June 12, 2026 • 33 mins
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Speaker 1 (00:03):
It's that time time sign time lucking load. The Michael
Arry Show is on the air.
Speaker 2 (00:20):
It's Charlie from BlackBerry Smoking.
Speaker 3 (00:22):
I can feel a good one coming on.
Speaker 4 (00:24):
It's the Michael Berry Show.
Speaker 5 (00:32):
Two six packs, Shiner, ninety nine cent putet ladder, look
as track center.
Speaker 6 (00:39):
Fifth of patrol.
Speaker 5 (00:44):
I s down at egg glue Coodler, take a.
Speaker 3 (00:47):
Guess at all to door.
Speaker 5 (00:50):
I can feel a good one coming on, throwing a
real winy Hubbard singing long red the mother.
Speaker 3 (01:01):
Any plus I had before.
Speaker 4 (01:07):
Another working week is over, no chance staying sober.
Speaker 3 (01:13):
I can feel a good woman coming on.
Speaker 5 (01:17):
In the week.
Speaker 3 (01:20):
Man, we're gonna get to feed in a run.
Speaker 2 (01:24):
We're gonna keep this fire.
Speaker 5 (01:26):
I can feel the break of doll.
Speaker 4 (01:31):
I can feel a good one in coming. Three sit
a rack toop, mustn't see shut the boots down to
the lady.
Speaker 3 (01:51):
Didn't have to think about tattoo.
Speaker 5 (01:54):
No, that's right, giving in the right moon out.
Speaker 3 (02:00):
Situation couldn't be both rack. I can feel a good
one coming on. Yeah, we gonna get to feel it right.
Speaker 5 (02:13):
We gonna keep this piety rock.
Speaker 3 (02:16):
Until the break and No.
Speaker 5 (02:20):
I can feel a good one, feel like one.
Speaker 3 (02:26):
I can feel a good one coming on.
Speaker 2 (02:40):
WHOA.
Speaker 6 (02:44):
We're doing a deep dive into one of my greatest
intellectual influences, and that is Milton Friedman, and so I
hope you will enjoy what we have to say. I
hope afterwards you have enjoyed what we have to say.
Maybe it's dry, maybe it's not what you wanted, maybe
you wanted something a little lighter. I get that, but
(03:05):
it's important to me. And We've been working on this
for a while, and I'll share it with you, and
I hope you'll bookmarket and go back to it. I
hope you'll share it with other people. I hope you'll
send a link to others. I think that we have
to understand the fundamental principles of what we believe and
why we believe them. And I don't think anybody does
a better job than Milton Friedman laying those out. Politicians,
particularly Democrats, fall in love with this concept of minimum wage.
(03:28):
Minimum wage, Oh yes, everyone should make more money. Politicians
love to tell everybody else what they should pay their people.
Those politicians have never run a business. Those politicians don't
have to meet payroll, and when businesses go out of business,
they don't care. They don't understand how it works anyway.
They've never met a payroll. They're in the government. They
(03:49):
just keep printing more money for themselves. It's a tough
thing to run a business. Ask a business owner, and
everybody says I should be paid more money. All right, Well,
at some point, what if we start losing money as
a company. Eventually you're going to lose your job. So
you took one step forward and two steps back. You
made more money in the short term, and your business
went out of business. And yes, it does happen. Here's
(04:13):
one that still makes people's head explodsed because it goes
against what feels like common sense. Raising the minimum wage
helps poor people. Never the intuition is it'll help poor people,
but it doesn't. You pay people more, they're better off, right.
(04:34):
The problem is, Milton Friedman makes clear good intentions don't
override the laws of economics. When you force employers to
pay more than a job is worth in the market,
more than they would be willing to offer and the
person would be willing to accept because you artificially inflate
that wage. Employers do the math, and what do they do.
They hire fewer people, They find ways to eliminate workers
(05:00):
and the people who get priced out of the job market.
Speaker 1 (05:02):
First.
Speaker 6 (05:03):
They're going to be the young, They're going to be
the unskilled. They're going to be the people just trying
to get their foot in the door, trying to get started.
Just like rent controls end up hurting renters, this too.
These are almost always the people the law was supposed
to help, and they hurt the worst. Look, a lot
(05:25):
of liberal policies have the best of intentions, but they
end up hurting the very people they claim they're going
to help. And those people cannot understand that because they
don't understand the laws of economics themselves. Milton Friedman said
wage laws were one of the most anti poor, anti
minority pieces of legislation on the books. And he isn't
shy about it. He doesn't scream, he doesn't holler, he
(05:48):
doesn't threaten, he doesn't insult. He believes it with a
religious zeal and he says it very clearly, and I
love him for it.
Speaker 3 (05:56):
Listen to this Take the minimum way, Joe.
Speaker 7 (05:59):
It's well meaning. They are always in these cases two
groups of sponsors. There are the well meaning sponsors and
there are the special interests who are using the well
meaning sponsors as front man. If you, almost always when
you have bad programs, have an unholy coalition of the
duke goods on the one hand, then the special interests
in the other. The minimum wage laws is clearer cases
you could want. The special inners are, of course, the
(06:20):
trade unions, the monopolistic craft trade unions, in particular, the
do goodters believe that by passing a law saying that
nobody shall get less than two dollars an hour or
two fifty an hour, or whatever the minimum wage is,
you are helping poor people who need the money.
Speaker 3 (06:34):
You are doing nothing of the kind.
Speaker 7 (06:36):
What you are doing is to assure that people whose
skills are not sufficient to justify that kind of a
wage will be unemployed. It is no accident that the
teen age unemployment rate, the unemployment rate among teenagers in
this country, is over twice as high as the overall
unemployment rate. It's no accident that that was not always
the case. Until the nineteen fifties, when the minimum wage
(06:57):
law wage rate was raised very dryly, very quickly, teenage
unemployment was higher than ordinary unemployment, because, of course, the
teenagers are the ones who are just coming into the
labor market. They're searching and finding jobs, and it's understandable
on the average they would have be unemployed more, but
it was nothing like the extraordinary level it has now
reached its close to twenty percent. Why because the minimum
(07:19):
wage law is most properly described as a law saying
employers must discriminate against people who.
Speaker 6 (07:26):
Have low skills.
Speaker 3 (07:27):
That's what the law says.
Speaker 7 (07:28):
The law says, here's a man who has a skill
which would justify a wage rate of a dollar and
a half two dollars an hour.
Speaker 3 (07:34):
You can and you may not employ him.
Speaker 7 (07:35):
It's illegal because you have to be If you employ him,
you have to claim two fifteen. Well, what's the result
to employ him at two point fifty is to engage
in charity. Now, there's nothing wrong with charity, but most
employers are not in a position where they can engage
in that kind of charity. Thus, the consequences of minimum
wage trades have been almost wholly bad.
Speaker 3 (07:53):
To increase unemployment and to increase poverty.
Speaker 7 (07:56):
Moreover, the effects have been concentrated on the groups as
the do gooders would most like to help. The people
who have been hurt most by minimum wave laws are
the blacks, I have often said that the most anti
Negro law on the books of this land is a
minimum way drone, And so I think the real answer
to your question is.
Speaker 3 (08:12):
That you must not judge a bottle solely by its label.
You have to look at what's inside and see what
the law or the measure is.
Speaker 8 (08:21):
Disinformation Again, it's disinformation, right, Michael Berris. That's all they're
good at, cheating on elections and disinformation.
Speaker 6 (08:28):
For generation. The conventional story about the Great Depression was
that capitalism failed, right, we needed government to bail it out.
Free market collapsed under its own way. Only Franklin Roosevelt
and the New Deal saved us. Milton Friedman spent decades
(08:49):
demolishing that story. It's not true.
Speaker 3 (08:51):
By the way.
Speaker 6 (08:52):
Thomas Soul has some interesting things to say about it
as well. He had a landmark work did Milton Friedman
called a Monetary History of the United States. Now, I
understand that's not really the kind of stuff that just
jumps off at you. You really want to go buy that,
a monetary History of the United States, But in it
(09:12):
he laid out a very different case. The Federal Reserve
a governmental entity, the harbingers of ill through bad monetary policy.
They caused the Great Depression, not capitalism, not Wall Street.
The FED, a government institution, allowed the money supply to
(09:33):
collapse by a third, turning a bad recession, which is
what it should have been, into a catastrophe. This is
a quick cut, but it's a gun punch to the left.
Listen carefully.
Speaker 7 (09:46):
A third of the banks of this country closed their
doors and went broke because, in my opinion, of the
poor policy followed by the Federal Reserve system. As an
objective's collar, I can tell you what the facts are.
The facts were, that's from nineteen twenty nine to nineteen
thirty three, the total quantity of money in the United States,
the amount of currency, the amount of bank depostles. That
(10:07):
total amount of money declined by one third. The total
number of banks went down by one third. And why
did the quantity of money decline? It declined because the
Federal reserve system failed to prevent the decline. The Federal
Reserve system could have prevented the decline at all times.
There never was a moment during that period when the
Federal Reserve did not have the power to prevent the
(10:28):
decline in the quantity of money. If it had prevented
the decline in the quantity of money, you might still
have had a recession, but it would have been a
garden variety of recession. It would have been over in
the middle of nineteen thirty or early in thirty one
at the latest. It would not have been the major
catastrophe not only for this country but throughout the rest
of the world.
Speaker 6 (10:46):
You know, many times reading emails, people will say to me,
we need to simplify the tax code. And I have
said again and again and again, and I'm quoting Milton Friedman.
Will never simplify the tax code. Icians want the tax
code to be complicated because then you need them to
fix it. They create problems that they then offer to fix.
(11:11):
Every few years they'll offer somebody will come up a
radical ron poll type, well, you know, flat tax or
fair attax or postcard filing, and it polls great. Yeah, simplify.
We waste too much time filling out tax documents. It's
too much work, it's not efficient. Everybody says they want it,
(11:33):
and nothing happens. In nineteen seventy eight, Milton Friedman gave
as his answer why it never happens, a truth that
is just as true today as it was back then.
Complexity in the tax code is not an accident, it's
not incompetence. It's a feature, not a bug. Notice we
keep going back to that language. Every carve out, every exemption,
(11:57):
every loophole exists because somebody need for it. They paid
a lobbyist. They wanted an advantage over someone in their industry.
They wanted an advantage to get ahead. That's what the
lobbyists are for. That's why people contribute to politicians. If
nobody needed the government to give them an advantage, then
nobody would spend money on politicians and their elections. You
(12:20):
don't spend money because you don't need the government. You
need the government to do less, not more. The complexity
of the tax code is the price of doing business
in Washington, and the people in Washington have absolutely no
incentive to simplify it ever, because simplicity for you would
mean less power for them. This is almost fifty years
(12:44):
ago and it's just as true, maybe more today than
it was back then. And it says, if we still
haven't listened.
Speaker 7 (12:53):
You'll put a twenty five percent top rate on the
tax system, and what the congressmen have to sell in
order to raise funds.
Speaker 3 (13:02):
I'm not saying this as a pleasantry. It is literally true.
Speaker 7 (13:05):
If you're a congressman, you have to engage in activities
which will enable you to get reelected. One of the
most important of those activities is making the tax system
more complicated. By making the tax system more complicated, on
(13:29):
the one hand, you get people who are willing to
contribute to you and work for you in order to
try to get a special provision which will benefit them.
On the other hand, you play the other side of
the street as well. You have people who are willing
to contribute to you in order to avoid having a
(13:50):
special burden placed on them. Now, if you had a
simple tax system of a kind, which undoubtedly would be preferable,
that possibility disappear.
Speaker 6 (14:01):
If you ever watched Ron Paul campaign, you heard him
say that we should abolish the FED, And if you
didn't understand what that means, that's okay. Don't let anybody
tell you they're more of an expert than you, because
I guarantee you you have a skill that they don't have.
Maybe you've rocked a baby to sleep overnight and they
never have. You've given birth. That's a pretty massive accomplishment.
(14:26):
We take it for granted because every one of us
is the beneficiary of it. But it's a big deal.
I haven't done it, and the Lord knows. I don't
want to. If I could, I wouldn't as it looks
like it's brutal. Maybe you can tear an engine apart
and put it back together. Maybe you could keep the
books of a company. Maybe you can farm land and
make it give way to crops. Whatever it is. You
(14:49):
have a skill that other people don't, and you can
understand these basics.
Speaker 3 (14:53):
You can.
Speaker 6 (14:55):
Here is Milton Friedman on why we should abolish the FED.
The FED is the one who decides how much cash
will be pushed into the economy, which ends up in
your interest rates and what it costs you to take
a mortgage out, for instance.
Speaker 3 (15:09):
I have long been in favor of abolishing it.
Speaker 7 (15:13):
I think there is no institution in the United States
that has such a high public standing and such a
poor record of performance. A reserve system was established in
nineteen fourteen, started operation in nineteen fourteen. It presided over
a doubling of prices during World War One. It produced
a major collapse in nineteen twenty one. It had a
(15:38):
good period from about nineteen twenty two to about twenty eight.
Speaker 3 (15:44):
Then it gay.
Speaker 7 (15:45):
It undertook actions which led to the Great which led
to a recession in nineteen twenty nine and thirty, and
it converted that recession by its actions into the Great Depression.
The major villain in the Great Depression was, in my opinion,
unquestionably of the Federal Reserve system. Since that time it
(16:07):
was largely It presided over a doubling of prices during
World War two Head two financed the inflation of the
nineteen seventies.
Speaker 3 (16:20):
On the whole, it has a very poor record.
Speaker 6 (16:22):
It's done far more harm than good.
Speaker 7 (16:24):
But I'm reminded of someone proverb now quoted by Sheilo.
Speaker 1 (16:28):
Jackson Lean mus I die the Michael Berry Joe.
Speaker 6 (16:32):
Here is Milson Freveman talking about capitalism. We say we
believe in capitalism, and for the longest time democrats claim
they believe in capitalism too. But what is capitalism?
Speaker 3 (16:42):
Does it mean?
Speaker 6 (16:44):
When democrats say now, capitalism's not good? They say capitalism's
not good? Are you making as much one as you want? Well, no,
I'm not well thin. Capitalism's not good. Capitalism's not good?
Is the product they sent you that you ordered online
exactly as you hoped it would be was a matter
of feddancy. Capitalism is not good. Milton Friedman lays out
(17:09):
how our system, the American system, works and how capitalism
is a necessary condition for our political and legal freedoms.
Real quick, and I mean real quick. It's twenty one seconds.
I've tried to cut these down to as short as
we possibly can, because I know you're driving, you're distracted.
A lot of this stuff is very heavy, but I
(17:30):
think it's important to learn. I hope you'll save it.
I hope you'll share it. Here's Milton Friedman making an
argument that doesn't get made nearly enough. We talk about
freedom like it's purely political, free speech, free press, free elections.
But Milton Friedman argued that economic freedom isn't separate from
political freedom. It's the foundation of it. You can't have
(17:55):
a genuinely free society without a free market. Those two
are inseparable. You have to be able to buy what
you want, spend your money how you wish. Every country
that has given up economic freedom in the name of equality,
and many have or security because security is always comforting,
(18:17):
has eventually given up political freedom too. History is not
ambiguous on this point. Twenty one seconds. That's all I'm
asking for twenty one seconds.
Speaker 7 (18:28):
The capitalism is not a sufficient condition for freedom.
Speaker 6 (18:31):
It's a necessary condition for freedom.
Speaker 3 (18:33):
I never said that wherever you had capitalism, you had freedom.
Speaker 2 (18:36):
I never said that.
Speaker 7 (18:37):
I never made that statement. I made the office statement.
Wherever you had freedom, you had capitalism. Capitalism is a
necessary condition for freedom, but not a sufficient condition for freedom.
Speaker 6 (18:49):
This is one of my favorite clips of Milton freedoman
of all time. It's absolutely glorious. He uses a simple pencil,
and I realize for young people you didn't use a
pon so but I grew up using a number two.
That's what you had to have to fill in your
scan tron. That's what you used to take notes. A
number two pencil, a pencil sharpener. This was a big
(19:11):
part of our lives, a standalone eraser that you got
to realize that when he cut this decades ago, everybody
had a number two pencil. We used a number two
pencil constantly. We used a pencil. Anyway. I want you
to pick up that pencil, simple, right, You've had one
(19:32):
since you were five years old. But the question Milton
Friedman wants you to think about, do you personally know
how to make one? You ever think about all the
elements that go into this. I think about this all
the time. If we were wiped out by a nuclear
weapon or the apocalypse and the world was left for
(19:54):
me to start over, I wouldn't know how to do anything.
I don't know how to manufacture a tire, I don't
know how to make a spood, and i'd do anything.
You ever think about all the things that went into
such a simple thing as making a pencil. Capitalism drives innovation,
(20:15):
and that innovation gives us our quality of life, our
length of life, our enjoyment, the ability to travel, to
spend time with our family, to heal our wounds. It's
not perfect. It was pre join good.
Speaker 2 (20:28):
Look at this lead pencil.
Speaker 8 (20:30):
There's not a single person in the world who could
make this pencil remarkable statement, not at all. The wood
from which it's made, for all I know, comes from
a tree that was cut down in the state of Washington.
To cut down that tree, it took a saw to
make the saw. It took steel to make the steel.
It took iron orn this black center. We call it lead,
(20:55):
but it's really graphight compressed graphight. I'm not sure where
it comes from, but I think it comes from some
minds in South America. This red top up here, the
eraser bit of rubber probably comes from Malaya, where the
rubber tree isn't even native. Who was imported from South
America by some businessmen with the help of the British government.
(21:19):
This brass feral. I haven't the slightest idea where it
came from, or the yellow paint, or the paint that
made the black lines, or the glue.
Speaker 2 (21:29):
That holds it together.
Speaker 8 (21:31):
Literally, thousands of people cooperated to make this pencil.
Speaker 2 (21:36):
People who don't speak the same.
Speaker 8 (21:37):
Language, who practice different religions, who.
Speaker 2 (21:41):
Might hate one another if they ever met.
Speaker 8 (21:44):
When you go down the store and buy this pencil,
you are in effect treating a few minutes of your
time for a few seconds of the time of all
those thousands of people. What brought them together and induced
them to cooperate to make this pencil. There was no
commisar sending out orders from some central office. It was
(22:06):
a magic of the price system, the impersonal operation of
prices that brought them together and got them to cooperate
to make this pencil.
Speaker 2 (22:17):
So that you could have it for a trifling sum.
Speaker 6 (22:21):
That is why.
Speaker 2 (22:23):
The operation of the free market is so.
Speaker 8 (22:25):
Essential, not only to promote productive efficiency, but even more
to foster harmony and peace among the peoples of the world.
Speaker 6 (22:36):
This was Milton Friedman who was invited onto the Phil
Donahue Show, and the idea was, all right, mister capitalism,
we're going to show you that capitalism is for rich,
fat cats, and it's evil, and we're going to shame you.
Wilton Friedman was not in the business of trying to
be popular. He was in the business of trying to
be right, trying to seek truth, trying to talk about
(22:59):
fundamental truths, the laws of economics.
Speaker 7 (23:01):
Did you ever have a moment of doubt about capitalism
and whether greed's a good idea to run on? Well,
first of all, tell me, is there some society you
know that doesn't run on greed? You think Russia doesn't
run on greed, You think China doesn't run on greed?
Speaker 3 (23:17):
What is greed?
Speaker 7 (23:19):
Of course, none of us are greeding. It's only the
other fellow who's greeding. The world runs on individuals pursuing
their separators. The great achievements of civilization have not come
from government bureaus. Einstein didn't construct his theory under order
from a bureaucrat. Henry Ford didn't revolutionize the automobile industry
that way. In the only cases in which the masses
(23:43):
have escaped from the kind of grinding poverty you're talking about,
the only cases in recorded history or where they have
had capitalism and largely free trade. If you want to
know where the masses are worse off worst off, it's
exactly from the kinds of societies that depart from that,
So that the record of history is absolutely crystal clear
(24:04):
that there is no alternative way so far discovered of
improving the lot of the ordinary people that can hold
a candle to the productive activities that are unleashed by
a free enterprise. So it seems to reward not virtue
as much as ability to manipulate the system.
Speaker 3 (24:22):
And what does reward virtue?
Speaker 7 (24:24):
You think the UH Communist commissary rewards virtue? Do you
think a Hitler rewards virtue? You think, excuse me, if
you'll pardon me, do you think American president's reward virtue?
Do they choose their appointees on the basis of the
virtue of the people appointed or on the basis of
their political clout. Is it really true that political self
(24:44):
edterst is nobler somehow than economic self edittererst. You know,
I think you're taking a lot of things for granted.
And just tell me where in the world you find
these angels who.
Speaker 3 (24:54):
Are going to organize society for us. Well, I don't
even trust you to do that. It's of the world
as we know that Michael Show, End.
Speaker 1 (25:06):
Of the World.
Speaker 6 (25:09):
I have pulled some more clips for your consideration. Since
we're on the subject of Milton Friedman, who's had such
a profound influence on my way of thinking. There's a
phrase so identified with Milton Friedman that it practically became
(25:30):
his not his signature, what's the word I'm thinking of,
Uh no, his trademark. It practically became his trademark. He said,
there's no such thing as a free lunch. How many
times have you heard that? How many people have said that?
And you really didn't know he's the one who made
(25:52):
that phrase commonplace in this country. There is no free lunch.
There's no such thing as a free lunch. Somebody had
to make the materials, somebody had to buy the materials.
Somebody had to present those materials to you. It's not free.
It costs somebody something. Most people have no idea what
that actually means or how deep it goes. They think
(26:15):
it means, well, you just don't have to pay for
your meal. No, every government program, every subsidy, every giveaway,
every quote unquote benefit, every entitlement, somebody is paying for that.
Nothing is free. It can be free to the recipient,
but it is not free. Someone paid for it. Somewhere,
(26:40):
somebody is paying for it, and usually it's the people
who can least afford it. And this is the part
that is the most tyrannical. Milton Friedman used the idea
to cut through decades of political what I would call fantasy,
the idea that government can give you something for nothing.
It cannot, It cannot. He calls it a myth.
Speaker 3 (27:01):
It is a myth.
Speaker 6 (27:02):
He calls it dangerous. It is dangerous. He breaks down
exactly why this is one of his best pieces ever.
Speaker 7 (27:11):
It's the free lunch myth, the belief that somehow or
other government can spend money at nobody's expense. I don't
know how many of you have ever heard of a
wonderful description of government that was made by a French
economist by the name of Frederick Bostiat about one hundred
and fifty years ago. He said, government is that fiction
(27:36):
whereby everybody believes that he can live at the expense
of everybody else. And that is the free lunch myth,
the myth that somehow or other government can provide goods
and services, can spend money at nobody's expense. Now, the
particular form which that myth takes, it's very specific. It
(28:02):
has two parts. One part is a belief that somehow
or other you can tax business without consumers or workers
or individuals paying for it.
Speaker 3 (28:13):
Somehow business is a.
Speaker 7 (28:15):
Big source, a big cornucopia out there that can be
taxed at no cost.
Speaker 3 (28:21):
And the other way a firm the myth takes is
that you can create money at no cost, that.
Speaker 7 (28:26):
If you turn the printing press, if you produce those greenbacks,
that will enable people to become richer with nobody becoming poorer. Well,
let me look at first problem. Can you tax business?
What's business? There's no business to be taxed. There are people.
Only people can pay taxes. Can I tax this floor?
(28:49):
Can I tax the building? The building can't pay taxes?
Only people can pay taxes. So when you talk about
a tax on business, it has to be paid by somebody.
Either it's paid by the stockholder, or it's paid by
the customer, or it's paid by the worker.
Speaker 3 (29:07):
There's no other way it can come from. There's no
there's no.
Speaker 7 (29:14):
Santa Claus, no tooth fairing that's going to provide a
source by which the government can spend money that doesn't
come from somebody.
Speaker 3 (29:24):
Somebody has to pay. And yet, over and over again
you hear the claim.
Speaker 7 (29:32):
Oh, we cannot, we must not increase taxes on individuals,
will increase taxes on business. In connection with the current
discussion of Social security, this fiction arises.
Speaker 3 (29:44):
There is a fiction that the.
Speaker 7 (29:46):
Social Security tax is half on the individual and half
on the employer. It's that that the individual only pays
five point seventy five percent. The employer plan plays it
pays an equal amount. That's nonsense. That's bookkeeping, that's not economics,
that's not reality. The part that the employer pays is
(30:08):
part of his wage cost. If an employer considers whether
it's worth his while to hire an additional worker, he
has to consider as part of his cost, not only
what he pays to the worker, but also the extra
taxes he will have to pay to the government. It
makes no difference to the employer at all if he
(30:28):
pays the worker a bigger check and the worker pays
a larger part of that directly to the government, or
he pays a worker a smaller check but an addition.
Speaker 3 (30:37):
Has to send a check to Washington.
Speaker 7 (30:39):
What matters to him is a total number of dollars
it costs him to hire an additional person. So the
fact is, the logic is, the reason is that the
tax on, the so.
Speaker 3 (30:51):
Called tax on the employer, is paid by the employee.
Speaker 7 (30:55):
Now this has always been clear from economic reasoning general
economic reasoning, but it has also been subjected to empirical
test in a book, even from that from that tempo
of belief in greater and bigger government. The Bookings Institution
(31:17):
in Washington, published a couple of years ago, demonstrated empirically
that the tax on the employer was really paid by
the employee, that it was shifted to the employee. And
it can't be any other way, as you will see
if you think about it. So business doesn't pay that tax.
And yet despite this you have the great move in
(31:38):
Congress right now in remedying the problem of social security.
To impose a larger fraction of the tax on business
on the alleged grounds that, somehow or other that spa
is a worker, It.
Speaker 3 (31:52):
Doesn't have any such effect.
Speaker 7 (31:53):
It reduces the incentive to hire people, and thus is
imposed on the worker. But again, if you look at
the taxing corporate profits, the distinction you have to draw
is between who writes the check and who fundamentally bears
the cost. It may well be that an official of
(32:15):
a corporation writes the check for the tax on profits,
so called profits. He writes the check, but who pays it?
He doesn't pay it. Here is a poor fellow who
may be earning a modest competence. He may be writing
a check for ten million dollars That isn't coming out.
Speaker 6 (32:33):
Of his hide.
Speaker 3 (32:34):
Where's that ten million dollars coming from?
Speaker 7 (32:37):
It has to come from the proceeds of the goods
and services which the enterprise sells. And that ten million
dollars is ten million dollars less available either for cutting prices,
or for paying out dividends, or for paying wages and salaries.
The tax is borne by people, and for this reason
(32:59):
I must say, I've always myself been strongly in favor
of eliminating altogether the tax on corporations. So it's open
and above board that you are taxing people, and that
you do not conceal that fact by appearing to tax corporations.
Well again, with respect to money, can you print money
at no cost? It's very cheap to turn out those
(33:21):
pieces of paper. But does that get society something for nothing?
Speaker 3 (33:27):
Not at all.
Speaker 7 (33:28):
It's simply a different form of taxation. If you print money,
people have more money to spend. If they spend, If
they spend more money on the same amount of goods,
prices go up, and in effect everybody is paying a
tax through inflation.
Speaker 3 (33:45):
Once again, it's only a form of taxation.
It's that time time sign time lucking load. The Michael
Arry Show is on the air.
Speaker 2 (00:20):
It's Charlie from BlackBerry Smoking.
Speaker 3 (00:22):
I can feel a good one coming on.
Speaker 4 (00:24):
It's the Michael Berry Show.
Speaker 5 (00:32):
Two six packs, Shiner, ninety nine cent putet ladder, look
as track center.
Speaker 6 (00:39):
Fifth of patrol.
Speaker 5 (00:44):
I s down at egg glue Coodler, take a.
Speaker 3 (00:47):
Guess at all to door.
Speaker 5 (00:50):
I can feel a good one coming on, throwing a
real winy Hubbard singing long red the mother.
Speaker 3 (01:01):
Any plus I had before.
Speaker 4 (01:07):
Another working week is over, no chance staying sober.
Speaker 3 (01:13):
I can feel a good woman coming on.
Speaker 5 (01:17):
In the week.
Speaker 3 (01:20):
Man, we're gonna get to feed in a run.
Speaker 2 (01:24):
We're gonna keep this fire.
Speaker 5 (01:26):
I can feel the break of doll.
Speaker 4 (01:31):
I can feel a good one in coming. Three sit
a rack toop, mustn't see shut the boots down to
the lady.
Speaker 3 (01:51):
Didn't have to think about tattoo.
Speaker 5 (01:54):
No, that's right, giving in the right moon out.
Speaker 3 (02:00):
Situation couldn't be both rack. I can feel a good
one coming on. Yeah, we gonna get to feel it right.
Speaker 5 (02:13):
We gonna keep this piety rock.
Speaker 3 (02:16):
Until the break and No.
Speaker 5 (02:20):
I can feel a good one, feel like one.
Speaker 3 (02:26):
I can feel a good one coming on.
Speaker 2 (02:40):
WHOA.
Speaker 6 (02:44):
We're doing a deep dive into one of my greatest
intellectual influences, and that is Milton Friedman, and so I
hope you will enjoy what we have to say. I
hope afterwards you have enjoyed what we have to say.
Maybe it's dry, maybe it's not what you wanted, maybe
you wanted something a little lighter. I get that, but
(03:05):
it's important to me. And We've been working on this
for a while, and I'll share it with you, and
I hope you'll bookmarket and go back to it. I
hope you'll share it with other people. I hope you'll
send a link to others. I think that we have
to understand the fundamental principles of what we believe and
why we believe them. And I don't think anybody does
a better job than Milton Friedman laying those out. Politicians,
particularly Democrats, fall in love with this concept of minimum wage.
(03:28):
Minimum wage, Oh yes, everyone should make more money. Politicians
love to tell everybody else what they should pay their people.
Those politicians have never run a business. Those politicians don't
have to meet payroll, and when businesses go out of business,
they don't care. They don't understand how it works anyway.
They've never met a payroll. They're in the government. They
(03:49):
just keep printing more money for themselves. It's a tough
thing to run a business. Ask a business owner, and
everybody says I should be paid more money. All right, Well,
at some point, what if we start losing money as
a company. Eventually you're going to lose your job. So
you took one step forward and two steps back. You
made more money in the short term, and your business
went out of business. And yes, it does happen. Here's
(04:13):
one that still makes people's head explodsed because it goes
against what feels like common sense. Raising the minimum wage
helps poor people. Never the intuition is it'll help poor people,
but it doesn't. You pay people more, they're better off, right.
(04:34):
The problem is, Milton Friedman makes clear good intentions don't
override the laws of economics. When you force employers to
pay more than a job is worth in the market,
more than they would be willing to offer and the
person would be willing to accept because you artificially inflate
that wage. Employers do the math, and what do they do.
They hire fewer people, They find ways to eliminate workers
(05:00):
and the people who get priced out of the job market.
Speaker 1 (05:02):
First.
Speaker 6 (05:03):
They're going to be the young, They're going to be
the unskilled. They're going to be the people just trying
to get their foot in the door, trying to get started.
Just like rent controls end up hurting renters, this too.
These are almost always the people the law was supposed
to help, and they hurt the worst. Look, a lot
(05:25):
of liberal policies have the best of intentions, but they
end up hurting the very people they claim they're going
to help. And those people cannot understand that because they
don't understand the laws of economics themselves. Milton Friedman said
wage laws were one of the most anti poor, anti
minority pieces of legislation on the books. And he isn't
shy about it. He doesn't scream, he doesn't holler, he
(05:48):
doesn't threaten, he doesn't insult. He believes it with a
religious zeal and he says it very clearly, and I
love him for it.
Speaker 3 (05:56):
Listen to this Take the minimum way, Joe.
Speaker 7 (05:59):
It's well meaning. They are always in these cases two
groups of sponsors. There are the well meaning sponsors and
there are the special interests who are using the well
meaning sponsors as front man. If you, almost always when
you have bad programs, have an unholy coalition of the
duke goods on the one hand, then the special interests
in the other. The minimum wage laws is clearer cases
you could want. The special inners are, of course, the
(06:20):
trade unions, the monopolistic craft trade unions, in particular, the
do goodters believe that by passing a law saying that
nobody shall get less than two dollars an hour or
two fifty an hour, or whatever the minimum wage is,
you are helping poor people who need the money.
Speaker 3 (06:34):
You are doing nothing of the kind.
Speaker 7 (06:36):
What you are doing is to assure that people whose
skills are not sufficient to justify that kind of a
wage will be unemployed. It is no accident that the
teen age unemployment rate, the unemployment rate among teenagers in
this country, is over twice as high as the overall
unemployment rate. It's no accident that that was not always
the case. Until the nineteen fifties, when the minimum wage
(06:57):
law wage rate was raised very dryly, very quickly, teenage
unemployment was higher than ordinary unemployment, because, of course, the
teenagers are the ones who are just coming into the
labor market. They're searching and finding jobs, and it's understandable
on the average they would have be unemployed more, but
it was nothing like the extraordinary level it has now
reached its close to twenty percent. Why because the minimum
(07:19):
wage law is most properly described as a law saying
employers must discriminate against people who.
Speaker 6 (07:26):
Have low skills.
Speaker 3 (07:27):
That's what the law says.
Speaker 7 (07:28):
The law says, here's a man who has a skill
which would justify a wage rate of a dollar and
a half two dollars an hour.
Speaker 3 (07:34):
You can and you may not employ him.
Speaker 7 (07:35):
It's illegal because you have to be If you employ him,
you have to claim two fifteen. Well, what's the result
to employ him at two point fifty is to engage
in charity. Now, there's nothing wrong with charity, but most
employers are not in a position where they can engage
in that kind of charity. Thus, the consequences of minimum
wage trades have been almost wholly bad.
Speaker 3 (07:53):
To increase unemployment and to increase poverty.
Speaker 7 (07:56):
Moreover, the effects have been concentrated on the groups as
the do gooders would most like to help. The people
who have been hurt most by minimum wave laws are
the blacks, I have often said that the most anti
Negro law on the books of this land is a
minimum way drone, And so I think the real answer
to your question is.
Speaker 3 (08:12):
That you must not judge a bottle solely by its label.
You have to look at what's inside and see what
the law or the measure is.
Speaker 8 (08:21):
Disinformation Again, it's disinformation, right, Michael Berris. That's all they're
good at, cheating on elections and disinformation.
Speaker 6 (08:28):
For generation. The conventional story about the Great Depression was
that capitalism failed, right, we needed government to bail it out.
Free market collapsed under its own way. Only Franklin Roosevelt
and the New Deal saved us. Milton Friedman spent decades
(08:49):
demolishing that story. It's not true.
Speaker 3 (08:51):
By the way.
Speaker 6 (08:52):
Thomas Soul has some interesting things to say about it
as well. He had a landmark work did Milton Friedman
called a Monetary History of the United States. Now, I
understand that's not really the kind of stuff that just
jumps off at you. You really want to go buy that,
a monetary History of the United States, But in it
(09:12):
he laid out a very different case. The Federal Reserve
a governmental entity, the harbingers of ill through bad monetary policy.
They caused the Great Depression, not capitalism, not Wall Street.
The FED, a government institution, allowed the money supply to
(09:33):
collapse by a third, turning a bad recession, which is
what it should have been, into a catastrophe. This is
a quick cut, but it's a gun punch to the left.
Listen carefully.
Speaker 7 (09:46):
A third of the banks of this country closed their
doors and went broke because, in my opinion, of the
poor policy followed by the Federal Reserve system. As an
objective's collar, I can tell you what the facts are.
The facts were, that's from nineteen twenty nine to nineteen
thirty three, the total quantity of money in the United States,
the amount of currency, the amount of bank depostles. That
(10:07):
total amount of money declined by one third. The total
number of banks went down by one third. And why
did the quantity of money decline? It declined because the
Federal reserve system failed to prevent the decline. The Federal
Reserve system could have prevented the decline at all times.
There never was a moment during that period when the
Federal Reserve did not have the power to prevent the
(10:28):
decline in the quantity of money. If it had prevented
the decline in the quantity of money, you might still
have had a recession, but it would have been a
garden variety of recession. It would have been over in
the middle of nineteen thirty or early in thirty one
at the latest. It would not have been the major
catastrophe not only for this country but throughout the rest
of the world.
Speaker 6 (10:46):
You know, many times reading emails, people will say to me,
we need to simplify the tax code. And I have
said again and again and again, and I'm quoting Milton Friedman.
Will never simplify the tax code. Icians want the tax
code to be complicated because then you need them to
fix it. They create problems that they then offer to fix.
(11:11):
Every few years they'll offer somebody will come up a
radical ron poll type, well, you know, flat tax or
fair attax or postcard filing, and it polls great. Yeah, simplify.
We waste too much time filling out tax documents. It's
too much work, it's not efficient. Everybody says they want it,
(11:33):
and nothing happens. In nineteen seventy eight, Milton Friedman gave
as his answer why it never happens, a truth that
is just as true today as it was back then.
Complexity in the tax code is not an accident, it's
not incompetence. It's a feature, not a bug. Notice we
keep going back to that language. Every carve out, every exemption,
(11:57):
every loophole exists because somebody need for it. They paid
a lobbyist. They wanted an advantage over someone in their industry.
They wanted an advantage to get ahead. That's what the
lobbyists are for. That's why people contribute to politicians. If
nobody needed the government to give them an advantage, then
nobody would spend money on politicians and their elections. You
(12:20):
don't spend money because you don't need the government. You
need the government to do less, not more. The complexity
of the tax code is the price of doing business
in Washington, and the people in Washington have absolutely no
incentive to simplify it ever, because simplicity for you would
mean less power for them. This is almost fifty years
(12:44):
ago and it's just as true, maybe more today than
it was back then. And it says, if we still
haven't listened.
Speaker 7 (12:53):
You'll put a twenty five percent top rate on the
tax system, and what the congressmen have to sell in
order to raise funds.
Speaker 3 (13:02):
I'm not saying this as a pleasantry. It is literally true.
Speaker 7 (13:05):
If you're a congressman, you have to engage in activities
which will enable you to get reelected. One of the
most important of those activities is making the tax system
more complicated. By making the tax system more complicated, on
(13:29):
the one hand, you get people who are willing to
contribute to you and work for you in order to
try to get a special provision which will benefit them.
On the other hand, you play the other side of
the street as well. You have people who are willing
to contribute to you in order to avoid having a
(13:50):
special burden placed on them. Now, if you had a
simple tax system of a kind, which undoubtedly would be preferable,
that possibility disappear.
Speaker 6 (14:01):
If you ever watched Ron Paul campaign, you heard him
say that we should abolish the FED, And if you
didn't understand what that means, that's okay. Don't let anybody
tell you they're more of an expert than you, because
I guarantee you you have a skill that they don't have.
Maybe you've rocked a baby to sleep overnight and they
never have. You've given birth. That's a pretty massive accomplishment.
(14:26):
We take it for granted because every one of us
is the beneficiary of it. But it's a big deal.
I haven't done it, and the Lord knows. I don't
want to. If I could, I wouldn't as it looks
like it's brutal. Maybe you can tear an engine apart
and put it back together. Maybe you could keep the
books of a company. Maybe you can farm land and
make it give way to crops. Whatever it is. You
(14:49):
have a skill that other people don't, and you can
understand these basics.
Speaker 3 (14:53):
You can.
Speaker 6 (14:55):
Here is Milton Friedman on why we should abolish the FED.
The FED is the one who decides how much cash
will be pushed into the economy, which ends up in
your interest rates and what it costs you to take
a mortgage out, for instance.
Speaker 3 (15:09):
I have long been in favor of abolishing it.
Speaker 7 (15:13):
I think there is no institution in the United States
that has such a high public standing and such a
poor record of performance. A reserve system was established in
nineteen fourteen, started operation in nineteen fourteen. It presided over
a doubling of prices during World War One. It produced
a major collapse in nineteen twenty one. It had a
(15:38):
good period from about nineteen twenty two to about twenty eight.
Speaker 3 (15:44):
Then it gay.
Speaker 7 (15:45):
It undertook actions which led to the Great which led
to a recession in nineteen twenty nine and thirty, and
it converted that recession by its actions into the Great Depression.
The major villain in the Great Depression was, in my opinion,
unquestionably of the Federal Reserve system. Since that time it
(16:07):
was largely It presided over a doubling of prices during
World War two Head two financed the inflation of the
nineteen seventies.
Speaker 3 (16:20):
On the whole, it has a very poor record.
Speaker 6 (16:22):
It's done far more harm than good.
Speaker 7 (16:24):
But I'm reminded of someone proverb now quoted by Sheilo.
Speaker 1 (16:28):
Jackson Lean mus I die the Michael Berry Joe.
Speaker 6 (16:32):
Here is Milson Freveman talking about capitalism. We say we
believe in capitalism, and for the longest time democrats claim
they believe in capitalism too. But what is capitalism?
Speaker 3 (16:42):
Does it mean?
Speaker 6 (16:44):
When democrats say now, capitalism's not good? They say capitalism's
not good? Are you making as much one as you want? Well, no,
I'm not well thin. Capitalism's not good. Capitalism's not good?
Is the product they sent you that you ordered online
exactly as you hoped it would be was a matter
of feddancy. Capitalism is not good. Milton Friedman lays out
(17:09):
how our system, the American system, works and how capitalism
is a necessary condition for our political and legal freedoms.
Real quick, and I mean real quick. It's twenty one seconds.
I've tried to cut these down to as short as
we possibly can, because I know you're driving, you're distracted.
A lot of this stuff is very heavy, but I
(17:30):
think it's important to learn. I hope you'll save it.
I hope you'll share it. Here's Milton Friedman making an
argument that doesn't get made nearly enough. We talk about
freedom like it's purely political, free speech, free press, free elections.
But Milton Friedman argued that economic freedom isn't separate from
political freedom. It's the foundation of it. You can't have
(17:55):
a genuinely free society without a free market. Those two
are inseparable. You have to be able to buy what
you want, spend your money how you wish. Every country
that has given up economic freedom in the name of equality,
and many have or security because security is always comforting,
(18:17):
has eventually given up political freedom too. History is not
ambiguous on this point. Twenty one seconds. That's all I'm
asking for twenty one seconds.
Speaker 7 (18:28):
The capitalism is not a sufficient condition for freedom.
Speaker 6 (18:31):
It's a necessary condition for freedom.
Speaker 3 (18:33):
I never said that wherever you had capitalism, you had freedom.
Speaker 2 (18:36):
I never said that.
Speaker 7 (18:37):
I never made that statement. I made the office statement.
Wherever you had freedom, you had capitalism. Capitalism is a
necessary condition for freedom, but not a sufficient condition for freedom.
Speaker 6 (18:49):
This is one of my favorite clips of Milton freedoman
of all time. It's absolutely glorious. He uses a simple pencil,
and I realize for young people you didn't use a
pon so but I grew up using a number two.
That's what you had to have to fill in your
scan tron. That's what you used to take notes. A
number two pencil, a pencil sharpener. This was a big
(19:11):
part of our lives, a standalone eraser that you got
to realize that when he cut this decades ago, everybody
had a number two pencil. We used a number two
pencil constantly. We used a pencil. Anyway. I want you
to pick up that pencil, simple, right, You've had one
(19:32):
since you were five years old. But the question Milton
Friedman wants you to think about, do you personally know
how to make one? You ever think about all the
elements that go into this. I think about this all
the time. If we were wiped out by a nuclear
weapon or the apocalypse and the world was left for
(19:54):
me to start over, I wouldn't know how to do anything.
I don't know how to manufacture a tire, I don't
know how to make a spood, and i'd do anything.
You ever think about all the things that went into
such a simple thing as making a pencil. Capitalism drives innovation,
(20:15):
and that innovation gives us our quality of life, our
length of life, our enjoyment, the ability to travel, to
spend time with our family, to heal our wounds. It's
not perfect. It was pre join good.
Speaker 2 (20:28):
Look at this lead pencil.
Speaker 8 (20:30):
There's not a single person in the world who could
make this pencil remarkable statement, not at all. The wood
from which it's made, for all I know, comes from
a tree that was cut down in the state of Washington.
To cut down that tree, it took a saw to
make the saw. It took steel to make the steel.
It took iron orn this black center. We call it lead,
(20:55):
but it's really graphight compressed graphight. I'm not sure where
it comes from, but I think it comes from some
minds in South America. This red top up here, the
eraser bit of rubber probably comes from Malaya, where the
rubber tree isn't even native. Who was imported from South
America by some businessmen with the help of the British government.
(21:19):
This brass feral. I haven't the slightest idea where it
came from, or the yellow paint, or the paint that
made the black lines, or the glue.
Speaker 2 (21:29):
That holds it together.
Speaker 8 (21:31):
Literally, thousands of people cooperated to make this pencil.
Speaker 2 (21:36):
People who don't speak the same.
Speaker 8 (21:37):
Language, who practice different religions, who.
Speaker 2 (21:41):
Might hate one another if they ever met.
Speaker 8 (21:44):
When you go down the store and buy this pencil,
you are in effect treating a few minutes of your
time for a few seconds of the time of all
those thousands of people. What brought them together and induced
them to cooperate to make this pencil. There was no
commisar sending out orders from some central office. It was
(22:06):
a magic of the price system, the impersonal operation of
prices that brought them together and got them to cooperate
to make this pencil.
Speaker 2 (22:17):
So that you could have it for a trifling sum.
Speaker 6 (22:21):
That is why.
Speaker 2 (22:23):
The operation of the free market is so.
Speaker 8 (22:25):
Essential, not only to promote productive efficiency, but even more
to foster harmony and peace among the peoples of the world.
Speaker 6 (22:36):
This was Milton Friedman who was invited onto the Phil
Donahue Show, and the idea was, all right, mister capitalism,
we're going to show you that capitalism is for rich,
fat cats, and it's evil, and we're going to shame you.
Wilton Friedman was not in the business of trying to
be popular. He was in the business of trying to
be right, trying to seek truth, trying to talk about
(22:59):
fundamental truths, the laws of economics.
Speaker 7 (23:01):
Did you ever have a moment of doubt about capitalism
and whether greed's a good idea to run on? Well,
first of all, tell me, is there some society you
know that doesn't run on greed? You think Russia doesn't
run on greed, You think China doesn't run on greed?
Speaker 3 (23:17):
What is greed?
Speaker 7 (23:19):
Of course, none of us are greeding. It's only the
other fellow who's greeding. The world runs on individuals pursuing
their separators. The great achievements of civilization have not come
from government bureaus. Einstein didn't construct his theory under order
from a bureaucrat. Henry Ford didn't revolutionize the automobile industry
that way. In the only cases in which the masses
(23:43):
have escaped from the kind of grinding poverty you're talking about,
the only cases in recorded history or where they have
had capitalism and largely free trade. If you want to
know where the masses are worse off worst off, it's
exactly from the kinds of societies that depart from that,
So that the record of history is absolutely crystal clear
(24:04):
that there is no alternative way so far discovered of
improving the lot of the ordinary people that can hold
a candle to the productive activities that are unleashed by
a free enterprise. So it seems to reward not virtue
as much as ability to manipulate the system.
Speaker 3 (24:22):
And what does reward virtue?
Speaker 7 (24:24):
You think the UH Communist commissary rewards virtue? Do you
think a Hitler rewards virtue? You think, excuse me, if
you'll pardon me, do you think American president's reward virtue?
Do they choose their appointees on the basis of the
virtue of the people appointed or on the basis of
their political clout. Is it really true that political self
(24:44):
edterst is nobler somehow than economic self edittererst. You know,
I think you're taking a lot of things for granted.
And just tell me where in the world you find
these angels who.
Speaker 3 (24:54):
Are going to organize society for us. Well, I don't
even trust you to do that. It's of the world
as we know that Michael Show, End.
Speaker 1 (25:06):
Of the World.
Speaker 6 (25:09):
I have pulled some more clips for your consideration. Since
we're on the subject of Milton Friedman, who's had such
a profound influence on my way of thinking. There's a
phrase so identified with Milton Friedman that it practically became
(25:30):
his not his signature, what's the word I'm thinking of,
Uh no, his trademark. It practically became his trademark. He said,
there's no such thing as a free lunch. How many
times have you heard that? How many people have said that?
And you really didn't know he's the one who made
(25:52):
that phrase commonplace in this country. There is no free lunch.
There's no such thing as a free lunch. Somebody had
to make the materials, somebody had to buy the materials.
Somebody had to present those materials to you. It's not free.
It costs somebody something. Most people have no idea what
that actually means or how deep it goes. They think
(26:15):
it means, well, you just don't have to pay for
your meal. No, every government program, every subsidy, every giveaway,
every quote unquote benefit, every entitlement, somebody is paying for that.
Nothing is free. It can be free to the recipient,
but it is not free. Someone paid for it. Somewhere,
(26:40):
somebody is paying for it, and usually it's the people
who can least afford it. And this is the part
that is the most tyrannical. Milton Friedman used the idea
to cut through decades of political what I would call fantasy,
the idea that government can give you something for nothing.
It cannot, It cannot. He calls it a myth.
Speaker 3 (27:01):
It is a myth.
Speaker 6 (27:02):
He calls it dangerous. It is dangerous. He breaks down
exactly why this is one of his best pieces ever.
Speaker 7 (27:11):
It's the free lunch myth, the belief that somehow or
other government can spend money at nobody's expense. I don't
know how many of you have ever heard of a
wonderful description of government that was made by a French
economist by the name of Frederick Bostiat about one hundred
and fifty years ago. He said, government is that fiction
(27:36):
whereby everybody believes that he can live at the expense
of everybody else. And that is the free lunch myth,
the myth that somehow or other government can provide goods
and services, can spend money at nobody's expense. Now, the
particular form which that myth takes, it's very specific. It
(28:02):
has two parts. One part is a belief that somehow
or other you can tax business without consumers or workers
or individuals paying for it.
Speaker 3 (28:13):
Somehow business is a.
Speaker 7 (28:15):
Big source, a big cornucopia out there that can be
taxed at no cost.
Speaker 3 (28:21):
And the other way a firm the myth takes is
that you can create money at no cost, that.
Speaker 7 (28:26):
If you turn the printing press, if you produce those greenbacks,
that will enable people to become richer with nobody becoming poorer. Well,
let me look at first problem. Can you tax business?
What's business? There's no business to be taxed. There are people.
Only people can pay taxes. Can I tax this floor?
(28:49):
Can I tax the building? The building can't pay taxes?
Only people can pay taxes. So when you talk about
a tax on business, it has to be paid by somebody.
Either it's paid by the stockholder, or it's paid by
the customer, or it's paid by the worker.
Speaker 3 (29:07):
There's no other way it can come from. There's no
there's no.
Speaker 7 (29:14):
Santa Claus, no tooth fairing that's going to provide a
source by which the government can spend money that doesn't
come from somebody.
Speaker 3 (29:24):
Somebody has to pay. And yet, over and over again
you hear the claim.
Speaker 7 (29:32):
Oh, we cannot, we must not increase taxes on individuals,
will increase taxes on business. In connection with the current
discussion of Social security, this fiction arises.
Speaker 3 (29:44):
There is a fiction that the.
Speaker 7 (29:46):
Social Security tax is half on the individual and half
on the employer. It's that that the individual only pays
five point seventy five percent. The employer plan plays it
pays an equal amount. That's nonsense. That's bookkeeping, that's not economics,
that's not reality. The part that the employer pays is
(30:08):
part of his wage cost. If an employer considers whether
it's worth his while to hire an additional worker, he
has to consider as part of his cost, not only
what he pays to the worker, but also the extra
taxes he will have to pay to the government. It
makes no difference to the employer at all if he
(30:28):
pays the worker a bigger check and the worker pays
a larger part of that directly to the government, or
he pays a worker a smaller check but an addition.
Speaker 3 (30:37):
Has to send a check to Washington.
Speaker 7 (30:39):
What matters to him is a total number of dollars
it costs him to hire an additional person. So the
fact is, the logic is, the reason is that the
tax on, the so.
Speaker 3 (30:51):
Called tax on the employer, is paid by the employee.
Speaker 7 (30:55):
Now this has always been clear from economic reasoning general
economic reasoning, but it has also been subjected to empirical
test in a book, even from that from that tempo
of belief in greater and bigger government. The Bookings Institution
(31:17):
in Washington, published a couple of years ago, demonstrated empirically
that the tax on the employer was really paid by
the employee, that it was shifted to the employee. And
it can't be any other way, as you will see
if you think about it. So business doesn't pay that tax.
And yet despite this you have the great move in
(31:38):
Congress right now in remedying the problem of social security.
To impose a larger fraction of the tax on business
on the alleged grounds that, somehow or other that spa
is a worker, It.
Speaker 3 (31:52):
Doesn't have any such effect.
Speaker 7 (31:53):
It reduces the incentive to hire people, and thus is
imposed on the worker. But again, if you look at
the taxing corporate profits, the distinction you have to draw
is between who writes the check and who fundamentally bears
the cost. It may well be that an official of
(32:15):
a corporation writes the check for the tax on profits,
so called profits. He writes the check, but who pays it?
He doesn't pay it. Here is a poor fellow who
may be earning a modest competence. He may be writing
a check for ten million dollars That isn't coming out.
Speaker 6 (32:33):
Of his hide.
Speaker 3 (32:34):
Where's that ten million dollars coming from?
Speaker 7 (32:37):
It has to come from the proceeds of the goods
and services which the enterprise sells. And that ten million
dollars is ten million dollars less available either for cutting prices,
or for paying out dividends, or for paying wages and salaries.
The tax is borne by people, and for this reason
(32:59):
I must say, I've always myself been strongly in favor
of eliminating altogether the tax on corporations. So it's open
and above board that you are taxing people, and that
you do not conceal that fact by appearing to tax corporations.
Well again, with respect to money, can you print money
at no cost? It's very cheap to turn out those
(33:21):
pieces of paper. But does that get society something for nothing?
Speaker 3 (33:27):
Not at all.
Speaker 7 (33:28):
It's simply a different form of taxation. If you print money,
people have more money to spend. If they spend, If
they spend more money on the same amount of goods,
prices go up, and in effect everybody is paying a
tax through inflation.
Speaker 3 (33:45):
Once again, it's only a form of taxation.
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