December 15, 2006 Capitalism and Friedman A half century ago, Milton Friedman’s advocacy of free markets over government intervention and his prescription for inflation fighting by central banks were treated as fringe notions by many economists. By the time the Nobel Prize winning economist died in November at the age of 94, his views had helped to reshape modern capitalism. Mr. Friedman’s ideas, which were expressed in his classic book Capitalism and Freedom, written in 1962, provided the intellectual foundation for the anti-inflation, tax cutting and anti-government policies of President Ronald Reagan and Prime Minister Margaret Thatcher and an era of more disciplined central banking. These ideas were later adopted by the countries of Chile, Estonia, Lithuania,. Latvia, Slovakia, Romania, Ukraine, Russia, Georgia, Bosnia-Herzegovina and Austria. His ideas also helped to end the military draft, gave birth to staple conservative causes such as school vouchers and created the groundwork for new economic views about the Great Depression, unemployment, inflation and exchange rates as well as less typically conservative policies such as the Earned Income Tax Credit. Friedman conveyed to millions an understanding of the economic benefit of free, competitive markets as well as built upon Friedrich Hayek’s theory of the close connection that economic freedom bear to other types of liberty. His thesis in A Modern History of the United States 1867-1960, a book published in 1963, held that the Great Depression was not as was once commonly assumed, a "market failure", but a failure of goverment policy. Contraction of the money supply in the wake of the stock market crash of 1929 was what turned a financial event into an economic catastrophe. His theory was proven when after the Market Crash of 2000-2002, his disciple, Alan Greenspan lowered interest rates so much that the money supply greatly expanded and economic catastrophe was averted. On the death of Ronald Reagan, whom he advised, Mr. Friedman wrote "few people in human history have contributed more to the achievement of human freedom". The same can and long will be said of Milton Friedman. Wall Street Journal 11/17/06 pp. A1, A20 Deja Vu Cindy Sheehan is the Irene Castle of this generation. Military Reservists Receive Benefits Military reservists called to active duty for at least 180 days can receive payments from their IRAs, 401(k) Plans and 403(b) tax sheltered annuities without having to pay the 10% early distribution penalty, according to newly enacted Pension Protection Act of 2006. Eligible reservists activated after September 11, 2001 and before December 31, 2007 qualify for this relief. Because the relief is retroactive, eligible reservists who already paid the 10% tax can claim a refund by using Form 1040X to amend their tax return for the year in which the retirement distribution was received. The words "ACTIVE DUTY RESERVIST" at the top of the form. In Part II, Explanation of Changes, the reservist should write the date he or she was called to active duty, the amount of the retirement distribution and the amount of early distribution tax paid. AICPA Members in Small Local Accounting Firms 11/06 p.4 We hope you take the time to enjoy family and friends this holiday seasonand have a safe, healthy and Happy New Year!! Remember, We’re Here for You!!