3: the ordinary man to improve his lot on life. 241 00:15:26,200 --> 00:15:27,360 Speaker 2: Everybody can benefit. 242 00:15:27,920 --> 00:15:31,480 Speaker 3: You can have some people become wealthy, not at the 243 00:15:31,520 --> 00:15:35,640 Speaker 3: expense of other people, but by enabling other people to 244 00:15:35,640 --> 00:15:36,560 Speaker 3: become wealthy. 245 00:15:37,240 --> 00:15:38,239 Speaker 2: We had robber. 246 00:15:38,000 --> 00:15:41,680 Speaker 3: Barons then and we have robber barons today, But there's 247 00:15:41,720 --> 00:15:44,120 Speaker 3: a big difference between the robber barons then and the 248 00:15:44,200 --> 00:15:49,160 Speaker 3: robber barons today. The robber barons then primarily could get 249 00:15:49,200 --> 00:15:52,120 Speaker 3: their money only if people freely gave it to them. 250 00:15:52,680 --> 00:15:56,240 Speaker 3: They got their money by selling a service and nobody 251 00:15:56,280 --> 00:15:58,320 Speaker 3: had to buy it, and if people bought it, it 252 00:15:58,360 --> 00:16:01,240 Speaker 3: was because it was a better service than it was before. 253 00:16:01,960 --> 00:16:05,120 Speaker 3: The robber barons today are in large part able to 254 00:16:05,160 --> 00:16:07,960 Speaker 3: get their money by sending a policeman to take the 255 00:16:08,000 --> 00:16:11,560 Speaker 3: money out of your pocket. Now that's a figurative expression 256 00:16:11,600 --> 00:16:15,120 Speaker 3: on a literal expression. But how do you become wealthy today? 257 00:16:15,760 --> 00:16:22,520 Speaker 3: By getting government assistance, to mention only one very famous example, 258 00:16:23,200 --> 00:16:32,040 Speaker 3: by getting government to assign you some TV licenses, or 259 00:16:32,120 --> 00:16:37,160 Speaker 3: by getting anyone of a large variety of other sources 260 00:16:37,160 --> 00:16:42,360 Speaker 3: of government support. If you look at where modern wealth 261 00:16:42,400 --> 00:16:47,440 Speaker 3: comes from, it almost always comes from political influence, which 262 00:16:47,520 --> 00:16:50,680 Speaker 3: enables you to get benefits at the expense of the 263 00:16:50,720 --> 00:16:51,600 Speaker 3: public at large. 264 00:16:51,960 --> 00:16:54,080 Speaker 2: Now that is a zero sum game. 265 00:16:55,080 --> 00:16:58,240 Speaker 3: When the money is transferred from some to others through 266 00:16:58,320 --> 00:16:59,480 Speaker 3: force and coercion and. 267 00:16:59,520 --> 00:17:02,480 Speaker 2: The tax, then it need not be that. 268 00:17:02,400 --> 00:17:06,120 Speaker 3: The one man's benefit is also the other man's benefit. 269 00:17:06,480 --> 00:17:09,800 Speaker 2: Then it can, and often is, that both parties. 270 00:17:11,320 --> 00:17:13,720 Speaker 3: That the party who gains gains at the expense of 271 00:17:13,760 --> 00:17:17,159 Speaker 3: the party who pays. So robber barons will always be 272 00:17:17,240 --> 00:17:20,680 Speaker 3: with us. The crucial question is whether we have a 273 00:17:20,720 --> 00:17:26,000 Speaker 3: form of economic organization in which one robber baron keeps 274 00:17:26,040 --> 00:17:29,199 Speaker 3: the other robber baron in check, or whether we have 275 00:17:29,280 --> 00:17:32,680 Speaker 3: a form of economic and political organization in which one 276 00:17:32,760 --> 00:17:35,119 Speaker 3: robber baron can help the other robber baron at the 277 00:17:35,160 --> 00:17:38,159 Speaker 3: expense of the public. I want to turn to the 278 00:17:38,200 --> 00:17:42,199 Speaker 3: second of these myths, the Great Depression myth. There is 279 00:17:42,280 --> 00:17:46,119 Speaker 3: hardly any view that is more widespreadent then the view that, 280 00:17:46,240 --> 00:17:49,399 Speaker 3: somehow or other, the Great Depression was produced by a 281 00:17:49,440 --> 00:17:50,960 Speaker 3: failure of private business. 282 00:17:51,600 --> 00:17:54,440 Speaker 2: That view is held not only. 283 00:17:54,880 --> 00:17:58,480 Speaker 3: By those who are in favor of greater role of government. 284 00:17:58,520 --> 00:18:00,960 Speaker 2: It is held by almost everybody. I venture to. 285 00:18:00,960 --> 00:18:03,440 Speaker 3: Suggest that if you go to any bankers, the people 286 00:18:03,440 --> 00:18:06,440 Speaker 3: who are here today at this banking conference, and if 287 00:18:06,440 --> 00:18:09,040 Speaker 3: you talk to them, I venture to say, nine out. 288 00:18:08,920 --> 00:18:13,159 Speaker 2: Of ten of them, if they didn't hadn't. 289 00:18:12,920 --> 00:18:17,480 Speaker 3: Heard what I'm going to send, that nine out of 290 00:18:17,520 --> 00:18:19,800 Speaker 3: ten of them would say, well, of course, the Great 291 00:18:19,840 --> 00:18:24,160 Speaker 3: Depression was a failure of private business. It was due 292 00:18:24,160 --> 00:18:27,520 Speaker 3: to an over extension over speculation in the nineteen twenties, 293 00:18:28,040 --> 00:18:31,359 Speaker 3: Or it was due to an excessive concentration of wealth 294 00:18:31,880 --> 00:18:34,280 Speaker 3: in the hands of the wealthy at the expense of 295 00:18:34,320 --> 00:18:37,040 Speaker 3: the poor in the nineteen twenties, or it was due 296 00:18:37,040 --> 00:18:40,359 Speaker 3: to the spectative investment abroad, or whatnot. But it was 297 00:18:40,400 --> 00:18:43,439 Speaker 3: a failure of private business, and government had to step 298 00:18:43,440 --> 00:18:47,840 Speaker 3: in in order to rescue private business from its own failure. 299 00:18:49,160 --> 00:18:53,119 Speaker 3: Nothing could be father from the truth, the Great Depression 300 00:18:53,240 --> 00:18:57,120 Speaker 3: was produced. In my opinion, and I may say this 301 00:18:57,200 --> 00:19:00,159 Speaker 3: is not a random opinion. I will be glad to 302 00:19:00,200 --> 00:19:02,760 Speaker 3: refer you to a several hundred page book in which 303 00:19:02,840 --> 00:19:06,600 Speaker 3: it is documented. I won't tell you who the author is. 304 00:19:09,880 --> 00:19:15,359 Speaker 3: Mister Eccles did that it was produced. The Great Depression 305 00:19:15,480 --> 00:19:19,640 Speaker 3: was produced by a failure of government, by a failure 306 00:19:19,680 --> 00:19:22,760 Speaker 3: of monetary policy. It was produced by a failure of 307 00:19:22,800 --> 00:19:26,199 Speaker 3: the Federal reserve system to act in accordance with the 308 00:19:26,240 --> 00:19:30,720 Speaker 3: intentions of those who established it. It was produced by 309 00:19:30,720 --> 00:19:35,720 Speaker 3: a failure of the Federal Reserve system, despite the presence 310 00:19:35,760 --> 00:19:38,199 Speaker 3: of knowledge on the part of many of the people 311 00:19:38,320 --> 00:19:42,800 Speaker 3: in the system about the right course of action. It's 312 00:19:42,800 --> 00:19:45,680 Speaker 3: interesting to speculate for a moment about why this myth 313 00:19:46,119 --> 00:19:47,080 Speaker 3: is so widespread. 314 00:19:48,280 --> 00:19:50,080 Speaker 2: The answer is really very simple. 315 00:19:50,080 --> 00:19:55,159 Speaker 3: In this case, private had a prize has no press agents. 316 00:19:55,680 --> 00:19:58,280 Speaker 2: The free market has no press agents. 317 00:19:58,840 --> 00:20:02,600 Speaker 3: The government has a great many press agents, the Federal 318 00:20:02,640 --> 00:20:06,719 Speaker 3: Reserve has a great many press agents. And the Federal Reserve, 319 00:20:06,800 --> 00:20:10,960 Speaker 3: of course, would never admit, never proclaim that it produced 320 00:20:10,960 --> 00:20:14,600 Speaker 3: a great depression. On the contrary, and again I don't 321 00:20:14,640 --> 00:20:19,640 Speaker 3: mean to be criticizing individuals. We're talking about the way 322 00:20:19,680 --> 00:20:23,200 Speaker 3: institutions operate. You and I are the same as all 323 00:20:23,200 --> 00:20:26,160 Speaker 3: the rest of us. We're all the same. The hardest 324 00:20:26,200 --> 00:20:28,040 Speaker 3: thing in the world is for anybody to admit that 325 00:20:28,080 --> 00:20:30,960 Speaker 3: he made a mistake. If any one of us makes 326 00:20:30,960 --> 00:20:33,760 Speaker 3: a mistake, we can always find somebody else to blame. 327 00:20:34,840 --> 00:20:38,600 Speaker 3: And if you read, as I have, for my sins, 328 00:20:38,920 --> 00:20:42,280 Speaker 3: had to read the annual reports of the Federal Reserve 329 00:20:42,320 --> 00:20:47,600 Speaker 3: System over a fifty year period, there's only one element 330 00:20:47,600 --> 00:20:52,240 Speaker 3: of humor that lightens that test, and that is the 331 00:20:52,480 --> 00:20:57,679 Speaker 3: cyclical fluctuation and the powers of the Federal Reserve. In 332 00:20:57,720 --> 00:21:00,840 Speaker 3: a good year, when things are good the enemy is booming, 333 00:21:01,359 --> 00:21:05,320 Speaker 3: you will read that the Federal Reserve, by its wise policy, 334 00:21:06,080 --> 00:21:13,040 Speaker 3: by its efficacious management of money, has produced this fine situation. However, 335 00:21:13,119 --> 00:21:16,159 Speaker 3: let things get bad, and all of a sudden the 336 00:21:16,200 --> 00:21:17,879 Speaker 3: tone of the annual report is different. 337 00:21:17,920 --> 00:21:20,560 Speaker 2: Then you discover that despite. 338 00:21:20,080 --> 00:21:26,040 Speaker 3: The best efforts of the Federal Reserve, outside forces combine 339 00:21:26,640 --> 00:21:31,840 Speaker 3: to produce difficulties. Even at the depth of the depression. 340 00:21:31,880 --> 00:21:37,720 Speaker 3: In nineteen thirty three, when in the spring of that year, 341 00:21:38,560 --> 00:21:42,280 Speaker 3: the Federal Reserve System, which had been established in order 342 00:21:42,320 --> 00:21:45,320 Speaker 3: to prevent banking panics and keep banks from closing. 343 00:21:45,800 --> 00:21:48,400 Speaker 2: When the Federal Reserve System itself closed. 344 00:21:48,040 --> 00:21:52,080 Speaker 3: Its doors and you had a banking holiday for seven days, 345 00:21:53,400 --> 00:21:57,560 Speaker 3: and when over the previous three years a third of 346 00:21:57,600 --> 00:22:02,320 Speaker 3: the banks of this country closed the doors and went broke, because, 347 00:22:02,440 --> 00:22:05,600 Speaker 3: in my opinion of the poor policy followed by the 348 00:22:05,640 --> 00:22:09,480 Speaker 3: Federal Reserve System, even in nineteen thirty three, if you 349 00:22:09,520 --> 00:22:12,359 Speaker 3: read the annual report, you will discover how much worse 350 00:22:12,440 --> 00:22:14,520 Speaker 3: things would have been if the Federal Reserve hadn't behaved 351 00:22:14,520 --> 00:22:18,840 Speaker 3: so well. Now, as I say, I don't blame the 352 00:22:19,000 --> 00:22:20,840 Speaker 3: members of the Federal Reserve for that. Any one of 353 00:22:20,880 --> 00:22:22,640 Speaker 3: us would do the same thing. We have to find 354 00:22:22,640 --> 00:22:27,240 Speaker 3: somebody to blame. But as an objective's collar, I can 355 00:22:27,280 --> 00:22:28,440 Speaker 3: tell you what the facts are. 356 00:22:29,600 --> 00:22:30,560 Speaker 2: The facts were. 357 00:22:31,880 --> 00:22:35,800 Speaker 3: That from nineteen twenty nine to nineteen thirty three, the 358 00:22:35,840 --> 00:22:39,359 Speaker 3: total quantity of money in the United States, the amount 359 00:22:39,400 --> 00:22:43,920 Speaker 3: of currency, the amount of bank deposits, what mister Ecchels 360 00:22:43,960 --> 00:22:46,960 Speaker 3: referred to as M two. That total amount of money 361 00:22:47,480 --> 00:22:52,680 Speaker 3: declined by one third. The total number of banks went 362 00:22:52,760 --> 00:22:53,600 Speaker 3: down by one. 363 00:22:54,320 --> 00:22:56,840 Speaker 2: And why did the quantity of money decline? 364 00:22:57,080 --> 00:23:00,120 Speaker 3: It declined because the Federal Reserve System failed. 365 00:23:00,000 --> 00:23:01,600 Speaker 2: Prevent the decline. 366 00:23:02,000 --> 00:23:04,760 Speaker 3: The Federal Reserve system could have prevented the decline at 367 00:23:04,760 --> 00:23:08,040 Speaker 3: all times. There never was a moment during that period 368 00:23:08,600 --> 00:23:11,320 Speaker 3: when the Federal Reserve did not have the power to 369 00:23:11,359 --> 00:23:14,159 Speaker 3: prevent the decline in the quantity of money. If it 370 00:23:14,200 --> 00:23:16,919 Speaker 3: had prevented the decline in the quantity of money, you 371 00:23:17,000 --> 00:23:19,520 Speaker 3: might still have had a recession, but it would have 372 00:23:19,560 --> 00:23:22,080 Speaker 3: been a garden variety of recession. It would have been 373 00:23:22,119 --> 00:23:24,879 Speaker 3: over in the middle of nineteen thirty or early in 374 00:23:24,960 --> 00:23:27,360 Speaker 3: thirty one at the latest. It would not have been 375 00:23:27,359 --> 00:23:30,919 Speaker 3: the major catastrophe not only for this country, but throughout 376 00:23:30,920 --> 00:23:36,600 Speaker 3: the rest of the world. The Moreover, this is not 377 00:23:36,760 --> 00:23:43,320 Speaker 3: only hindsight. At all times, the people at the Federal 378 00:23:43,359 --> 00:23:46,480 Speaker 3: Reserve Bank of New York and at the number of 379 00:23:46,520 --> 00:23:49,919 Speaker 3: other banks were pleading with the Federal Reserve Board in 380 00:23:50,080 --> 00:23:53,560 Speaker 3: Washington to do the right thing. At all times, there 381 00:23:53,560 --> 00:23:56,720 Speaker 3: were people in Congress who were arguing that the Federal 382 00:23:56,760 --> 00:24:01,720 Speaker 3: Reserve system should take a different course. At times, there 383 00:24:01,720 --> 00:24:07,479 Speaker 3: were outside commentators. One of the Canadian banks was particularly prescient, 384 00:24:08,119 --> 00:24:11,879 Speaker 3: but there were other commentators who were pointing out the 385 00:24:11,960 --> 00:24:16,240 Speaker 3: disastrous effects on the American economy of the restrictive policies 386 00:24:16,280 --> 00:24:19,520 Speaker 3: that the Federal Reserve system was following and which was causing, 387 00:24:19,800 --> 00:24:23,199 Speaker 3: was permitting and facilitating a whole series of bank runs. 388 00:24:24,200 --> 00:24:25,959 Speaker 2: So the Great Depression. 389 00:24:26,200 --> 00:24:29,679 Speaker 3: Was not produced by a failure of business. On the contrary, 390 00:24:30,240 --> 00:24:33,399 Speaker 3: it was produced by a failure of government, and a 391 00:24:33,440 --> 00:24:38,080 Speaker 3: failure of government in an area in which responsibility had 392 00:24:38,119 --> 00:24:40,840 Speaker 3: been assigned to government since the founding of this country. 393 00:24:41,480 --> 00:24:43,320 Speaker 2: The Constitution of the United States. 394 00:24:44,320 --> 00:24:48,040 Speaker 3: It gives Congress the power to coin money and set 395 00:24:48,080 --> 00:24:51,040 Speaker 3: the value thereup. And it was in the management of 396 00:24:51,080 --> 00:24:55,880 Speaker 3: this fundamental function of government that governments failed and produced 397 00:24:55,880 --> 00:25:00,600 Speaker 3: the Great Depression. We have learned from that failure. The 398 00:25:00,640 --> 00:25:02,960 Speaker 3: Federal Reserve will not fail in the same way again. 399 00:25:03,280 --> 00:25:09,800 Speaker 3: This time it will fail in a different way. This 400 00:25:09,960 --> 00:25:13,800 Speaker 3: time it has been failing not by producing a great depression, 401 00:25:13,800 --> 00:25:15,240 Speaker 3: but by producing an inflation. 402 00:25:16,480 --> 00:25:17,760 Speaker 2: Because just as. 403 00:25:18,760 --> 00:25:21,200 Speaker 3: You will hear the story that it was business that 404 00:25:21,359 --> 00:25:24,600 Speaker 3: was responsible for the depression, so you will today hear 405 00:25:24,680 --> 00:25:27,399 Speaker 3: the story that it is labor and management that are 406 00:25:27,440 --> 00:25:30,800 Speaker 3: responsible for inflation. It is the same kind of a myth. 407 00:25:31,640 --> 00:25:34,760 Speaker 3: Inflation is made in one place, in one place only. 408 00:25:35,000 --> 00:25:38,000 Speaker 2: Washington, d C. And in Washington, d C. 409 00:25:38,240 --> 00:25:42,720 Speaker 3: The chief source immediate source of inflation is a Greek 410 00:25:42,760 --> 00:25:48,080 Speaker 3: temple and constitution avenue in which houses the Federal Reserve Board. 411 00:25:49,240 --> 00:25:53,240 Speaker 3: An accomplice, and a major accomplice, of course, sits in 412 00:25:53,280 --> 00:25:57,320 Speaker 3: the halls of Congress in Washington. They are a major 413 00:25:57,359 --> 00:26:01,679 Speaker 3: accomplice because you tell them to be. The American people 414 00:26:01,720 --> 00:26:05,200 Speaker 3: have been telling Congress for many years, spend more money 415 00:26:05,240 --> 00:26:08,160 Speaker 3: on us, please, But they've been telling us, don't raise 416 00:26:08,160 --> 00:26:12,480 Speaker 3: their taxes. Congress has been listening. It's been spending more 417 00:26:12,520 --> 00:26:15,080 Speaker 3: money on you. But on the other hand, it's been 418 00:26:15,200 --> 00:26:19,120 Speaker 3: very unwilling to raise taxes. As a result, it has 419 00:26:19,200 --> 00:26:21,320 Speaker 3: imposed inflation as a tax. 420 00:26:22,040 --> 00:26:24,040 Speaker 2: That's one tax that you don't have to vote for, 421 00:26:25,160 --> 00:26:28,280 Speaker 2: but you have to pay. Let me turn to the 422 00:26:28,320 --> 00:26:30,200 Speaker 2: third of the myths I want to cover. 423 00:26:31,240 --> 00:26:35,840 Speaker 3: This is a myth closely related to the Great Depression myth. 424 00:26:36,640 --> 00:26:42,040 Speaker 3: It is a myth that somehow or other, the private 425 00:26:42,119 --> 00:26:48,080 Speaker 3: market has failed to provide certain important services and the 426 00:26:48,160 --> 00:26:51,760 Speaker 3: government has had to step in in response to an 427 00:26:51,800 --> 00:26:56,840 Speaker 3: overwhelming public demand in order to provide those services. The 428 00:26:56,920 --> 00:27:00,400 Speaker 3: reality is very different. The reality is is that if 429 00:27:00,400 --> 00:27:03,480 Speaker 3: you look at every program that the government has adopted 430 00:27:04,000 --> 00:27:07,919 Speaker 3: in the direction of extending its scope. It took an 431 00:27:08,080 --> 00:27:12,800 Speaker 3: enormous propaganda campaign by special propaganda groups to get those 432 00:27:12,840 --> 00:27:13,639 Speaker 3: measures passed. 433 00:27:15,480 --> 00:27:16,160 Speaker 2: There was no. 434 00:27:16,240 --> 00:27:20,840 Speaker 3: Underlying public demand for those measures. On the contrary, the 435 00:27:20,880 --> 00:27:23,800 Speaker 3: demand had to be created. It had to be developed, 436 00:27:24,040 --> 00:27:26,640 Speaker 3: It had to be produced, and it was created. 437 00:27:26,680 --> 00:27:27,600 Speaker 2: It was developed. 438 00:27:27,600 --> 00:27:31,800 Speaker 3: It was produced by people who, sincerely, I'm not questioning 439 00:27:31,880 --> 00:27:35,399 Speaker 3: their sincerity, who sincerely wanted to see an expansion in 440 00:27:35,440 --> 00:27:37,919 Speaker 3: the scope of government. Let me take some of the 441 00:27:37,960 --> 00:27:41,480 Speaker 3: most prominent examples. Let me take the example which today 442 00:27:41,560 --> 00:27:46,960 Speaker 3: is the greatest sacred cow of them all, social Security. 443 00:27:48,560 --> 00:27:51,119 Speaker 3: Was there an overwhelming demand for social Security in the 444 00:27:51,200 --> 00:27:53,040 Speaker 3: nineteen thirties when the law was adopted. 445 00:27:53,600 --> 00:27:57,080 Speaker 2: Far from it. There was no public demand for it. 446 00:27:57,080 --> 00:27:58,360 Speaker 2: It had to be sold. 447 00:27:58,560 --> 00:28:03,919 Speaker 3: How was it sold by the slightest devices of Madison Amna, 448 00:28:04,000 --> 00:28:06,800 Speaker 3: by imaginative packaging and deceptive labeling. 449 00:28:08,160 --> 00:28:11,800 Speaker 2: Social Security was sold as an insurance scheme. It is 450 00:28:11,840 --> 00:28:13,000 Speaker 2: not an insurance scheme. 451 00:28:13,880 --> 00:28:16,320 Speaker 3: There is very little relationship to the amount of money 452 00:28:16,359 --> 00:28:19,440 Speaker 3: any one individual pays and the amount of money. 453 00:28:19,280 --> 00:28:20,479 Speaker 2: He is entitled to receive. 454 00:28:21,440 --> 00:28:25,600 Speaker 3: Social Security is a combination of a bad tax system 455 00:28:25,680 --> 00:28:30,800 Speaker 3: with a bad way of distributing welfare. It's got two components, 456 00:28:31,400 --> 00:28:34,639 Speaker 3: and I have never known anybody, whatever his political or 457 00:28:34,680 --> 00:28:37,879 Speaker 3: other persuasion, who would defend either components separately. 458 00:28:38,960 --> 00:28:40,360 Speaker 2: If you look at the tax. 459 00:28:40,120 --> 00:28:45,480 Speaker 3: System, who can defend a wage tax, a tax on 460 00:28:45,560 --> 00:28:48,720 Speaker 3: wages up to a maximum, a tax on work, a 461 00:28:48,840 --> 00:28:54,240 Speaker 3: tax which discourages employers from hiring people and discourages people 462 00:28:54,280 --> 00:28:57,720 Speaker 3: from going to work. And a tax which is borne 463 00:28:57,760 --> 00:28:59,880 Speaker 3: by the lowest wage groups. 464 00:29:00,040 --> 00:29:01,280 Speaker 2: It's a regressive tax. 465 00:29:02,120 --> 00:29:08,040 Speaker 3: You could never in a millions of years Sundays, you 466 00:29:08,120 --> 00:29:12,360 Speaker 3: could never have gotten such a tax passed as a tax. 467 00:29:13,680 --> 00:29:17,040 Speaker 2: Look at the benefit arrangements here. 468 00:29:17,120 --> 00:29:20,320 Speaker 3: You have an arrangement under which the amount of money 469 00:29:20,320 --> 00:29:23,120 Speaker 3: a person receives does not depend on his poverty or 470 00:29:23,120 --> 00:29:26,720 Speaker 3: his indigence. It depends on the accident of what industry 471 00:29:26,720 --> 00:29:29,520 Speaker 3: he worked in. If he happened to work in a 472 00:29:29,560 --> 00:29:34,840 Speaker 3: covered industry, he gets a benefit. If he happens to 473 00:29:34,880 --> 00:29:40,040 Speaker 3: work in a non covered industry, he doesn't. If he 474 00:29:40,080 --> 00:29:42,760 Speaker 3: has only worked a certain number of quarters and not more, 475 00:29:43,040 --> 00:29:46,120 Speaker 3: no matter how much how indigent he is, he doesn't 476 00:29:46,120 --> 00:29:51,320 Speaker 3: get anything. If he's sixty five and he decides to 477 00:29:51,360 --> 00:29:55,840 Speaker 3: continue to work earning more than a modest amount per year, 478 00:29:55,920 --> 00:29:58,160 Speaker 3: not only doesn't he get a benefit, but to add 479 00:29:58,160 --> 00:30:01,760 Speaker 3: insult injury, he has to pay tax on the wages 480 00:30:01,800 --> 00:30:04,640 Speaker 3: he is receiving in order to finance the benefit he 481 00:30:04,720 --> 00:30:12,640 Speaker 3: is not receiving. If a man who is sixty five 482 00:30:12,800 --> 00:30:16,560 Speaker 3: years old has a million dollars in income from property 483 00:30:16,680 --> 00:30:19,360 Speaker 3: he is and doesn't work, he gets his full Social 484 00:30:19,400 --> 00:30:24,760 Speaker 3: Security benefit tax free. If the same man goes to 485 00:30:24,800 --> 00:30:27,920 Speaker 3: work and earns twenty thousand dollars a year, he is 486 00:30:27,960 --> 00:30:29,360 Speaker 3: in the position I just described. 487 00:30:29,400 --> 00:30:30,520 Speaker 2: He doesn't get any benefit. 488 00:30:30,960 --> 00:30:34,920 Speaker 3: Is there anybody who would justify that system of distributing benefits? 489 00:30:34,920 --> 00:30:38,520 Speaker 3: And I could go on to all the difficulties with it, 490 00:30:38,960 --> 00:30:40,320 Speaker 3: I've only touched the surface. 491 00:30:42,960 --> 00:30:46,400 Speaker 2: Note the misleading language. 492 00:30:47,080 --> 00:30:51,320 Speaker 3: The Social Security system consistently refers to the taxes you 493 00:30:51,400 --> 00:30:55,760 Speaker 3: pay as a contribution. Now tell me do you regard 494 00:30:55,880 --> 00:31:02,440 Speaker 3: taxes as contributions. The word contribution denotes voluntary arrangements. If 495 00:31:02,480 --> 00:31:06,720 Speaker 3: you buy an insurance program, you are contributing freely. If 496 00:31:06,760 --> 00:31:10,240 Speaker 3: you contribute to the United Way freely, you're contributing freely. 497 00:31:11,200 --> 00:31:14,200 Speaker 3: But if you pay taxes on your wages as the 498 00:31:14,240 --> 00:31:16,680 Speaker 3: conditions of being employed, that's a tax. 499 00:31:16,720 --> 00:31:17,760 Speaker 2: It's not a contribution. 500 00:31:19,320 --> 00:31:23,040 Speaker 3: Again, it always refers to the payments people get as benefits. 501 00:31:23,800 --> 00:31:25,600 Speaker 2: They are not benefits, they're subsidies. 502 00:31:27,280 --> 00:31:30,000 Speaker 3: What you have is a system of subsidizing people on 503 00:31:30,000 --> 00:31:32,600 Speaker 3: the one hand, and of taxing it. What about the 504 00:31:32,600 --> 00:31:36,440 Speaker 3: claim that it's insurance, that there's a relationship between the two, Well, 505 00:31:36,440 --> 00:31:40,960 Speaker 3: there is a minor relationship. It is true that on 506 00:31:41,080 --> 00:31:45,360 Speaker 3: the whole, those people who pay more will receive more 507 00:31:45,720 --> 00:31:49,120 Speaker 3: other things the same. But every student of the subject 508 00:31:49,840 --> 00:31:53,840 Speaker 3: has pointed out that the relationship is very small, that 509 00:31:54,080 --> 00:31:59,360 Speaker 3: most payments are independent of most receipts. Moreover, what you 510 00:31:59,440 --> 00:32:01,800 Speaker 3: really have is not a system under which people are 511 00:32:01,840 --> 00:32:05,200 Speaker 3: providing for their own security as a social security system. 512 00:32:05,240 --> 00:32:08,680 Speaker 3: Will say it as they describe it in their pamphlets. 513 00:32:08,680 --> 00:32:11,440 Speaker 3: They describe it as a way in which ninety percent 514 00:32:11,480 --> 00:32:13,840 Speaker 3: of American workers are providing for their own future. 515 00:32:13,880 --> 00:32:14,640 Speaker 2: That's nonsense. 516 00:32:15,640 --> 00:32:19,480 Speaker 3: What people today are doing is paying taxes today to 517 00:32:19,600 --> 00:32:22,719 Speaker 3: pay the subsidies to the people who are receiving benefits today. 518 00:32:23,680 --> 00:32:25,880 Speaker 3: What you have is a system of taxing the young 519 00:32:26,680 --> 00:32:28,920 Speaker 3: at any point in time to subsidize the old. 520 00:32:29,840 --> 00:32:32,640 Speaker 2: Now, there may be nothing wrong with that. For the moment, 521 00:32:32,680 --> 00:32:34,240 Speaker 2: I'm not discussing that issue. 522 00:32:34,400 --> 00:32:37,840 Speaker 3: I'm discussing whether social Security was a response to a 523 00:32:37,880 --> 00:32:41,160 Speaker 3: broad scale public demand or whether it had to be 524 00:32:41,240 --> 00:32:45,000 Speaker 3: sold to the people by the worst devices of Madison Avdey. 525 00:32:45,880 --> 00:32:47,720 Speaker 2: And the answer is that clearly was the latter. 526 00:32:48,440 --> 00:32:50,720 Speaker 3: What you have is a system under which people today 527 00:32:50,760 --> 00:32:53,520 Speaker 3: are being taxed to pay benefits today. 528 00:32:53,800 --> 00:32:56,200 Speaker 2: To the people who are receiving them. 529 00:32:56,600 --> 00:33:01,920 Speaker 3: So far, those people who are been receiving payments have 530 00:33:02,000 --> 00:33:05,200 Speaker 3: received much more than the actuarial. 531 00:33:04,640 --> 00:33:06,160 Speaker 2: Value of what they paid. 532 00:33:06,640 --> 00:33:09,560 Speaker 3: That's because you've had a growing working force, You've had 533 00:33:09,640 --> 00:33:11,080 Speaker 3: higher wages being paid. 534 00:33:11,640 --> 00:33:13,280 Speaker 2: Wage rates have gone up very rare. 535 00:33:13,320 --> 00:33:15,880 Speaker 3: I mean, the wage tax has gone up very sharply, 536 00:33:16,920 --> 00:33:20,560 Speaker 3: but the number of recipients is growing relative to the 537 00:33:20,600 --> 00:33:23,760 Speaker 3: number of people paying. And that's why Social Security is 538 00:33:23,760 --> 00:33:27,160 Speaker 3: currently in so much financial trouble. That's why the so 539 00:33:27,400 --> 00:33:31,920 Speaker 3: called reserve, which is not a reserve at all, the 540 00:33:31,960 --> 00:33:36,800 Speaker 3: so called reserve has been getting smaller and smaller, and 541 00:33:36,840 --> 00:33:39,320 Speaker 3: that's why you have all the agitation for Congress to 542 00:33:39,360 --> 00:33:42,920 Speaker 3: do something to make Social Security again financially. 543 00:33:42,480 --> 00:33:45,280 Speaker 2: Responsible again for the moment. 544 00:33:45,760 --> 00:33:48,800 Speaker 3: I'm not discussing whether social Security or the separate parts 545 00:33:48,800 --> 00:33:51,560 Speaker 3: are good or bad, but only whether it can be 546 00:33:51,640 --> 00:33:55,120 Speaker 3: regarded as a program adopted in response to a great 547 00:33:55,120 --> 00:33:55,880 Speaker 3: public demand. 548 00:33:56,480 --> 00:33:58,720 Speaker 2: Let me take another more recent movement. 549 00:34:00,080 --> 00:34:03,360 Speaker 3: Imposition on you and me and on our automobiles of 550 00:34:03,400 --> 00:34:09,120 Speaker 3: all sorts of safety equipment, so called safety equipment. Nothing 551 00:34:09,160 --> 00:34:12,200 Speaker 3: to prevent us individually from buying it, but now we 552 00:34:12,280 --> 00:34:14,520 Speaker 3: are required to buy it by government. 553 00:34:15,160 --> 00:34:18,920 Speaker 2: Why was there a great public demand? Not at all. 554 00:34:19,120 --> 00:34:20,720 Speaker 2: There was a man named Ralph Nader. 555 00:34:21,600 --> 00:34:24,160 Speaker 3: Now maybe he arose in response to a public demand, 556 00:34:25,160 --> 00:34:27,560 Speaker 3: but if so, it was a public demand for entertainment, 557 00:34:27,640 --> 00:34:36,920 Speaker 3: not for safety. But Ralph Nader launched a major propaganda campaign, 558 00:34:37,480 --> 00:34:40,160 Speaker 3: and as a result of this propaganda campaign, as a 559 00:34:40,200 --> 00:34:42,959 Speaker 3: result of a great selling effort also. 560 00:34:42,920 --> 00:34:44,680 Speaker 2: Characterized by misrepresentation. 561 00:34:45,960 --> 00:34:49,959 Speaker 3: Also, as you know, his original weapon was a book 562 00:34:50,000 --> 00:34:55,399 Speaker 3: safe unsafe at any price, which damned the Corvair as 563 00:34:55,440 --> 00:34:59,920 Speaker 3: being an unsafe and a knowingly unsafe car. Later study 564 00:35:00,719 --> 00:35:04,440 Speaker 3: have demonstrated that his claim was not justified, but that 565 00:35:04,480 --> 00:35:07,359 Speaker 3: did not prevent it from having its effect. It did 566 00:35:07,360 --> 00:35:10,640 Speaker 3: not prevent it from adopting it. But the extent to 567 00:35:10,680 --> 00:35:13,520 Speaker 3: which this did not result from a great public clamor 568 00:35:13,600 --> 00:35:17,480 Speaker 3: can be shown by what has happened whenever the. 569 00:35:21,600 --> 00:35:23,560 Speaker 2: Agency that was established. 570 00:35:23,040 --> 00:35:27,360 Speaker 3: To administer auto safety regulations has overstepped its bounds. You 571 00:35:27,400 --> 00:35:30,719 Speaker 3: will recall it a few years ago it tried to 572 00:35:30,760 --> 00:35:33,600 Speaker 3: impose the requirement of an interlock, that no car could 573 00:35:33,640 --> 00:35:37,520 Speaker 3: be started unless the seat belts were fastened, and that 574 00:35:37,560 --> 00:35:41,319 Speaker 3: produced such a great public outcry that Congress stepped in 575 00:35:41,360 --> 00:35:46,319 Speaker 3: and it had to be rescinded. You are now having 576 00:35:46,360 --> 00:35:50,680 Speaker 3: a similar kind of a controversy about the airbag. Or again, 577 00:35:50,800 --> 00:35:53,399 Speaker 3: let me take a very different example, one which has 578 00:35:53,440 --> 00:35:56,840 Speaker 3: not yet emerged, fortunately, the drive for. 579 00:35:56,920 --> 00:35:58,120 Speaker 2: National health insurance. 580 00:35:59,040 --> 00:36:01,719 Speaker 3: Is there a wide spread drive for national health insurance? 581 00:36:02,600 --> 00:36:03,799 Speaker 2: Not so you can notice it. 582 00:36:04,719 --> 00:36:07,640 Speaker 3: Indeed, the proponents of it have been trying to get 583 00:36:07,640 --> 00:36:09,640 Speaker 3: it passed a year after year, and so far they 584 00:36:09,680 --> 00:36:13,359 Speaker 3: haven't gotten it passed. As I say fortunately, because if 585 00:36:13,560 --> 00:36:16,839 Speaker 3: so called national health insurance were passed, it would bear 586 00:36:16,880 --> 00:36:20,520 Speaker 3: as little relationship to insurance as social security does. It's 587 00:36:20,560 --> 00:36:23,520 Speaker 3: not a program for national health insurance at all. It's 588 00:36:23,520 --> 00:36:27,240 Speaker 3: a program for socialized medicine. It's a program for making 589 00:36:27,320 --> 00:36:34,800 Speaker 3: physicians government employees. It's a program for creating long waiting 590 00:36:34,880 --> 00:36:37,040 Speaker 3: lines and inferior medical service. 591 00:36:37,840 --> 00:36:39,360 Speaker 2: But that isn't the way it's labeled. 592 00:36:41,040 --> 00:36:43,600 Speaker 3: But the pressure for it is having to be created 593 00:36:44,000 --> 00:36:44,680 Speaker 3: and build. 594 00:36:44,560 --> 00:36:48,800 Speaker 2: Up by propaganda. Or again, let me take another modern version. 595 00:36:49,239 --> 00:36:52,279 Speaker 3: Has the FDA's been on saccharin been in response to 596 00:36:52,360 --> 00:36:57,400 Speaker 3: a great public outcry for it? Let me turn to 597 00:36:57,480 --> 00:37:03,040 Speaker 3: the fourth of my myths, the free lunch myth, the 598 00:37:03,120 --> 00:37:06,480 Speaker 3: belief that somehow or other government can spend money at 599 00:37:06,480 --> 00:37:12,200 Speaker 3: nobody's expense. I don't know how many of you have 600 00:37:12,320 --> 00:37:15,640 Speaker 3: ever heard of a wonderful description of government that was 601 00:37:15,680 --> 00:37:18,120 Speaker 3: made by a French economist by the name of Frederic 602 00:37:18,160 --> 00:37:22,160 Speaker 3: Bostiat about one hundred and fifty years ago. He said, 603 00:37:22,239 --> 00:37:27,120 Speaker 3: government is a fiction whereby everybody believes that he can 604 00:37:27,160 --> 00:37:28,880 Speaker 3: live at the expense of everybody else. 605 00:37:30,880 --> 00:37:34,319 Speaker 2: And that is the free lunch myth, the myth. 606 00:37:34,400 --> 00:37:39,880 Speaker 3: That somehow or other government can provide goods and services, 607 00:37:39,920 --> 00:37:44,839 Speaker 3: can spend money at nobody's expense. Now, the particular form 608 00:37:44,920 --> 00:37:49,239 Speaker 3: which that myth takes is very specific. 609 00:37:50,400 --> 00:37:51,480 Speaker 2: It has two parts. 610 00:37:52,600 --> 00:37:55,440 Speaker 3: One part is a belief that somehow or other you 611 00:37:55,520 --> 00:38:01,960 Speaker 3: can tax business without consumers or workers or individuals. 612 00:38:01,280 --> 00:38:01,799 Speaker 2: Paying for it. 613 00:38:01,880 --> 00:38:06,799 Speaker 3: Somehow business is a big source, a big cornucopia out 614 00:38:06,800 --> 00:38:10,080 Speaker 3: there that can be taxed at no cost. And the 615 00:38:10,120 --> 00:38:13,000 Speaker 3: other way it form the myth takes is that you 616 00:38:13,040 --> 00:38:15,480 Speaker 3: can create money at no cost, that if you turn 617 00:38:15,560 --> 00:38:18,839 Speaker 3: the printing press, if you produce those greenbacks, that will 618 00:38:18,920 --> 00:38:22,520 Speaker 3: enable people to become richer with nobody becoming poorer. Well, 619 00:38:22,600 --> 00:38:25,440 Speaker 3: let me look at first problem. Can you tax business? 620 00:38:26,360 --> 00:38:32,880 Speaker 3: What's business? There's no business to be taxed. There are people. 621 00:38:33,320 --> 00:38:37,200 Speaker 3: Only people can pay taxes. Can I tax this floor? 622 00:38:37,600 --> 00:38:41,200 Speaker 3: Can I tax the building? The building can't pay taxes. 623 00:38:41,800 --> 00:38:44,640 Speaker 3: Only people can pay taxes. So when you talk about 624 00:38:44,640 --> 00:38:48,480 Speaker 3: a tax on business, it has to be paid by somebody. 625 00:38:48,600 --> 00:38:53,399 Speaker 3: Either it's paid by the stockholder, or it's paid by 626 00:38:53,400 --> 00:38:55,840 Speaker 3: the customer, or it's paid by the worker. 627 00:38:56,320 --> 00:38:58,960 Speaker 2: There's no other way it can come from. There's no 628 00:39:01,120 --> 00:39:05,600 Speaker 2: there's no Santa Claus, no tooth. 629 00:39:05,360 --> 00:39:10,360 Speaker 3: Fairy that's going to provide a source by which the 630 00:39:10,360 --> 00:39:13,680 Speaker 3: government can spend money that doesn't come from somebody. Somebody 631 00:39:13,680 --> 00:39:19,520 Speaker 3: has to pay. And yet, over and over again you 632 00:39:19,640 --> 00:39:23,200 Speaker 3: hear the claim, oh, we cannot, we must not increase 633 00:39:23,239 --> 00:39:26,880 Speaker 3: taxes on individuals, will increase taxes on business. In connection 634 00:39:27,000 --> 00:39:31,799 Speaker 3: with the current discussion of social security, this fiction arises. 635 00:39:32,719 --> 00:39:36,960 Speaker 3: There is a fiction that the social security tax is 636 00:39:37,280 --> 00:39:42,000 Speaker 3: half on the individual and half on the employer. It's 637 00:39:41,719 --> 00:39:45,360 Speaker 3: that the individual only pays five point seventy five percent, 638 00:39:45,440 --> 00:39:49,839 Speaker 3: the employer plays it pays an equal amount. That's nonsense. 639 00:39:50,280 --> 00:39:55,240 Speaker 3: That's bookkeeping. That's not economics, that's not reality. The part 640 00:39:55,280 --> 00:39:58,160 Speaker 3: that the employer pays is part of his wage cost. 641 00:39:58,880 --> 00:40:01,600 Speaker 3: If an employer can see whether it's worth his while 642 00:40:02,719 --> 00:40:06,200 Speaker 3: to hire an additional worker, he has to consider as 643 00:40:06,280 --> 00:40:08,279 Speaker 3: part of his cost not only what he pays to 644 00:40:08,320 --> 00:40:11,560 Speaker 3: the worker, but also the extra taxes. 645 00:40:11,200 --> 00:40:12,520 Speaker 2: He will have to pay to the government. 646 00:40:13,480 --> 00:40:16,920 Speaker 3: It makes no difference to the employer at all if 647 00:40:16,920 --> 00:40:19,400 Speaker 3: he pays the worker a bigger check and the worker 648 00:40:19,440 --> 00:40:21,640 Speaker 3: pays a larger part of that directly to the government, 649 00:40:22,360 --> 00:40:25,040 Speaker 3: or he pays a worker a smaller check but an 650 00:40:25,080 --> 00:40:28,680 Speaker 3: addition has to send a check to Washington. What matters 651 00:40:28,680 --> 00:40:30,959 Speaker 3: to him is a total number of dollars it costs 652 00:40:31,000 --> 00:40:34,319 Speaker 3: him to hire an additional person. So the fact is, 653 00:40:35,160 --> 00:40:39,080 Speaker 3: the logic is, the reason is that the tax on, 654 00:40:39,200 --> 00:40:41,719 Speaker 3: the so called tax on the employer is paid by 655 00:40:41,719 --> 00:40:43,440 Speaker 3: the employee. 656 00:40:43,760 --> 00:40:45,160 Speaker 2: Now this has always. 657 00:40:44,880 --> 00:40:50,160 Speaker 3: Been clear from economic reasoning general economic reasoning, but it 658 00:40:50,200 --> 00:40:54,280 Speaker 3: has also been subjected to empirical test in a book, 659 00:40:54,320 --> 00:41:01,640 Speaker 3: even from that from that tempo of belief in greater 660 00:41:01,719 --> 00:41:02,600 Speaker 3: and bigger government. 661 00:41:02,600 --> 00:41:04,120 Speaker 2: The Brookings Institution. 662 00:41:05,400 --> 00:41:10,720 Speaker 3: In Washington, published a couple of years ago, demonstrated empirically 663 00:41:11,920 --> 00:41:15,120 Speaker 3: that the tax on the employer was really paid by 664 00:41:15,160 --> 00:41:17,480 Speaker 3: the employee, that it was shifted to the employee, And 665 00:41:17,520 --> 00:41:19,560 Speaker 3: it can't be any other way, as you will see 666 00:41:19,560 --> 00:41:20,319 Speaker 3: if you think about it. 667 00:41:20,320 --> 00:41:22,000 Speaker 2: So business doesn't pay that tax. 668 00:41:22,400 --> 00:41:26,880 Speaker 3: And yet despite this you have the great move in 669 00:41:26,960 --> 00:41:32,399 Speaker 3: Congress right now in remedying the problem of social security, 670 00:41:32,440 --> 00:41:35,560 Speaker 3: to impose a larger fraction of the tax on business 671 00:41:36,600 --> 00:41:39,280 Speaker 3: on the alleged grounds that somehow or other that spares 672 00:41:39,320 --> 00:41:42,560 Speaker 3: the worker. It doesn't have any such effect. It reduces 673 00:41:42,560 --> 00:41:46,360 Speaker 3: the incentive to hire people, and thus is imposed on 674 00:41:46,400 --> 00:41:46,880 Speaker 3: the worker. 675 00:41:48,239 --> 00:41:49,680 Speaker 2: But again, if. 676 00:41:49,560 --> 00:41:54,120 Speaker 3: You look at the taxing corporate profits, the distinction you 677 00:41:54,200 --> 00:41:57,880 Speaker 3: have to draw is between who writes the check and 678 00:41:58,000 --> 00:42:02,279 Speaker 3: who fundamentally bears the cost. It may well be that 679 00:42:02,400 --> 00:42:05,960 Speaker 3: an official of a corporation writes the check for the 680 00:42:06,040 --> 00:42:08,839 Speaker 3: tax on profits, so called profits. 681 00:42:08,960 --> 00:42:12,280 Speaker 2: He writes the check, but who pays it? He doesn't 682 00:42:12,320 --> 00:42:12,680 Speaker 2: pay it. 683 00:42:13,680 --> 00:42:17,279 Speaker 3: Here is a poor fellow who may be earning a 684 00:42:17,320 --> 00:42:20,359 Speaker 3: modest competence. He may be writing a check for ten 685 00:42:20,400 --> 00:42:23,600 Speaker 3: million dollars. That isn't coming out of his hide. Where's 686 00:42:23,600 --> 00:42:25,160 Speaker 3: that ten million dollars coming from? 687 00:42:26,200 --> 00:42:27,000 Speaker 2: It has to. 688 00:42:26,920 --> 00:42:30,919 Speaker 3: Come from the proceeds of the goods and services which 689 00:42:30,960 --> 00:42:32,000 Speaker 3: the enterprise sells. 690 00:42:32,800 --> 00:42:35,440 Speaker 2: And that ten million dollars is ten million dollars. 691 00:42:35,239 --> 00:42:41,360 Speaker 3: Less available either for cutting prices, or for paying out dividends, 692 00:42:41,480 --> 00:42:44,800 Speaker 3: or for paying wages and salaries. The tax is borne 693 00:42:44,840 --> 00:42:48,319 Speaker 3: by people, and for this reason I must say I 694 00:42:48,360 --> 00:42:52,840 Speaker 3: have always myself been strongly in favor of eliminating altogether 695 00:42:53,320 --> 00:42:56,880 Speaker 3: the tax on corporations. So it's open and above board 696 00:42:56,920 --> 00:43:00,239 Speaker 3: that you are taxing people, and that you do not 697 00:43:00,320 --> 00:43:04,200 Speaker 3: conceal that fact by appearing to tax corporations. Well again, 698 00:43:04,280 --> 00:43:06,720 Speaker 3: with respect to money, can you print money at no cost? 699 00:43:08,880 --> 00:43:11,200 Speaker 3: It's very cheap to turn out those pieces of paper. 700 00:43:12,360 --> 00:43:14,760 Speaker 3: But does that get society something for nothing? 701 00:43:15,440 --> 00:43:16,080 Speaker 2: Not at all. 702 00:43:16,840 --> 00:43:21,040 Speaker 3: It's simply a different form of taxation. If you print money, 703 00:43:21,680 --> 00:43:25,120 Speaker 3: people have more money to spend. If they spend, If 704 00:43:25,160 --> 00:43:28,000 Speaker 3: they spend more money on the same amount of goods, 705 00:43:28,120 --> 00:43:32,120 Speaker 3: prices go up, and in effect everybody is paying a 706 00:43:32,239 --> 00:43:36,320 Speaker 3: tax through inflation. Once again, it's only a form of taxation. 707 00:43:37,400 --> 00:43:40,520 Speaker 3: Let me turn to my final myth because it is 708 00:43:40,560 --> 00:43:44,480 Speaker 3: in some ways the most pervasive, the most dangerous, and 709 00:43:44,520 --> 00:43:47,920 Speaker 3: the most deep seated. That is a robin Hood myth, 710 00:43:49,000 --> 00:43:52,880 Speaker 3: the myth the government has benefited the poor at the 711 00:43:52,920 --> 00:43:53,839 Speaker 3: expense of the rich. 712 00:43:55,920 --> 00:43:56,640 Speaker 2: That's the myth. 713 00:43:59,280 --> 00:44:02,320 Speaker 3: Those are the terms on which many a governmental program 714 00:44:02,400 --> 00:44:02,840 Speaker 3: is sold. 715 00:44:03,440 --> 00:44:08,120 Speaker 2: What is the reality. The reality has. 716 00:44:08,000 --> 00:44:10,799 Speaker 3: Been described in an article in the Journal of Law 717 00:44:10,800 --> 00:44:14,280 Speaker 3: and Economics by my colleague George Stiegler under the title 718 00:44:14,320 --> 00:44:19,160 Speaker 3: of Director's Law. And Director is the name of Aaron Director, 719 00:44:19,160 --> 00:44:22,280 Speaker 3: who is a professor at the University of Chicago Law School. 720 00:44:22,600 --> 00:44:30,120 Speaker 3: And I might also say, my brother in law. Director's 721 00:44:30,200 --> 00:44:36,520 Speaker 3: law is that almost invariably, government programs benefit the middle 722 00:44:36,560 --> 00:44:39,920 Speaker 3: income class at the expense of the very poor and 723 00:44:39,960 --> 00:44:47,240 Speaker 3: the very rich. Now that may seem to you strange, 724 00:44:47,840 --> 00:44:52,160 Speaker 3: but let me first explain why it makes logical sense, 725 00:44:52,880 --> 00:44:56,600 Speaker 3: and second give you some empirical evidence, starting right here 726 00:44:56,640 --> 00:45:01,840 Speaker 3: at home with higher education and the state financing of 727 00:45:01,920 --> 00:45:07,760 Speaker 3: higher education. On the logical level, you have an econotic 728 00:45:07,800 --> 00:45:13,080 Speaker 3: political system under which laws are passed by fifty one 729 00:45:13,160 --> 00:45:15,680 Speaker 3: percent of the people voting one way against forty. 730 00:45:15,520 --> 00:45:16,600 Speaker 2: Nine percent of the people. 731 00:45:17,640 --> 00:45:19,680 Speaker 3: Now the way to get a law pass therefore, is 732 00:45:19,680 --> 00:45:22,720 Speaker 3: to form a coalition covering fifty one percent of the people. 733 00:45:24,000 --> 00:45:26,120 Speaker 3: You might think that you would take the bottom fifty 734 00:45:26,120 --> 00:45:27,880 Speaker 3: one percent versus the top. 735 00:45:27,719 --> 00:45:28,680 Speaker 2: Forty nine percent. 736 00:45:29,520 --> 00:45:31,200 Speaker 3: But the more you think about it, the more you 737 00:45:31,280 --> 00:45:33,520 Speaker 3: realize that that's not a very effective way to form 738 00:45:33,560 --> 00:45:37,920 Speaker 3: a coalition. Why because those people who are at the 739 00:45:37,920 --> 00:45:43,480 Speaker 3: bottom tend to be much less skillful in political activity 740 00:45:43,840 --> 00:45:46,760 Speaker 3: for the very reasons that leave them at the bottom 741 00:45:46,760 --> 00:45:49,520 Speaker 3: in the economic scale. They are at the bottom of 742 00:45:49,560 --> 00:45:52,560 Speaker 3: the economic scale because they have low skills, or low abilities, 743 00:45:52,640 --> 00:45:56,000 Speaker 3: or low entrepreneurial capacities, or have been unfortunate to have 744 00:45:56,040 --> 00:45:59,640 Speaker 3: been born handicapped, or in groups that are discriminated against. 745 00:46:00,080 --> 00:46:03,400 Speaker 3: But those same features make them relatively less effective in 746 00:46:03,440 --> 00:46:07,320 Speaker 3: political activity. Who are the most effective people in political activity? 747 00:46:08,239 --> 00:46:11,480 Speaker 3: Those of us in the middle and in the middle classes. 748 00:46:11,480 --> 00:46:13,239 Speaker 3: Where are the people who are literate. Where are the 749 00:46:13,280 --> 00:46:15,359 Speaker 3: people who write for the newspapers, Where are the people 750 00:46:15,400 --> 00:46:18,360 Speaker 3: who mount the hustings, Where are the people who provide 751 00:46:18,360 --> 00:46:22,000 Speaker 3: the candidates? Well, you might say, why doesn't the coalition 752 00:46:22,080 --> 00:46:25,799 Speaker 3: come from the top all the way down fifty one percent? Well, 753 00:46:25,800 --> 00:46:29,879 Speaker 3: the answer is the g those people at the top. 754 00:46:29,960 --> 00:46:31,399 Speaker 3: That's a place we can get a lot of money 755 00:46:31,400 --> 00:46:35,799 Speaker 3: from and it's worth sacrificing a few votes to get 756 00:46:35,840 --> 00:46:36,520 Speaker 3: a large. 757 00:46:36,280 --> 00:46:37,520 Speaker 2: Fraction of a tax base. 758 00:46:38,320 --> 00:46:41,880 Speaker 3: And therefore the logically most reasonable coalition is sort of 759 00:46:41,920 --> 00:46:45,560 Speaker 3: fifty one percent of the people running from the lower 760 00:46:45,600 --> 00:46:47,960 Speaker 3: middle class through the upper middle class and leaving out 761 00:46:47,960 --> 00:46:50,480 Speaker 3: the very rich at the top and the very part 762 00:46:50,480 --> 00:46:51,000 Speaker 3: at the bottom. 763 00:46:51,000 --> 00:46:52,520 Speaker 2: Now, it doesn't always work that way. 764 00:46:53,239 --> 00:46:56,600 Speaker 3: Sometimes the very rich are able to use their money 765 00:46:56,840 --> 00:46:59,719 Speaker 3: to get a effective coalition. But most of the time 766 00:46:59,760 --> 00:47:02,480 Speaker 3: that's the way it works. Now, let me illustrate it 767 00:47:02,480 --> 00:47:07,680 Speaker 3: in reality, in the real world. One of my favorite 768 00:47:07,719 --> 00:47:13,560 Speaker 3: examples is state finance of higher education. This is always 769 00:47:13,640 --> 00:47:18,239 Speaker 3: sold on the ground of providing opportunities to everybody in 770 00:47:18,280 --> 00:47:19,600 Speaker 3: the society to get an education. 771 00:47:19,719 --> 00:47:20,760 Speaker 2: But what are the facts. 772 00:47:21,920 --> 00:47:26,480 Speaker 3: I doubt that there is any program financed by government 773 00:47:26,480 --> 00:47:31,960 Speaker 3: in the United States which is as regressive in its 774 00:47:32,040 --> 00:47:35,240 Speaker 3: impact and its financial impact as the financing of higher schooling. 775 00:47:36,560 --> 00:47:38,480 Speaker 3: Who are the people who go to school? Who are 776 00:47:38,520 --> 00:47:43,879 Speaker 3: the people who are attending this university? Mostly people who 777 00:47:43,920 --> 00:47:49,160 Speaker 3: come from middle, upper middle or lower middle income class families. 778 00:47:50,440 --> 00:47:52,960 Speaker 3: If there are a few among you who come from 779 00:47:53,120 --> 00:47:55,480 Speaker 3: lower income families, you are going to. 780 00:47:55,440 --> 00:47:59,279 Speaker 2: Be among the middle and upper income classes. You are 781 00:47:59,360 --> 00:48:03,640 Speaker 2: the rich among the poor. They are the people who 782 00:48:03,680 --> 00:48:05,520 Speaker 2: go to school. They are the people who get the 783 00:48:05,520 --> 00:48:06,160 Speaker 2: benefit from it. 784 00:48:07,040 --> 00:48:09,600 Speaker 3: Your training here will enable you to get higher incomes 785 00:48:09,600 --> 00:48:14,200 Speaker 3: than you otherwise. Coun Who pays for it, well, you 786 00:48:14,320 --> 00:48:16,520 Speaker 3: pay for it and your family and friends pay for it. 787 00:48:16,600 --> 00:48:17,360 Speaker 2: Not through tuition. 788 00:48:18,200 --> 00:48:20,759 Speaker 3: I am told your tuition covers about fifteen percent of 789 00:48:20,800 --> 00:48:24,680 Speaker 3: the cost of your schooling. The taxpayers pay for it, 790 00:48:25,120 --> 00:48:27,680 Speaker 3: including the people who don't go to school. 791 00:48:29,080 --> 00:48:31,240 Speaker 2: Some years ago, there. 792 00:48:31,120 --> 00:48:34,160 Speaker 3: Was a study made for the state of California which 793 00:48:34,200 --> 00:48:38,040 Speaker 3: showed that fifty percent of the students at state supporting 794 00:48:38,160 --> 00:48:41,040 Speaker 3: institutions of higher education came from the top twenty five 795 00:48:41,080 --> 00:48:45,000 Speaker 3: percent of the income class, and five percent came from 796 00:48:45,000 --> 00:48:48,319 Speaker 3: the bottom twenty five percent of the income class. 797 00:48:48,920 --> 00:48:49,960 Speaker 2: This is a program. 798 00:48:50,800 --> 00:48:53,319 Speaker 3: When I talk in California and want to be demagogic, 799 00:48:53,840 --> 00:48:56,200 Speaker 3: I say it's a program to impose taxes on the 800 00:48:56,239 --> 00:48:59,399 Speaker 3: people in Watts to send the children from Beverly Hills 801 00:48:59,400 --> 00:49:04,080 Speaker 3: to college. Now you here in Utah know better what 802 00:49:04,120 --> 00:49:05,640 Speaker 3: the local equivalents of that are. 803 00:49:06,920 --> 00:49:08,799 Speaker 2: Now I'm not blaming you as individuals. 804 00:49:08,840 --> 00:49:12,600 Speaker 3: Again, I couldn't do that because I myself am a 805 00:49:12,640 --> 00:49:16,640 Speaker 3: beneficiary of state support of higher education. I went through 806 00:49:17,040 --> 00:49:20,320 Speaker 3: a school that has since become a state university, Rutgers University, 807 00:49:20,320 --> 00:49:22,359 Speaker 3: in the state of New Jersey, on a state scholarship. 808 00:49:23,800 --> 00:49:24,560 Speaker 2: Now I think I. 809 00:49:24,680 --> 00:49:27,520 Speaker 3: Benefited from going to the university, although I know and 810 00:49:27,600 --> 00:49:30,920 Speaker 3: I think even maybe the country at large did. Although 811 00:49:30,960 --> 00:49:32,879 Speaker 3: I know there are many people who disagree with that. 812 00:49:35,760 --> 00:49:37,920 Speaker 3: But there's no reason why I shouldn't have paid for it. 813 00:49:38,600 --> 00:49:41,640 Speaker 3: What did the poor citizens in New Jersey game? The 814 00:49:41,719 --> 00:49:44,160 Speaker 3: day I graduated from college, I left New Jersey and 815 00:49:44,200 --> 00:49:45,720 Speaker 3: I've hardly ever been back since. 816 00:49:50,160 --> 00:49:51,319 Speaker 2: There's a strong. 817 00:49:51,080 --> 00:49:53,480 Speaker 3: Case to be made that everybody who wants to go 818 00:49:53,520 --> 00:49:57,320 Speaker 3: to university should have an opportunity to do so, provided 819 00:49:57,360 --> 00:50:00,920 Speaker 3: he's willing to pay for it. Not necessary right now, 820 00:50:01,480 --> 00:50:04,160 Speaker 3: it's highly desirable to have arrangements under which he can 821 00:50:04,200 --> 00:50:06,440 Speaker 3: borrow now to pay it back later out of a 822 00:50:06,520 --> 00:50:11,879 Speaker 3: higher income that his education will make possible. But there 823 00:50:11,960 --> 00:50:17,520 Speaker 3: is no justification for imposing taxes on lower income people 824 00:50:18,520 --> 00:50:21,160 Speaker 3: to finance the schooling of people who are or will 825 00:50:21,200 --> 00:50:24,920 Speaker 3: be in the higher income groups. And yet, how much 826 00:50:24,960 --> 00:50:29,160 Speaker 3: political movement is there to impose full cost tuition on colleges. 827 00:50:31,600 --> 00:50:35,480 Speaker 3: There is nobody who would have a ghost of a 828 00:50:35,600 --> 00:50:38,759 Speaker 3: chance of being elected to a legislature or to the 829 00:50:38,800 --> 00:50:43,040 Speaker 3: state house on that program. It's the hardest thing in 830 00:50:43,080 --> 00:50:47,399 Speaker 3: the world legislatively to get higher tuitions in post one 831 00:50:47,600 --> 00:50:50,160 Speaker 3: because the middle class looks after itself. 832 00:50:51,200 --> 00:50:55,000 Speaker 2: Because of Director's Law. Now, what's true for higher education 833 00:50:55,120 --> 00:50:58,480 Speaker 2: is true in every other area. Consider social security. 834 00:50:59,239 --> 00:51:01,720 Speaker 3: Now, social secure curity is also sold as a program 835 00:51:01,760 --> 00:51:02,600 Speaker 3: to benefit the poor. 836 00:51:02,680 --> 00:51:05,799 Speaker 2: What are the facts? Social security is a. 837 00:51:05,760 --> 00:51:10,920 Speaker 3: Program which imposes unduly heavy taxes on the lower income 838 00:51:10,960 --> 00:51:16,960 Speaker 3: groups in the society to provide higher benefits. 839 00:51:16,480 --> 00:51:18,320 Speaker 2: To upper income groups in the society. 840 00:51:18,560 --> 00:51:21,160 Speaker 3: How does it work. It's not because of the regressive 841 00:51:21,239 --> 00:51:24,080 Speaker 3: nature of the wage tax. It's not because of the 842 00:51:24,120 --> 00:51:27,120 Speaker 3: structure of benefits. It's because of a very simple phenomenon. 843 00:51:28,239 --> 00:51:30,040 Speaker 3: At what age do. 844 00:51:30,080 --> 00:51:32,160 Speaker 2: Younger men from the lower classes go to work? 845 00:51:33,480 --> 00:51:37,439 Speaker 3: Sixteen seventeen, eighteen nineteen, that's when they start to pay 846 00:51:37,440 --> 00:51:38,680 Speaker 3: Social security taxes? 847 00:51:39,200 --> 00:51:41,120 Speaker 2: At what age are you people. 848 00:51:40,880 --> 00:51:43,440 Speaker 3: Going to go to work and start paying Social security taxes? 849 00:51:44,440 --> 00:51:46,680 Speaker 3: Some of you may in part time jobs have been 850 00:51:46,680 --> 00:51:49,600 Speaker 3: doing so, but you will be a full time Social 851 00:51:49,640 --> 00:51:56,840 Speaker 3: security pay payers only when you reach your middle twenties, 852 00:51:58,280 --> 00:52:01,799 Speaker 3: so they will pay tax for the more years then 853 00:52:01,840 --> 00:52:05,920 Speaker 3: you will pay taxes next, which one is going to 854 00:52:05,960 --> 00:52:10,359 Speaker 3: receive benefits for longer. Every demographic study is shown that 855 00:52:10,400 --> 00:52:12,920 Speaker 3: the average expected length to life of a middle and 856 00:52:13,000 --> 00:52:17,360 Speaker 3: upper income classes is longer than the average length to 857 00:52:17,400 --> 00:52:21,120 Speaker 3: life of people from the lower income classes. So those 858 00:52:21,200 --> 00:52:26,000 Speaker 3: poor suckers are going to pay taxes for more years 859 00:52:26,080 --> 00:52:32,640 Speaker 3: and receive payments for fewer years than you and I will. Now, 860 00:52:32,760 --> 00:52:36,920 Speaker 3: some of us, by virtue of continuing to work between 861 00:52:36,960 --> 00:52:39,040 Speaker 3: sixty five and seventy two, will not be in that 862 00:52:39,120 --> 00:52:44,520 Speaker 3: favored class. But already the fraction of people who work 863 00:52:44,600 --> 00:52:46,880 Speaker 3: between sixty five and seventy two has been cut to 864 00:52:46,960 --> 00:52:50,640 Speaker 3: a small part of what it used to be because 865 00:52:50,680 --> 00:52:55,520 Speaker 3: of the incentive offered by social Security. And overall there 866 00:52:55,600 --> 00:52:59,000 Speaker 3: is little doubt therefore, that Social Security is a program 867 00:52:59,080 --> 00:53:02,960 Speaker 3: which transfers income from low income classes to high income classes. 868 00:53:04,200 --> 00:53:07,080 Speaker 3: Same thing is true of almost every other social program 869 00:53:07,120 --> 00:53:10,480 Speaker 3: you can mention. I have often challenged people to find 870 00:53:10,520 --> 00:53:14,359 Speaker 3: a single governmental program in which the people who pay 871 00:53:14,440 --> 00:53:17,800 Speaker 3: taxes have higher incomes than those who get the benefits. 872 00:53:18,360 --> 00:53:24,120 Speaker 3: I know only one, and that's direct relief public assistance, 873 00:53:24,480 --> 00:53:28,719 Speaker 3: the aid to families that dependent children. It's not a 874 00:53:28,760 --> 00:53:31,520 Speaker 3: good program. It's a terrible program. It's a welfare mess. 875 00:53:31,800 --> 00:53:33,799 Speaker 3: But so far as I can find out, it's the 876 00:53:33,840 --> 00:53:39,480 Speaker 3: only program that demonstrably transfers income from higher income classes 877 00:53:39,520 --> 00:53:42,200 Speaker 3: to lower income classes. And that's why it's such an 878 00:53:42,239 --> 00:53:48,239 Speaker 3: unpopular program. Director's Law shows up in the unpopularity of 879 00:53:48,280 --> 00:53:51,640 Speaker 3: the welfare mess as well as in the popularity of 880 00:53:51,680 --> 00:53:53,920 Speaker 3: social security, housing. 881 00:53:53,600 --> 00:53:56,480 Speaker 2: Programs and the like. I could go down, agreed many others, 882 00:53:56,719 --> 00:53:59,839 Speaker 2: and that time will not permit. I come to my. 883 00:54:03,600 --> 00:54:07,360 Speaker 3: That if we are going to look forward to the future, 884 00:54:09,080 --> 00:54:12,600 Speaker 3: to an end of this reduction in our freedom and 885 00:54:12,640 --> 00:54:16,920 Speaker 3: the growth in centralized government, I think we must begin 886 00:54:17,160 --> 00:54:22,640 Speaker 3: to dismantle these myths which are so widely accepted by people, 887 00:54:23,040 --> 00:54:28,640 Speaker 3: which have become an unthinking part of their philosophy and 888 00:54:28,719 --> 00:54:34,960 Speaker 3: of their beliefs. And I hope that in the course 889 00:54:35,000 --> 00:54:38,840 Speaker 3: of this hour I have deflated your air mattress and 890 00:54:38,960 --> 00:54:40,840 Speaker 3: given you an uncomfortable jolt. 891 00:54:41,080 --> 00:54:41,440 Speaker 2: Thank you. 892 00:54:43,200 --> 00:54:46,280 Speaker 1: If you like the Michael Berry Show in podcast, please 893 00:54:46,440 --> 00:54:50,560 Speaker 1: tell one friend, and if you're so inclined, write a 894 00:54:50,680 --> 00:54:55,680 Speaker 1: nice review of our podcast. Comments, suggestions, questions, and interest 895 00:54:55,840 --> 00:54:59,680 Speaker 1: in being a corporate sponsor and partner. Can be communicated 896 00:54:59,680 --> 00:55:04,200 Speaker 1: directly to the show at our email address, Michael at 897 00:55:04,360 --> 00:55:08,160 Speaker 1: Michael Berryshow dot com, or simply by clicking on our 898 00:55:08,200 --> 00:55:13,000 Speaker 1: website Michael Berryshow dot com. The Michael Berry Show and 899 00:55:13,160 --> 00:55:17,120 Speaker 1: Podcast is produced by Ramon Roeblis, The King of Ding. 900 00:55:18,560 --> 00:55:28,040 Speaker 1: Executive producer is Chad Nakanishi. Jim Mudd is the creative director. 901 00:55:28,840 --> 00:55:34,440 Speaker 1: Voices Jingles, Tomfoolery and Shenanigans are provided by Chance McLean. 902 00:55:35,280 --> 00:55:39,719 Speaker 1: Director of Research is Sandy Peterson. Emily Bull is our 903 00:55:39,800 --> 00:55:47,200 Speaker 1: assistant listener and superfan. Contributions are appreciated and often incorporated 904 00:55:47,400 --> 00:55:50,960 Speaker 1: into our production. Where possible, we give credit. Where not, 905 00:55:51,520 --> 00:55:54,680 Speaker 1: we take all the credit for ourselves. God bless the 906 00:55:54,719 --> 00:56:00,400 Speaker 1: memory of Rush Limbaugh. Long live Elvis, be a simple 907 00:56:00,480 --> 00:56:06,280 Speaker 1: man like Leonard Skinnard told you, and God bless America. Finally, 908 00:56:07,040 --> 00:56:10,759 Speaker 1: if you know a veteran suffering from PTSD, call Camp 909 00:56:10,840 --> 00:56:16,680 Speaker 1: Hope at eight seven seven seven one seven PTSD and 910 00:56:16,800 --> 00:56:21,120 Speaker 1: a combat veteran will answer the phone to provide free counseling.