Inequality Much Less If You Count Government Transfers as Part of Income

Despite the gratuitous jab contained in the “fanciful assumptions” phrase, what is notable about the passages quoted below is that Porter is mainly, though grudgingly, granting Burkhauser’s main point: including government transfers reduces allegedly high inequality.

(p. B1) Washington already redistributes income from the rich to the poor. Richard Burkhauser and Philip Armour from Cornell and Jeff Larrimore from the Joint Committee on Taxation have become heroes to the right by trying to establish that government redistribution has, in fact, erased the trend of increasing inequality.

While these claims rest on fanciful assumptions about what counts as income, their analysis of taxes and government programs does support the argument that the government does more than it has in a long time to protect lower-income Americans from the blows of the market economy.
. . .
(p. B5) “Substantial changes in tax and transfer policies during the Bush and Obama administrations have increased dramatically the resources available at the middle of the distribution and at the bottom more so,” Professor Burkhauser told me.
. . .
Research by Leslie McCall of Northwestern University finds that . . . American voters remain lukewarm about government interventions to reduce income inequality, . . .

For the full commentary, see:
Eduardo Porter. “Seeking New Tools to Address a Wage Gap.” The New York Times (Weds., NOV. 5, 2014): B1 & B5.
(Note: ellipses added.)
(Note: the online version of the commentary has the date NOV. 4, 2014.)

The Burkhauser co-authored paper summarized above, is:
Armour, Philip, Richard V. Burkhauser, and Jeff Larrimore. “Levels and Trends in U.S. Income and Its Distribution: A Crosswalk from Market Income Towards a Comprehensive Haig-Simons Income Approach.” Southern Economic Journal 81, no. 2 (Oct. 2014): 271-93.

I believe that the research being to referred to by McCall is in her book:
McCall, Leslie. The Undeserving Rich: American Beliefs About Inequality, Opportunity, and Redistribution. New York: Cambridge University Press, 2013.

French Entrepreneurs Protest Government Crushing Them with Taxes and Regulations

FrenchBossesProtest2014-12-26.jpg “Protesting business owners in Paris brandished locks and chains to signify the constraints they said the government imposed on French businesses.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B3) PARIS — They jammed the boulevards, blowing whistles, tossing firecrackers, wearing locks and chains around their necks, and shouting into megaphones: “Enough is enough!”

In France, where protest marches are a well-practiced tradition, it is usually workers who take to the streets. But in a twist on Monday, thousands of French bosses demonstrated in Paris and Toulouse, the opening act in a weeklong revolt against government regulations and taxes that they say are straitjacketing companies, discouraging hiring and choking the economy.
“We feel like we’re being taken hostage,” said Laurence Manabre, owner of a home-maintenance business that has 28 workers — but could employ many more, she said, if not for onerous government-imposed labor rules.
Ms. Manabre marched with the throng toward the Finance Ministry, brandishing a bronze lock, a symbol that hundreds of other bosses wore to signify the constraints they said the Socialist government imposed on French businesses. “Between regulations, taxes, new laws, and razor-thin margins,” she said, “we’re being crushed little by little.”
. . .
. . . there are . . . entrenched parts of the French labor code, which employers say make it a difficult, lengthy process to lay off employees, and make bosses reluctant to take on new workers, especially with permanent contracts.
“France has high unemployment,” Ms. Manabre said. “But the French labor code is incomprehensible, and it just keeps getting more complex. How can I possibly hire more people?”
. . .
Mr. Roland has 35 employees, and his son is supposed to take over the business when he retires. But now his son is thinking of leaving the country, Mr. Roland said, because “France doesn’t seem to have a future, and the conditions for entrepreneurs are difficult.”
Mr. Roland said he did not plan to hire more workers, out of concern that coming regulations would menace his already-thin profit margins.

For the full story, see:
LIZ ALDERMAN. “In Twist on French Tradition, Bosses Take to Streets in Protest.” The New York Times (Tues., DEC. 2, 2014): B3.
(Note: ellipses added.)
(Note: the online version of the story has the date DEC. 1, 2014,)

With Targeted Research, Scientists Not Allowed to Pursue Serendipitous Discoveries

(p. 303) When scientists were allowed to pursue whatever they found, serendipitous discovery flourished.
Today, targeted research is pretty much all there is. Yet, as Richard Feynman put it in his typical rough-hewn but insightful manner, giving more money “just increases the number of guys following the comet head.”2 Money doesn’t foster new ideas, ideas that drive science; it only fosters applications of old ideas, most often enabling improvements but not discoveries.

Meyers, Morton A. Happy Accidents: Serendipity in Modern Medical Breakthroughs. New York: Arcade Publishing, 2007.

Pentagon Bureaucracy “Hindered Progress” on Drones

(p. A13) Compared with, say, a B-2 Bomber, drones are simple things. An empty B-2 weighs 158,000 pounds. The largest version of the Predator–the unmanned aerial vehicle now playing a critical role in every theater where the American military is engaged–weighs just under 5,000. Yet these small aircraft are revolutionizing warfare. Given the simplicity of drones, why did it take so long to put them into operation?
. . .
The most alarming take-away from Mr. Whittle’s history is the persistent opposition of officials in the Pentagon who, for bureaucratic reasons, hindered progress at every step of the way.
A case in point: Two months after 9/11, the Predator was employed to incinerate one of al Qaeda’s senior operatives, Mohammed Atef. The same blast also incinerated–metaphorically–a study released two weeks earlier by the Pentagon’s office of operational testing and evaluation. The study had declared Predator “not operationally effective or suitable” for combat. If one seeks to understand why the drone revolution was late in coming–too late to help avert 9/11–the hidebound mentality behind that Pentagon document is one place to start.

For the full review, see:
Gabriel Schoenfeld. “BOOKSHELF; Building Birds of Prey; Red tape at the Pentagon prevented the development of a drone that could have helped avert the attacks of Sept. 11, 2001.” The Wall Street Journal (Tues., Sept. 16, 2014): A13.
(Note: ellipsis added.)
(Note: the online version of the review has the date Sept. 15, 2014, and has the title “BOOKSHELF; Book Review: ‘Predator’ by Richard Whittle; Red tape at the Pentagon prevented the development of a drone that could have helped avert the attacks of Sept. 11, 2001.”)

The book under review is:
Whittle, Richard. Predator: The Secret Origins of the Drone Revolution. New York, NY: Henry Holt and Co., 2014.

Netflix Proved TV Programs Can Be Delivered on Web

(p. B1) Netflix pointed a way forward by not only establishing that programming could be reliably delivered over the web, but showing that consumers were more than ready to make the leap. The reaction of the incumbents has been fascinating to behold.
As a reporter, I watched as newspapers, books and music all got hammered after refusing to acknowledge new competition and new consumption habits. They fortified their defenses, doubled down on legacy approaches and covered their eyes, hoping the barbarians would recede. That didn’t end up being a good idea.
Television, partly because its files are so much larger and tougher to download, was insulated for a time, and had the benefit of having seen what happens when you sit still — you get run over.
. . .
For any legacy business under threat of disruption, the challenge is to get from one room — the one with the tried and true profitable approach — to another, (p. B5) where consumers are headed and innovators are setting up shop. To get there, you have to enter a long, dark hallway, a scary place.

For the full commentary, see:
David Carr. “The Stream Finally Cracks the Dam of Cable TV.” The New York Times (Mon., OCT. 20, 2014): B1 & B5.
(Note: bolded words, and last ellipsis, in original; other ellipses, and bracketed date, added.)
(Note: the online version of the commentary has the date OCT. 19, 2014.)

Inequality Increased by Lack of Investment Knowledge or Discipline

MiddleAndLowIncomeScaredStocksGraph.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A2) Millions of Americans inadvertently made a classic investment mistake that contributed to today’s widening economic inequality: They bought high and sold low.
. . .
. . . the data suggest some investors simply sold at the wrong moment. “Even at the worst of the recession, most people still had jobs,” said Mr. Maki. “Certainly, some of the people who got out of the equity market were doing it because of fear rather than need.”
That’s also the finding of new research from economists Bing Chen and Frank Stafford at the University of Michigan. They plumbed the Panel Study of Income Dynamics, a survey that tracks the same households over time, to evaluate the factors behind their fluctuating incomes and wealth.
Households with the highest education and strong portfolios to begin with were likely to keep buying stocks during the decline, they found. Those with less education and smaller account balances were more likely to sell during the downturn.
When the subsequent rebound happened, the already rich got even richer.
. . .
“. . . there certainly is a widening gap there in terms of the return that higher-income people are receiving in the market,” said Mr. Akabas [an economist at the Bipartisan Policy Center in Washington who works on the center’s Personal Savings Initiative]. “Lower- to middle-income people aren’t privy to those gains. That’s exacerbated by the fact that many of them have taken their money out of the stock market.”

For the full commentary, see:
JOSH ZUMBRUN. “THE OUTLOOK; Market Missteps Fuel Inequality.” The Wall Street Journal (Mon., Oct. 27, 2014): A2.
(Note: ellipses, and bracketed words, added.)
(Note: the online version of the commentary has the date Oct. 26, 2014, and has the title “THE OUTLOOK; Bad Stock-Market Timing Fueled Wealth Disparity.”)

Government Funding Rewards Conformity

(p. 302) Inherent in the system is a mindset of conformity: one will tend to submit only proposals that are likely to be approved, which is to say, those that conform to the beliefs of most members on the committee of experts. Because of the intense competition for limited money, investigators are reluctant to submit novel or maverick proposals. Needless to say, this environment stifles the spirit of innovation. Taking risks, pioneering new paths, thwarting conventional wisdom–the very things one associates with the wild-eyed, wild-haired scientists of the past–don’t much enter into the picture nowadays.

Meyers, Morton A. Happy Accidents: Serendipity in Modern Medical Breakthroughs. New York: Arcade Publishing, 2007.