Blog/Armstrong Economics 101
Posted Mar 28, 2016 by Martin Armstrong
Richard Nixon unsuccessfully tried to pass a version of Milton Friedman’s plan. Nixon’s Democratic opponent in the 1972 presidential election, George McGovern, also suggested a guaranteed annual income. Milton’s basic guaranteed income proposal was well thought out and substantially different than simply the welfare state. Our welfare system has seriously altered human behavior as it pays people not to work and pays others per child, which creates incentives to have children to gain more money. The welfare system has done much to alter human behavior and destroy the family structure.
Milton’s proposal was to flip the process to create incentives rather than destroy them. It is ironic that the one president who tried to implement this plan was taken down by the Watergate scandal. The proposal passed Congress and the Democrats stopped it in the Senate under the pretense that they wanted more money.
Another important aspect of Friedman’s proposal was that there were no strings attached. The government did not attempt to tell people what they could buy or do with the money. Whenever government gets involved, they typically screw things up pretty good. Driving to work, I see signs offering cash for diabetes materials that people on welfare get from government. Others sell their food stamps. When you just hand people things, they will alter their behavior to get rid of them if if they do not need them. Milton’s proposal eliminated the government red tape, yet instilled the spirit to raise oneself up out of poverty. This type of system made sense.