Milton Friedman – The Social Security Myth

there has been a drastic shift in public attitudes in public opinions in the past 50 years or so with respect to the role of the individual on the one hand and the role of government and collective institutions on the other there has been a shift in the philosophy and attitudes of the public from a belief in individual responsibility from a belief in a society in which the role of government was as an umpire to a belief in a society in which the emphasis is on social responsibility and the role of government as big brother and protector of the individual as always when such shifts arise in public opinion they are largely produced and reinforced by the development of myths about prior experience someone once wrote and I'm not sure who it was that a myth is like an air mattress there's nothing in it but it's wonderfully comfortable and deflation causes an uncomfortable jolt it is a myth that somehow or other the private market has failed to provide certain important services and the government has had to step in in response to an overwhelming public demand in order to provide those services the reality is very different the reality is that if you look at every program that the government has adopted in the direction of extending its scope it took an enormous propaganda campaign by special propaganda groups to get those measures passed there was no underlying public demand for those measures on the contrary the demand had to be created it had to be developed it had to be produced and it was created it was developed it was produced by people who sincerely I'm not questioning their sincerity who sincerely wanted to see an expansion in the scope of government let me take some of the most prominent examples let me take the example which today is the greatest greatest sacred cow of them all social security was there an overwhelming demand for social security in the 1930s when the law was adopted far from it there was no public demand for it it had to be sold how was it so by the slickest Devices of Madison Avenue by imaginative packaging and deceptive labeling Social Security was sold as an insurance scheme it is not an insurance scheme there is very little relationship to the amount of money any one individual pays and the amount of money he is entitled to receive Social Security is a combination of a bad tax system with a bad way of distributing welfare it's got two components and I have never known anybody whatever his political or other persuasion who would defend either component separately if you look at the tax system who can defend a wage tax a tax on wages up to a maximum a tax on work a tax which discourages employers from hiring people and discourages people from going to work then the tax which is borne by the lowest wage groups it's a regressive tax you could never in a in a millions of years Sunday's you could never have gotten such a tax passed as a tax look at the benefit Arrangements here you have an arrangement under which the amount of money a person receives does not depend on his poverty or his indigent it depends on the accident of what industry he worked in if he happened to work in a covered industry he gets a benefit if he happens to work in a non-covered industry he doesn't if he has only worked a certain number of quarters and not more no matter how much how indigent he is he doesn't get anything if he's 65 and he decides to continue to work earning more than a modest amount per year not only doesn't he get a benefit but they had insult injury he has to pay taxes on the wages he is receiving in order to finance the benefit he is not receiving if a man who is 65 years old has a million dollars in income from property he is in time and doesn't work he gets his full Social Security benefit tax-free if the same man goes to work and earns twenty thousand dollars a year he is in the position I just described he doesn't get any benefit is there anybody who would justify that system of distributing benefits and I could go on to all the difficulties with it I've only touched the surface note the misleading language the Social Security system consistently refers to the taxes you pay as a contribution now tell me do you regard taxes as contributions the word contribution denotes voluntary arrangements if you buy an insurance program you are contributing freely if you contribute to the United Way freely you're contributing freely but if you pay taxes on your wages as the conditions of being employed that's a tax it's not a contribution again it always refers to the payments people get as benefits they are not benefits they're subsidies what you have is a system of subsidizing people on the one handed of taxing it what about the claim that it's insurance that there's a relationship between the two well there is a minor relationship it is true that on the whole those people who pay more will receive more other things the same but every student of the subject has pointed out that the relationship is very small that most payments are independent of most receipts moreover what you really have is not a system under which people are providing for their own security as a social security system will say as they describe it in their pamphlets they describe it as a way in which 90% of American workers are providing for their own future that's nonsense what people today are doing is paying taxes today to pay the sum cities to the people who are receiving benefits today what you have is a system of taxing the young at any point in time to subsidize the old now there may be nothing wrong with that for the moment I'm not discussing that issue I'm discussing whether Social Security was a response to a broad scale public demand or whether it had us to be sold to the people by the worst devices of Madison Avenue and the answer is it clearly was the latter what you have is a system under which people today are being taxed to pay benefits today to the people who are receiving you so far those people who have been receiving payments have received much more than the actuarial value of what they pay that's because you've had a growing working force you have had higher wages being paid wage rates have gone up very rare I mean the wage tax has gone up very sharply but the number of recipients is growing relative to the number of people paying and that's why Social Security is currently in so much financial trouble that's why the so called reserve which is not a reserve at all the so called reserve has been getting smaller and smaller and that's why you have all the agitation for Congress to do something to make Social Security again financially responsible again for the moment I'm not discussing whether Social Security or the separate parts are good or bad but only whether it can be regarded as a program adopted in response to a great public demand or again let me take a very different example one which is not yet emerged fortunately the drive for national health insurance is there a widespread drive for national health insurance not so you can notice it indeed the proponents of it have been trying to get it past year after year and so far they haven't gotten it passed as I say fortunately because if so-called national health insurance were passed it would bear as little relationship to insurance as Social Security does it's not a program for national health insurance at all it's a program for socialized medicine it's a program for making physician the government employees it's a program for creating long waiting lines and inferior medical service but that isn't the way it's labeled but the pressure for it is having to be created and built up by propaganda

49 thoughts on “Milton Friedman – The Social Security Myth

  • Great new book from John F. Cogan "The High Cost of Good Intentions." Goes through not just Social Security; he tackles every federal program back to Revolutionary War veteran pensions. Very informative.

  • Bailouts to corporations is a ponzi scheme. People paid into social security, so interests that accumulate over time, inflation/economy growth ensure that those who pay very little as well as others who pay more get their fair share! It isn't that difficult to figure out. This man mustn't have heard of compound interest/basic math/algebra. Very archaic way of thinking.

  • I'm from Brazil and the discussion of social security is – again – under discussion. Mr. Friedman speech is 100% contemporary!

  • If people who out into it were the only ones receiving it, maybe it wouldn't be so bad. Unfortunately, people who have never contributed are receiving benefits from it. So sad.

  • And for that I thank the american tax payer.
    They call it a trust but so many agencies have borrowed from it and have not paid back into it. I don't trust the government.

  • In school they should teach saving for retirement but don't, how to invest money wisely but they don't, how to budget but they don't and the reason is because they want us poor and powerless. Not rich and powerful.
    They also don't teach us how to bargain to get the best price. Everywhere else in the world they do but not here in america. They want us ignorant and gullible.

  • Government isn't some faceless leviathan. Our government is of, by, and for the people. Government is what we do together to survive and thrive…it’s not “in the way”…it's the only way. Try life without it for a while.

  • I’m 34 and I have accepted the reality that I probably will never “retire”. I’m ok with that because the concept of retirement from work is a relatively new concept that is only a reality for those who made sound financial decisions with a little bit of luck. If I’m smart enough, I’ll be able to grow a nest egg. My own personal responsibility in finance towards my future self is the only thing that can make retirement a reality.

  • I can remember when SOCIAL Security was called SUPPLEMENTAL Security. The way it was explained to me was that it's purpose was to SUPPLEMENT whatever Private retirement plan I built over my years of working.

  • Wow dead on about the health ins issue! Now it’s good luck getting treated for anything at all…no treat list…yes it does exist now..,good luck getting in to see a dentist when ur stuck with Obamacare type ins or’s not happening and if u do.,u get subpar care

  • Just goes to show that there are far more charlatans than there are Milton Friedmans.
    I also echo 'BigBossIsBlack's sentiment.
    That we are ineed domed.

  • A lot of Friedman's complaints about Social Security are just not true! For instance: If you work part of your Social Security becomes taxable.You don't lose it all.

  • most people don't know that your Employer has to match your SS "contribution" so if you "contribute" $100 on your week's paycheck then your employer must add their own $100 to your contribution making it a total contribution of $200. So the higher your wage, the more your employer must match. And don't think Employers aren't considering this fact when giving you a raise. Stifling to growth and forces manufacturing off shores.

  • Everyone is a market genius until they loose all their money. In the 20's and thirties ,no one would hire people over 40. They lived in disgusting poor houses and wrote to and pleaded with FDR to do something. I guess ole Milt thinks we should go back to stepping over old dead people in the streets again, after the prosperity was enjoyed by the next generation on their hard worked backs. Little too much like Rand/ parasite bs- they are only parasites after you have used them for everything they have and can't bleed the turnip anymore.

  • i am all for a tax boycott, sick of being bled like a stuck pig to fund shit we don't need… now govt's use social programs to buy votes from us, using our $$$ to manipulate us into voting for them, i'll give $$$ directly to people who need it, on my terms, not to useless bureaucrats who just take up space and piss all our $$$ away.

  • Ponder this:
    When Social Security was enacted in 1935, the average life expectancy in the US was 61.7 years.
    To collect SS you must be a minimum of 62 years old. So back then, for every person who collected the subsidy for a few years before dying, someone else who had been paying into the system died before they themselves could collect. It would appear that this kept it pretty balanced.
    Fast forward to today, and as of 2016 life expectancy has risen to 78.6 years, while the age to collect (62) remains the same. Taxpayers are now expected to fund an additional average of 17 years of subsidy per retiree. That is not what the system was built to do, and it is not sustainable.

  • I’ll assure you, less than 1% of kids grades K-12 in America don’t know this mans name or warnings! He should be a course all kids are mandatoried in Ca. No lgbt that is mandatory is California. 🤦‍♂️

  • Objective fact, objective truth, thank God at least Milton Friedman's work remains. I'm not going to try to quote the Bible, ( another place to find objective truth) however the Bible does speak of people hearing, and acting on those things they want to hear as told to them by those they want to believe. Milton was the truthful prophet they did not, and do not want to hear..

  • Milton Friedman outlined the dangers of big government over and over again. A brilliant man such as he, understood, that what president Reagan put in one sentence. Government is not the solution to a problem, government IS the problem.

  • "You can go to hell…I'm going to Texas." Getting there quickly if we can't turn around the welfare state.

  • In what world is the UKs NHS or Canada’s health service ever inferior to The US’ dog shit ‘health’ service.

  • I take exception with people that call Social Security a Ponzi scheme.  This is a insult to Ponzi.  Ponzi never forced anyone to give him their money.

  • I say the men that created the federal reserve are the stupidiest people of all because they did not understand quantum physics, so they went ahead and ignored it by teaching in their schools and hospitals that people are biological, therefore subject to germs and viruses and death, none of these being true.
    I have found out that protons spin as positive charges and electrons spin as negative charges. People vibrate as 100% charges, all 7,000,000,000,000,000,000,000,000,000 of them, each being an atom that spins and vibrates and oscillates as pure energy and light. According to the physicist Barbara Brennan, who wrote the book "Hands of Light' we are electromagnetic, holographic eternal energy and light beings. When is the last time any of you heard of electricity becoming susceptible to germs and viruses and death? All of us is being created by a never ending source of energy which we are constantly bursting from. From the book "The Quantum World" written by the physicist Kenneth Ford I found these words —- 'magically bursting forth are quarks spinning billions of times a second as 3 points of light, forming what are called protons and neutrons'.
    I say that I had a NDE as a child because these evil federal reserve bankers decided to cause a depression which made them a lot of money, but which kept those grandparents and mother of mine in a tent carrying guns and knives for protection.
    This depression caused a huge amount of grief for a huge amount of people, for which that mother never recovered. Her grief became intense prolonged violence towards me. Futhermore, these evil bankers taught their stupidity to the world, meaning the beliefs in enemies and germs and death, all based on solidity which does not exist. Subatomic particles spin and vibrate and pulsate way too fast for anything to be solid. This is why solidity is called an illusion. We don't see these spinning points of light as the basis of our existence, but they are there nonetheless.
    My NDE involved hearing and seeing and feeling electrical beings in my presence, which can be see pictures of them in the book "Hands of Light". I knew there was no such thing as death then, but I was bullied and scorned when I said so. I believe there should be a class action law suit against these federal reserve bankers for abusing and bullying all of us.

  • A way to get birthdates and registered to track everyone through life, before then, only birthdates were recorded in church records if that, and the government had no right to ask churches or go and retrieve information as Records of Births, especially of a church with religious freedoms and our Constitution. To entice people with a guarantee of money with insurance when they became old or unemployed was an in, and fear they said many that worked all their lives and ended on the streets as beggars if they became disabled or had no family to care for them and they would be yet a burden on families in many cases. So this simplified the process of being able to record each person from the cradle to the grave and government has opened and used these funds for support of wars and other causes at the tune of 8 billion my last understanding, They are always warning that the system is going broke, but they refuse to pay back the money they used, the interest alone would save the system. Hikes in payment to, near doubled in recent years. To keep moving the retirement age for full benefits furthering the goal post so to save and collect more of their money or not live long enough to collect benefits. Now everyone is invested with a fist in the cookie jar wanting their money to be there and have it when it is due.

    Stealing from Social Security to Pay for Wars and Bailouts
    Mar 10, 2011

    Ronald Reagan and The Great Social Security Heist
    Oct 11, 2013
    The Social Security Amendments of 1983 laid the foundation for 30-years of federal embezzlement of Social Security money in order to use the money to pay for wars,

    No to Foreign aid… America 1st, Number one rule, Take care of yourself and yours before others
    Pay Back the Money Borrowed From Social Security
    Dec 06, 2017

  • Said in all seriousness, Social Security is such an injustice. The very first person to receive Social Security was Ida May Fuller. She paid-in $24.75 and received $22,888.92 over a thirty-five year period, from January of 1940 until her death on 27 January, 1975. (!!!)

    At the opposite extreme are all the people who pay into the system their entire working-lives and who die around the time they retire, or sometime prior. Based on an admittedly quick internet search that might be ~15% of the working population. Their heirs get nothing.

    With all my heart & soul I wish that instead of creating SS, FDR had instead created the various IRA & 401(k) type retirement accounts. We’d collectively be in a much better place. Yes, of course, there would be the those who give no thought to the future and who would blow their money on alcohol, cigarettes, lottery-tickets, cable, etc. That can’t be helped.

  • <3 MF If we were true to our roots, there would be a statue of this man at every educational institution in the country.

  • if we had some great men like Mr. Friedman today, our economy and finances of the nation would be in much better shape.

  • Friedman sure nailed it with his comments on health insurance. The "obumma" care rubbish has validated Milton's analysis and condemnation on national health insurance, but yet the slope-at-the-trough, suck-at-the-golden-teat, commie/socialist, welfare "statists" who favor loot A to satisfy legalized criminality, are in denial.

  • Friedman is mistaken in saying the income tax is on wages. It is not a tax on wages. The income tax is a tax on corporate profits or gains. The problem is that the gd politicians and the IRS bureaucrats decided that the way to measure corporate profits was to look at the wages a corporation “paid” and use that as the statistic to then compute what the corporation should be assessed. So, the tax was on corporate profits measured by the wages it paid.

    Additionally, Friedman makes the mistake of using nominal SS payments exceeding what one has paid into SS. He forgets to adjust for inflation. Remember that inflation robs one of his wealth, so one must deflate such things as SS or other things that are dispensed by government before determining if one has received more than he paid into such welfare state monstrosities of legalized theft. How ironic is that?

    Now about the income tax, of course it is plain for anyone to see that if “money”: is taken from the corporation then that is “money” which is not in company coffers and available to dish out to the employees. So, the employees are deprived of possible or potential funds but it is not their wages that are stolen. Yes, the income tax is extortion. If you do not sign the document/1040, attesting that the corporation paid the amount of tax as stated on the check stub then you will be abused, have your property stolen and sent to jail in some cases. Of course the IRS, the politicians and the judges and US prosecutors are liars as almost all employees never witness what the corporate officers actually do with the “money” that is alleged by the check stub to have been sent to the IRS. I never ever saw any corporate officer send a check or any “money” to the IRS.

    Read the Corporation Excise Tax Act of 1909, the foundation for the 16th Amendment. It is clear that the income tax was to be levied on corporate or company activity. It is clear that wages were not defined as income.

    Read Merchant’s Loan and Trust vs. Smietanka wherein the word “income” is defined as profits or gains, not as wages. Wages were never understood or defined as profits because wages were necessary to sustain life. It is absurd to think that wages could be taxed and it would be an act of thievery if so done directly and so the politicians and their cadre of evil doers found a way to tax corporations which indirectly stole the wages.

    Read Brushaber v. Union Pacific Rail Road where the income tax was challenged. The court, the “supremen,” clearly stated that the 16th Amendment did not create a new class of direct tax on wages without apportionment, notwithstanding the fallacious and contrary belief that it did. The court said that if such a tax were possible then it would have brought one section of the constitution into irreconcilable conflict with another. See, the direct tax had to be levied by apportionment and the indirect tax levied by the rule of uniformity. Apportionment is a tax which is determined by the proportional representation of a state’s representatives in the House of Representatives. The indirect tax is levied by the rule of uniformity, which is a rate tax. The tax on alcohol, tobacco or firearms or a sales tax is a rate tax based on a unit quantity and the consumer gets some good or service with his purchase. The fraud arises because the income tax, though the “supremen” said that it was and indirect tax is was not really because it discriminated between people of different classes of wages. If you were in one class, the IRS demanded that the corporation pay one tax rate and if you were in another class then the IRS demanded that the corporation pay different tax. Clearly the income tax was not uniform by definition. This fraud is made clear when one examines how a real indirect tax is imposed. Take a gallon of alcohol, the tax is fixed and it is exacted no matter one’s race, color, creed, status or his wage status. Same applies to tobacco or firearms. No vendor of such stuff asks to see your wage stub and then applies a tax at a rate that depends on the class in which your wages fall.

    So, Friedman is mistaken but understandable as the gd government, politicians, prosecutors, US Attorneys, IRS Agents and bureaucrats in general and most people hold the same erroneous beliefs.

    The reality is that Politics is violence no matter the make, model or flavor and yet people still persist in voting. Go figure

    Politics is a false god. When people worship false god-politics, they get disasters of wars, recessions, inflation and taxation (murders, economic ruin, theft of wages, debt slavery, welfare “statism” based on looting A to satisfy B and extortion). But pay attention to politics as Marlon Brando warned his son to keep his enemies close, i.e. keep an eye on the wicked one’s, the politicians and their cadre of fawning, obsequious and sycophantic raving slop-at-the-trougher and suck-at-the-golden-teat commie/socialist, welfare “statists.”

    You’re a Statist if you advocate Statism. Statists believe that…
    1. Bad means are often needed to achieve good ends (the ends justify the means)
    2. The State should initiate force to achieve social goals (aggression/violence is acceptable, i.e. they are immoral, typically this describes politicians, especially commie/socialists and particularly DemonKraits but not limited to them)
    3. People who work for The State can morally do things that would be criminal for others to do (true for many bureaucrats but not all)

    Thomas Sowell said: “The most basic question is not what is best, but who shall decide what is best.”

    Read Lysander Spooner's No Treason No. 6, The Constitution of No Authority. And then check out The No State Project by Marc Stevens on YouTube where he asks: What factual evidence do you, judge, prosecutor, politician, IRS agent or anyone, have that the constitution and law apply to me just because I am physically present in some state such as commie/socialist Democrat dictatorship corruptifornia? It doesn't exist and never has else we would be stinkin' slaves on the plantation state run by masters/politicians and their overseers/judges/ enforcers in the "land of the free and home of the brave." Why weren’t the Spooner and Stevens points taught in government schools? Conflict of interest? Prejudice? How diabolically ironic is that? Factual evidence would come in the form of a sworn affidavit of truth stating what, when, where, why, how and by whom one was made subject to the jurisdiction thereof. It was never brought up in any school I attended. I have never heard any MSM commentator produce the “factual evidence.” I have asked judges in court and on record to provide the factual evidence and not one of the six I have challenged could produce that factual evidence thus failed to provide proof of jurisdiction.

    I recommend Ted R. Weiland’s books:
    Bible Law vs. The United States Constitution: The Christian Perspective
    Law & Kingdom: Their Relevance Under the New Covenant

    If Christian Americans ever expect God to fulfill his half of 2 Chronicles 7:14, they must first repent of their national idolatry their love affair with the humanistic, pluralistic, polytheistic, and antichristian United States Constitution.

    I also recommend the Jehovah Witness website publications:

    The hate speaking, commie/socialist, Democrat, SJWs, snowflakes, MSM and politicians are clearly unethical, immoral. They play the emotions game but most people know that the first casualty of emotion is reason, logic and morality. The imperious leaders and their cadre of sycophants are a lethal brew that has been eating out the substance of America from within for a very long time; the “cancer” is destroying America from within just as so many have predicted.

    Take a look at how Milton Friedman explains to Phil Donahue the fallacy of commie/socialism. This video should be viewed by all and then asked why they are voting for any politician that is commie/socialist.

  • This man predicts the future, "someday people will demand nationalized health insurance" well its 2018 and medicare for all is the democrats platform so. By the way I would to be against nationalized health insurance if all it did was allow people do bargain collectively with health providers. I feel like a system such as that could compete with the patient centered system we have now. What I am against is the massive subsidy regime that comes with it

  • Milton, I heard about you on one of my favorate conservative youtube channels. I figured you had to be a great man with great thngs to say. If this video is an example, I'm not so sure about that. I did a Google search, and realized it was Thomas Friedman, not Milton Friedman I had heard about. That explains it.

  • People back then had the need for something like social security, they just didn't call it that. Most old people back then had no income, despite working all of their lives. If they had a family that would take care of them, that was good, but many didn't. It was the observation that many old people lived in poverty that generated the idea of social security. Yes, social security wasn't in response to public demand, so your premis is correct, but neither was it simply dastardly plot to increase the size of govrnment.

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