News Scrapbook 1980
SAN DIEGO CLIPPING SERVICE SAN DIEGO UNION IIAR 1'
Wednesday, March 19, 1980
C-8
THE SAN DIEGO UNION
Wednesday, March 19, 1980
THE SAN DIEGO UNION
DENOUNCES CARTER'S PROGRAM Fr·edmQn Urges In Current Fe er· By DONALD C. BAUDER FincnciOI Editor, TIie son Diego Union
tote Economists Debate
assive
uts
Value Of Proposi tion 9
Four Area
ines
•
I Spending
"that we give Prop. 4 a chance to work. It is an mtelligent approach to holding down spending. ' He said he is WOJTied that to replace the government receipts from the state income tax, the state would tum to other taxes, "such as the so-called business taxes. "But business docsnit pay taxes. It just collects taxes. Only people ~ay taxes," he said. Nonetheless, high business taxes can discourage com- panies from moving into a state or e.'Cpanding, and that would be unde- sirable, The passage of Proposition 13 and its pa rtial implementation has helped to stimulate the state's econo- my, Friedman said. In particular, the cuts in business property taxes proved to be a stimulus, he said. The cuts in individuals' property taxes did not have such a major effect, he said. Other economists, however, ques- tion how much impact Proposition 13 had on l)le state's economy. Friedman is one of the authors of a proposed national constitutional amendment which would limit feder- al spending in the same way that Proposition 4 put a lid on state spending. Passage of such an amendment would be a very import- ant step in reducing inflation, he said. Laffer said the state has "experi- enced u boom of unprecedented propcirtiims" because of Proposition 13 propl'rty tax cuts. He said Propo- sition 9 rould have the same impact. Laffe.1 1s the creator of the "Laffer Curve," which postulates that a tax- rate cut can actually increase gov- ernment revenues. He argues lower tax rates provide additional incen- tives to work, produce and save.
By DONALD C. BAUDER Financial Editor, TIit Son Oie90 UniOn
In Sun Lite T urney
The tale's two b l-know econo- n I ts both of whom favor~ proper• ty tax cutting Proposition 13, yester- day spilt on Proposition 9 that would i:ut state income tax rates by 50 · percent. USC Professor Arthur Laffer en- dorsed the income tax reduction ini· tiative on the June 3 ballot. Howev- er, Milton Fnedman, now with Hoo- ver Institution, said he has serious reservations about it. Nobel Prize winning economist Friedman said during a press con- fPrence and student question-and- an~wer session al USD that Proposi• lion 4 to cut governmpnt spending - approved by voters in November - hould be given a chance to work. 'In general I am in favor of ·uttmg taxe·s as a way of rutting ov rnment sp ndmg, ' Friedman said, "but the important thing is to cu' spending ln allf rnia we haw• Proposition 4 lfl effect as a way to control spending Galifornia is a owing state, and spending should declme as a fraction of income under Proposition 4." Friedman explained, "The prob- lem of inflation is national, not local or state. We have to reduce what the overnmenl spends," he said, and a so the rate at which the Federal Re erve creates money, in large part to accommodate the excess or government spending over tax receipts. He said he favored Proposition 13 because it was a way to alert the public to the problem of excPssive government and help spur the tax revolt. N()w, he said, he would prefer
range later this year Interest 1 ates also should fall back - particularly if there is a r~cession, he said. Short-term interest rates six months from now should be lower. Long-term rates historically peak .ibout six month later than short ratf>s, he said. Toe long-term bond markl t and mortgage markets med not be con sidered dead or norih• d I
"The federal budget is out of control," said Nobel Prize-winning et.'Onomist Professor Milton Fried- man yesterday, and he had a solu- tion for the problem federal govern- ment spending cuts of $60 billion to $100 billion He also said he f vors Republican Ronald Reagan for the presidency. At a presi conkrence and student question-and-answer se:.s1on at the Uruvers1ty of San Diego, Friedman exnlamed that the so-called spending cuts as outlined by President Carter last. Fnday are not cuts at all: They are cuts in the increase in spending that was earlier proposed - not cuts m spending per sc. Friedman would "like to see mas- sive cuts rn spending per se, and so would most economists today. Friedman labeled . fr. Carter's anti-inflation initiatives as "a marshmallow program.' Moves such !l.'i ~etting up reserves on money market mutual funds and withholding taxes on sa"limgs and dividends "d1 ourage <;avings and di~ourage mve tment ' and thus t.'Oultl counte roduct· , Fncd man d "The only }\ay to redut-e rflat1on is to er •ate less money, and f r !ho:: government to ~pend less. No coun- try has ever done it any other way," said Friedman. '-.But Mr. Carter is not proposing hJ CLl spendmg at all; he is proposing to cut the proposed increase in spending." Fne(!11;1an said that the kind of spending which is "out of control is the trans.fer payments - Socia I Securitj payments, welfare unem- ployment, go,crnment pen~1ons and the like which reprl', ent a shift of money from productive persons to non-productJ.-c ones. Hl recom- mends cu ;; ln such a~ ·as. and he does not lluJ he argument that such nding h ,,andated by law and 1 1 "ur, ontrollable."
course
Colo. St. Son DiegoSt.
Ari1ono Portland St
11110 OOJGOO- J 4 C 11110000001-1 5 2
USIU N. Ari1.
SAN DIEGO CLIPPING SERVICE EVENING TRIBUNE MAR 1 9 1980
Schlep! ond w. HR - Sokolow;k Soko owskl USO Son DiegoSt.
2111121-ll' 404 09-11 14 0
~N- obel Prize economist allays fears, sees no financial collapse
DIVISION STANDINGS
RedD,vsion-USIU51 So De no funds in the marketplace for housing or machinery and plant expansion. "The tax burden is. $600 billion. And not a penny less." Where should the budget be cut? "First, across the board," Fried- man said, "and then we should ask where there's been the most growth · in the budget." Adecade or more ago, the econo- mist said defense spending took far more of the budget than did health, education and welfare. "No,~ HEW spends one and a half , times more than does defense. "We're out of control in transfer payments (handouts)." Friedman said Carter has pro- jected budget increases of $100 bil- lion by 1984. "His budget projections are based on continued higher inflation rates - but yet he says he will get down inflation," the economist said. "Carter is inconsistent." Friedman is opposed to the the June ballot measure of Proposition 9 which proposes to cut state personal income taxes by 50 percent. He said Proposition 4, which passed last year and put a lid on government spending, should be "' "given a chance to work first." Who is Friedman's favorite presi- dential candidate? Ronald Reagan is "at the moment." He lamented that others are equally as good, but the '·elec- toral process keeps good people out of contention." "Ronald Reagan was a good gov: ernor of California." Has Friedman as a noted Nobel Prize winner contributed to the Escondido sperm bank? "I have not been asked, and I have not given," he said. "Create less money in the market- place and have less government spending. No government. has ever been able to do it any other way." Friedman noted that Chile a few years ago had an annual inflation rate of as much as 500 percent and a monthly rate of 20 percent. On Friedman's-advice, he said, the Chilean government cut its spending and has turned things around. How about a tax cut to solve economic woes? A little tax cut is not enough, he said: "A tax burden goes up, and Congress votes a tax cut. It's a fake." Why? "Becaus~ a true tax cut is a cut in government spending,'' he said. Consider the 1980 federal budget of $600 billion for fiscal 1980. Taxes are said to finance $450 billion. "Who do you think pays for the remaining $150 billion? The Tooth Fairy? No, we pay," he said. " If the $15ll billion deficit is paid through the printing of more money, then we. pay through more inflation. . "If the government borrows (through Treasury auctions in vying for the money supply), we pay in a more subtle way, because there are While Friedman does not predict the system will bomb ou~, hE: sai? the country is far from solvmg its fman- cial woes of high interest and the high cost of just about everthing else in the market or on the table. He doesn't believe President Carter's announced plan to control things will do much good either. He favors big cuts in government spending - not just a little whittling, but big whacks of $100 biUion or more. Friedman was in San Diego speak- ing to the annual meeting of the Chamber of Commerce last night. Earlier the day, he held a press conference at the University of San Diego then took questions from an asse~bly of 1,500 students jn Canuno Theater campus. Interest rates are high, he said, but only because of inflation. ~oth have risen along together, he said. High interest is relative, he said, and a 16 percent mortgage might not be too bad. A 16 percent loan allows for con- siderable interest write-offs on fed- eral income tax, he said, and - allowing for a 10 percent ~ear)y increase in prices - the home JS still a good investment. By DONALD COLEMAN TRIBUNE Business Editor Milton Friedman, the Nobel Prize- winning economist, is known for his conservative preachings and attacks on the free-spending ways of the fe ral government, but he predicts no financial collapse of the system. Interest rates and inflation are spiraling to new da ly highs; . but Friedman sees no need for. pamc - no need for the populace to head for the lµlls, dig in and wait for the end to come. "Purveyors of gloom and doom that the nation is near collapse are domg individuals of this c~untry a disservice," Fnedman said here yest~rday. . . The economist said he 1s dlS- tressed by the number of letters he gets each day from people worried about the state of affairs. "They asked if they should take all their money and buy gold and bury it in the back yard or in the deep woods," he said. The economist said the country can withstand economic upheavals, as it has done before, and does not face collapse. He has faith, he said, just as Adam Smith had two centuries ago. SAN DIEGO CLIPPING SERVICE LOS ANGELES TIMES IIAR20S "Considering a 15 percent inflation rate, you're getting a bargain," Friedman said. The ecbnomist, like everyone else, doesn't want to live .with inflation, but he believes it can only be licked one way· Trial of Susan B. nthony Adapted forUSOProgram ..The Trial of Susan B. Anthony," an adaptation from the actual court proceedings against the 19th-Century women's rights activist, will be performed at the Univer- •sityof SanDiego at 7:30 p.m. Friday. The performance, to be held in the law school courtroom. was scnpted by second-year USD law student Sally J Penson and~ feat~e lawstudents and faculty, The per: formance will benefi~ th~ USD Women in Law organiza. lion, and a $1 donation 1s requested. A wine and cheese reception will followthe play. SAN DIEGO CLIPPING SERVICE SAN DIEGO CLI PPING SERVICE TIMES- ADVOCATE MA-R 19 1sso SENTINEL MAR 1 9 198Q Friedman: Spendthrift nation is on road to rui8' By GENE MICHAL'; T•A Staff Writer massive Increase over any previous year's budget, and probably will In- crease still further if precedent Is fol- may end up spending about $600 bil• lion this year, on an income of about $550 billion. "Who makes up' the dif- ference? Do you think there Is a tooth fairy who makes up the difference? We pay the difference," the dlminu- tive, balding economist told his audi• ence at the University of San Diego "The true tax on the American peo- pie i.'l what government spends," not just what it collects }n the form of di- He explained, In answer to one stu- dent's question from the floor, that rect taxes, he said. lowed. Friedman said the government yesterday. the Federal Reserve system "doesn't control interest rates, it controls the supply of money," which In turn af- fects inflation, which in turn affects The government increases inflation by increasing the supply of money, he But he also denied that the nation's economy is uncontrollable, as many persons have charged. "Nothing is "What Congress has enacted, Con- gress can unenact. But you can't do it said. uncontrollable," Friedman said. He said also that while he does not wish to directly criticize economic prognosticators such as Howard Ruff, "I think the purveyors of gloom and doom have been doing the country a interest rates. overnight." great disservice. The answer to this country's economic problems Is not to buy gold and bury it in the back yard." Even If the United States enters a major economic downturn - which does not have to happen, he indicated - that does not mean the rest of the world also would experience econom- ic collapse. "I don't expect a world- wide recession, even If the United States goes Into one." The way to solve many U.S. ec~ nomlc problems, Friedman said, is to restrict government spending. "N~ body," he stressed, "Is calling for a tax cut, just a reduction in spending." The only way to actually cut taxes - which can be indirect, such as infla- tion and excessive borrowing - is to cut government spending drastically, Friedman said. Probably the best way to do that, he said, Is to limit the money supply by some simple formula . For instance, he said, the supply could be fixed at a certain level now, and then allowed to increase at no more :"an say 4 per- cent a year. If that was done, he indica. "' because even when a so-<:alled tax cut Is announced, the federal budget still ends up higher than it was the previ- ous year. And as inflation drives more per- sons into higher-income levels, the government gets a bigger and bigger chunk of their income under the pro- gressive tax system. Inflation actually benefits the feder- al government, Friedman said, be- cause government income goes up faster than inflation. That's one reason politicians are not anxious to cut spending and infla- tion, Friedman indicated. Another is that "there is no way to avoid an ini- tial period of Increased unemploy- ment If government spending is cut." information, phone 291· 6480 Ext. 4296. formed at 7:30 p .m. Friday, March 21, in the University of San Diego School of Law Cour· troom. Sally Penso, second year USD law student, adapted the court transcripts into a reader's theater format. All proceeds will go to USD Women in Law Organization. A wine and cheese reception will follow the play. Tickets cost $1. For SAN DIEGO - The United States can never go bankrupt as long as it has printing presses, according to N~ bel Prize-winning economist Milton Friedman. But, he said, the country can and "will reach economic ruin In a hurry If government keeps spending money faster than It earns it. And that Is what bas been happening for years, be said. Friedman said President Jimmy Carter's budget, despite proposed cuts and other economic restrictions, Is "literally out of control." Friedman said the budget, although it supposed- ly wW be balanced this year for the flriit time in several years, still is a • -------
Made with FlippingBook - Online Brochure Maker