John Robson: What Milton Friedman Said 5 Decades Ago About Government Spending Still Holds True Today

Commentary

I’m not sure when Friedman said it. But he died in 2006 aged 94, and the clip shows him in middle age, so it was around half a century back. We should have listened, because it has applied consistently since and still does.

Indeed. Or at least indeed re the finding. The tracking isn’t as easy as it ought to be, because government budgets are infamously tangled forests of accounting conventions, focus-grouped prose, economic projections, and jiggery-pokery regarding long-term liabilities. And because neither the authors nor most of the audience adhere to Friedman’s wise words about what exactly we should be keeping an eye on as we navigate these deep dark woods.

As was his wont, Friedman compressed much potentially complex truth into short, clear, vivid words, immediately adding, “There is no such thing as an unbalanced budget.” Which is not addled but Chestertonian in its paradoxical brilliance because, Friedman went on, “You pay for it either in the form of taxes, or indirectly in the form of inflation or debt.”

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Exactly. The budget is, by definition, balanced by one of those proper accounting conventions that says for every dollar of assets in the ledger there must be a corresponding dollar in liabilities, and vice versa. Thus, what looks like cash the state dropped from heaven as we wandered the desert beyond the Red Ink seeking the promised land of social justice, is actually offset somewhere by something. It must be. There’s no magic money tree in Ottawa, in Washington, in Toronto, in Victoria, or for that matter in Moscow, Beijing, Pyongyang or Teheran. Whatever governments spend, they must take in somehow.

This maxim does not, of course, necessarily mandate my own preferred minimal “night watchman” state that defends the realm, suppresses force and fraud, and otherwise leaves adults to work out their own salvation in fear and trembling or whatever décor and mood seems best to them. But it does require that we discuss what the government is doing, and weigh its costs against its benefits, with a clear sense of what both entail.

So here’s my plea. In debating what government should attempt, and how big it should be, let’s agree that its real size, its real cost, is what it spends, and keep that side of the ledger as clean and clear as humanly possible.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.