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Tony Quain
Tony Quain is a commentator on free-market economic theory and policy. He has a Ph.D. in economics from George Mason Univ. More >>
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Inequality today
Redistribution today
Taxes today

Link: http://www.deirdremccloskey.org/docs/pdf/PikettyReviewEssay.pdf

Deidre McCloskey has a good essay here on Piketty. A little late, not very timely, so forth.

Link: http://www.city-journal.org/2015/eon0731fm.html

Saw this article over the weekend.

Francis Menton's thesis is summarized in these paragraphs:

Last year, Bloomberg Rankings published a national study on income inequality, using U.S. Census Bureau income data to rank each of the 435 congressional districts by economists’ standard measure of inequality, the Gini coefficient. The study found high levels of income inequality in areas of the country known for their political progressivism ... Of the top 25 spots, 23 went to Democratic districts ... All of those congressional districts have long been associated with progressive politics; most have long since adopted at least some of [New York Mayor Bill] de Blasio’s policy prescriptions, including extensive public and affordable-housing programs, generous welfare programs, relatively high and progressive state and local income taxes, and higher minimum wages.

Could it be that progressive policies intended to reduce income inequality actually cause it to increase? Quite likely, yes. The reason has to do with the effect of these policies on the low end of the income distribution. The government doesn’t count the distribution of in-kind benefits as income—and means-tested handouts create incentives for recipients to keep their measured incomes low. Further, where higher minimum wages—another progressive agenda item—cause higher unemployment, we see even more zero-income earners. Having lots of low-earners or zero-earners doesn’t help reduce inequality. Meanwhile, at the high end of the income distribution, taking money from high earners through higher marginal tax rates is not counted in official statistics as a cut in income—which means that income inequality again doesn’t shrink.

A very good hypothesis, one I am inclined to agree with. However, to be fair, the coincidence of high inequality in areas dominated by progressives might be because progressive policies cause greater income inequality or it might be because high inequality causes people to vote progressive. I think it's some combination of both.

Link: https://www.minneapolisfed.org/research/economic-policy-papers/on-the-ethics-of-redistribution

The linked paper applies the "If you want redistribution, see how you like global redistribution ..." argument to John Rawls' theory of justice (veil of ignorance, so forth), exposing the muddled ethics.
It specifically cites globalization and world trade as a policy example which hurts the lower-income citizens of developed countries but helps the incomes of people in developing countries; if a true Rawlsian system were employed, these policies would be supported for their global effects, despite their local effects in the developed world.

Link: http://www.realclearpolitics.com/articles/2015/08/03/minimum-wage_madness_127616.html

I wholeheartedly agree with this article except for the following paragraph:

Let's be clear. Some increase in the federal minimum is justified. It's been at $7.25 since 2009. Inflation has eroded its value 10 percent since then and 24 percent since its peak year of 1968, says the left-leaning Economic Policy Institute. But raising it to $15 (a doubling), or even $12 (a two-thirds increase), would be a radical act that front-loads the benefits and back-loads the costs.

Weak. He spends the whole article explaining that the minimum wage doesn't work, then says here that it should be raised. Stand up for your beliefs, damn it.

Link: http://www.nytimes.com/2015/07/30/opinion/congress-should-reauthorize-the-export-import-bank.html?ref=todayspaper&_r=0

Their argument is basically that other countries subsidize their exports, so we should also to avoid losing in the global marketplace.

Not buying it. If other countries subsidize their exports, our consumers are the beneficiaries. Why waste our own (tax) money trying to compete if we get the benefits of their unfair competition?

If country A exports airplanes and A's government subsidizes them to sell at a 50% discount, that benefits American consumers (or businesses like airlines, as may be the case here) by cutting their cost of business. If our own aerospace companies can't sell them for that cheap, then let capital re-allocate to a different industry where we are competitive. We're already getting the cheaper goods (at the expense of country A), so why pay the expense ourselves too?

Link: http://www.realclearmarkets.com/articles/2014/11/10/the_hidden_truth_behind_inequality_statistics_101381.html

A good article, particularly for readers who are new to the inequality debate.

Summary paragraphs:

These CBO reports are well known, as are plenty of other analyses of the distribution of consumption or purchasing power rather than income. Thus, while the Occupy-style protestors may not know the difference, many of the academic and political voices from the left that you hear bemoaning the increase in income inequality know the difference between pre-tax and post-tax, post-government benefits inequality. They are making a conscious choice to overstate the problem in order to claim support for their preferred political outcome.

Until the government disappears and everyone's pre-tax income is the same as their purchasing power, the distribution of pre-tax income would seem to be of little value. Many people probably cannot even tell you their gross pay; they only know the net amount they take home in their check. Anyone who wants to have a serious discussion about inequality should be focused on how much people are able to consume and save since those are the things that matter. Concentrating on the proper facts will make the debate better and a solution to any problem more likely.

Link: http://online.wsj.com/articles/kimberley-strassel-yes-virginia-there-is-a-senate-race-1413502713

Was feeling putting Mark Warner out of a job as my home state U.S. senator was pretty hopeless, until I saw this:

Yet this past week Mr. Warner’s image began to crumble. In June, Democratic state Sen. Phil Puckett abruptly resigned, throwing control to Republicans and derailing Democratic Gov. Terry McAuliffe ’s top priority, which is to expand Virginia’s Medicaid program. Within a week, federal investigators were probing whether Republicans had dangled a job for Mr. Puckett in return for his resignation.

That investigation is now producing quite different details. The Washington Post last week revealed it was Mr. Warner who called the Puckett family to discuss the possibility of a federal judgeship or corporate gig for Mr. Puckett’s daughter, as a means of getting him to stay in the Senate.

This revelation was made worse by news that Mr. Warner seems to have been acting for the McAuliffe administration. Mr. McAuliffe’s chief of staff had left his own message on Mr. Puckett’s phone: “If there’s something that we can do [for your daughter], I mean, you know, we have a couple of big agencies here that we still need agency heads,” ran the message. “So we would be very eager to accommodate her, if, if that would be helpful in keeping you in the Senate. We, we would basically do anything.”

Sounds pretty bad for Warner (for McAuliffe more so). That's good, because I don't like their policies or their politics.

Link: http://online.wsj.com/articles/mark-perry-and-michael-saltsman-about-that-ceo-employee-pay-gap-1413150999

An excellent article debunking the pay gap myth.

The crux of the argument:

[The AFL-CIO] points to a 331-to-1 gap in compensation between America’s chief executives and the pay of the average worker.

That’s a sizable number. But don’t grab the pitchforks just yet.

The AFL-CIO calculated a pay gap based on a very small sample?350 CEOs from the S&P 500. According to the Bureau of Labor Statistics, there were 248,760 chief executives in the U.S. in 2013.

The BLS reports that the average annual salary for these chief executives is $178,400, which we can compare to the $35,239-per-year salary the AFL-CIO uses for the average American worker. That shrinks the executive pay gap from 331-to-1 down to a far less newsworthy number of roughly five-to-one.

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