Why Isn't The $15 Minimum Wage Effective Immediately?

If you're in a trendy, happening coastal city these days, you know that the progressive cause of the moment is raising the minimum wage to $15 per hour.  And thus the poor will magically be raised up to prosperity, paid for entirely by evil exploitative employers who up until now have been woefully underpaying their workers.  Seattle led the way in the higher minimum wage movement in 2014 by raising its minimum to $15, followed closely by San Francisco.  And now New York, not about to be embarrassed by being behind the curve on trendy progressivism, is in the process of enacting its own $15 minimum wage.  As reported by the New York Post on Friday (uh-oh, that was April Fools' Day; but the news conference was on the previous day, March 31, and I think it actually happened) Governor Cuomo has announced that he is "near" a budget agreement with state lawmakers that includes a $15 minimum wage for our state too.

But here's the funny thing:  even though each of these trendy progressive jurisdictions claims to have enacted a $15 minimum wage, none of the new wage requirements has actually gone into effect.  Instead, all of them are scheduled for multi-year phase-ins, with full effectiveness of the $15 level at least several years away in each case.  According to the website of the mayor of Seattle here, its $15 minimum first takes effect on January 1, 2017, but only for employers with 500 or more employees who provide no medical insurance.  Large employers who provide medical insurance get longer, and smaller employers get longer still, so that many employers get until 2021 to reach the $15 level.  The San Francisco $15 minimum, passed by voters in a referendum in November 2014, only kicks in on July 1, 2018.   And in New York, the proposal is for a complicated patchwork of mandates varying by size of employer, location in the state, and maybe other factors.  The earliest $15 minimum will be in New York City in 2018.  Even the very prosperous immediate suburban counties will get at least two additional years, and further upstate, even longer. 

OK, here's my question:  If enacting a minimum wage just redistributes free money from evil, exploitative employers at no real cost to anyone, why not make it effective immediately?  What are you afraid of?  To put it bluntly, is there a down side here, or isn't there?  And if there is a down side, how does putting the increase off by two years (or four, or six) make that down side any less?

The fact that the enacted increases in the very most progressive jurisdictions in the country will only take place several years out is a clear admission that even the most ardent proponents of the increases understand that of course there is a down side.  And in addition, they also admit there is a downside when they draw the line on the increase at $15.  If there were no downside, then the minimum should be at least $20.  I mean $30.  I mean $100.  Or whatever.

And if there is a down side, on whom does it fall?  On the 20-year-old white college kid from a prosperous family whose parents can call in connections to get him a job even at the new raised minimum?  Or on the 20-year-old non-college-attending black kid whose parents have no connections to call in?  If you don't think the answer to those questions is completely obvious, you might consider the February 20, 2016 editorial from the New York Times titled "The Crisis Of Minority Unemployment."   Citing a study from something called the Great Cities Institute of the University of Illinois at Chicago, the Times points out that in recent years in New York and Los Angeles, close to 30% of black men aged 20 - 24 have been out of both work and school; and in Chicago the figure has been closer to 50%.  And those figures are before any recently-enacted minimum wage increases.  With a high enough minimum we could get those young-black-male unemployment rates to close to 100%!  The Times, of course, is an advocate of the $15 minimum wage.  Don't worry; according to the Times, we could mitigate the effect of the higher minimum wage with employer subsidies paid for with free federal money from the infinite credit card.

By delaying the effective date of the minimum wage increase, I think the proponents are trying to make it so the public will not perceive the cause and effect between the change in the law and the increase in minority unemployment many years later. 

But the $15 minimum wage has the potential to greatly enhance the visible contrast between the high-tax high-spend high-regulation "blue model" jurisdictions, and the low-tax, low-spend low-regulation "red model" jurisdictions.  So far, you really need to be a follower of the statistics to understand how much more successful places like Florida and Texas have been in recent years than places like New York and Illinois.  To all appearances, for New York, the City is doing rather well, and living here you don't realize that upstate is rapidly hollowing out and overall the population of the state has stagnated for decades.  Similarly in Illinois, the Loop and North Side of Chicago seem just fine, while no visitor would ever travel down to the dozens of square miles of abandonment on the South Side.  Losing population?  If you hang out where everybody hangs out, it's imperceptible to the eye.

But if places that enact the $15 minimum suddenly have black youth unemployment and idleness rates 10 and 20 and even 30 percent higher than other places that don't, that will be very hard not to notice.  Will it happen?  The obvious prediction is that it will.  As noted here several months ago, in Puerto Rico, where the federal minimum wage even at $7.25 per hour is around 70% of the median wage, the labor force participation rate is a full 20 percent below the rate on the mainland (42% versus 62%).  Why will the result be any different in New York, San Francisco, or Seattle?       

The Joke Of Criminalizing Money Laundering -- Part II

Who was it who first came up with the bright idea that if we just criminalize something called "money laundering," and make all the banks involuntary deputies of law enforcement, spying on their customers behind their backs 24/7, we can put a stop to all the nefarious criminality and perfect the world?  The game started with the disgusting Bank Secrecy Act back in 1970, and moved to a new level with the USA PATRIOT Act in 2001.  Today, banks in the U.S. file close to 2 million annual "Suspicious Activity Reports" on their customers.  Did they file one (or a hundred) on you?  You don't know, because they're not allowed to tell you. 

Did you notice that along the way the law enforcement authorities have achieved victory in the drug war?  Yeah, neither did I.  And drug dealing at least involves substantial amounts of real money.  Nobody can even give a coherent explanation of how a money laundering regime that can't make a dent in the multi-billion dollar drug business is supposed to stamp out terrorism, which generally does not involve any substantial amounts of real money.  In this post last June I called criminalization of "money laundering" a "joke" and "an exercise in total futility."  Of course, it may not seem like a joke to people like former House Speaker Denny Hastert, who found himself prosecuted for "money laundering" for engaging in the distasteful but otherwise perfectly legal activity of paying blackmail.  And then there are the banks, who have paid, in the aggregate, in excess of $20 billion in fines over the past decade for supposedly violating anti-money-laundering regulations.  For example, HSBC paid a fine in excess of $1.9 billion in 2012, said to arise mainly out of dealings in Mexico.  (You mean they have drug dealers down there?  Who knew?)

Bringing us up to date on the activities of our genius government, the Wall Street Journal yesterday helpfully carried a front-page article headlined "U.S. Terror-Finance Rules Drive Money Underground."   And guess what?  It seems that after paying the 20 or so billion, the banks have decided that it pays not to take chances, and they have moved to declining to do business with any potential customer who looks the least bit sketchy.  

U.S. banks have closed thousands of accounts held by people and organizations considered suspicious, high-risk or difficult to monitor—including money-transfer firms, foreign banks and nonprofits working abroad. Closing accounts for fear their customers may be up to no good evicts from the financial system the innocent as well as those the U.S. government would most like to watch, a consequence not anticipated by Washington.  Comptroller of the Currency Thomas Curry this month acknowledged the potential danger. “Transactions that would have taken place legally and transparently may be driven underground,” he told an international conference of bankers and regulators in Washington.  

Really, who could have guessed that such a thing might happen?

The Journal reporter then tracks the activities of one Abdi Warsame, a Somali native who works for a Midwestern money-transfer company.  Seems that the company has been shut out of the banking system.  No problem!  Warsame neatly stacks and wraps some tens of thousands in mid- to high-denomination dollar bills, packs them into his luggage, and flies off to Dubai.  Along the way, he files all the appropriate forms with the U.S. and Dubai authorities and goes through all the security and customs checks.  Upon his arrival in Dubai, the money disappears into the underground system.  Congratulations to our genius government functionaries!  Really, where did they think this was going?

But don't worry -- as reported here just a few days ago, the government geniuses already have the new plan at the ready, namely the abolition of cash.  Yeah, that'll work!  It's like they have never heard of Bitcoin.  Or then there's my favorite, gold.  At the current price of about $1250, $1 million in gold weighs about 50 pounds -- not so much more than $1 million in hundred dollar bills (which weighs about 20 pounds).  OK, it's a little awkward, but still not so much that you can't get it into your carry-on bag for the flight to Dubai. 

Government-Tampered Temperature Data Goes To The DC Circuit

In a famous column in 2006 titled "How to identify American totalitarians," author Dennis Prager quoted what he called the old Soviet dissident joke: "In the Soviet Union, the future is known; it’s the past that is always changing."  Prager cited examples of the likes of the ACLU and anti-smoking activists brazenly altering things from the past to support their narratives.  But of course the far more serious totalitarian threat comes when the government makes up facts about the past in its quest to expand its own power and take freedom away from the people.

Now, our own government would never do anything like that, right?  Right??????  If you think that, then you obviously haven't been reading my long-running series titled "The Greatest Scientific Fraud Of All Time," the most recent entry of which (Part IX) appeared in December.  That series has included links to some dozens of articles and blog posts where mostly independent researchers have gone out and compared raw temperature data from hundreds of places around the globe to the current data sets published by our government functionaries at the likes of NASA and NOAA.  And somehow, when these comparisons are made, the results are always the same, over and over again: the government agencies have altered older data to be cooler, thereby introducing into history exaggerated warming trends not present in the raw data.

As just a few examples from the series, in Part IX I linked to descriptions by German journalist Gunter Ederer describing the recent (November 2015) work of Professor Friederich Ewert that included checking raw data of large numbers of randomly-sampled stations against current NASA-GISS data.  In Part III I discussed the work of a guy named Paul Homewood as to massive lowering of old temperatures from Paraguay and other locations.  In Part II I dealt with the extensive work of a blogger named Tony Heller in documenting literally dozens of instances of lowering old temperatures from around the world.  Follow this link to get an idea of the massive extent of this.  Consider this from the description by Ederer of Ewert's 2015 work:

Ewert painstakingly examined and tabulated the reams of archived data from 1153 stations that go back to 1881 – which NASA has publicly available – data that the UN IPCC uses to base its conclusion that man is heating the Earth’s atmosphere through the burning of fossil fuels. According to Ederer, what Professor Ewert found is “unbelievable”:

From the publicly available data, Ewert made an unbelievable discovery: Between the years 2010 and 2012 the data measured since 1881 were altered so that they showed a significant warming, especially after 1950. […] A comparison of the data from 2010 with the data of 2012 shows that NASA-GISS had altered its own datasets so that especially after WWII a clear warming appears – although it never existed.”

Ederer writes that Ewert particularly found alterations at stations in the Arctic. Professor Ewert randomly selected 120 stations from all over the world and compared the 2010 archived data to the 2012 data and found that they had been tampered to produce warming.

(The work of Ederer and Ewert is in German, but the above can be found at NoTricksZone here.)

Now, what could be the purpose of the government altering temperatures of the past substantially downward?  Really, does anybody care what the temperature in Nome, Alaska was in 1910?  Well, there is the fact that EPA has declared to the world in its 2009 "Endangerment Finding" that CO2 from fossil fuels is a danger to humanity because it is warming the planet.  And EPA has used that "Endangerment Finding" as the basis for what it calls its "Clean Power Plan," (CPP) otherwise known as a massive seizure of power unto EPA, a federal takeover of the electric-power generating sector of the economy, as well as an effort to shut down the entire American coal industry from mining through power generation.

In one of the more consequential litigations going on in the country right now, some 27 states, plus numerous utilities that burn coal and numerous coal companies have sued EPA in the DC Circuit seeking invalidation of the CPP.  Early this year those petitioners asked the DC Circuit to stay the CPP pending the result of the litigation, and the DC Circuit refused the stay; but then the petitioners went to the Supreme Court for the stay, and in February they got it.  Now the case is before the DC Circuit for consideration on the merits.  And a couple of days ago there arrives on my desk a copy of EPA's main brief in the case justifying its position that the CPP is a valid exercise of its authority.  The brief is a massive effort at impenetrability, 175 pages of bureaucratic doublespeak.  But as relevant to this post, we find this at page 9:

Climate change is already occurring.  Nineteen of the twenty warmest years on record have all occurred in the past twenty years, and 2015 was the hottest year ever recorded.  Recent scientific assessments have found that climate change is damaging every area of the country.  80 Fed. Reg. at 64,686-88.  These assessments make clear that substantially reducing emissions now is necessary to avoid the worst impacts.

And what is the support for that statement that "2015 was the hottest year ever recorded"?  A footnote gives us these two links: https://www.climate.gov/news-features/videos/2014-global-temperature-recap; https://www.climate.gov/news-features/featured-images/no-surprise-2015-sets-new-global-temperature-record.  These are precisely the government press releases based entirely on the altered surface-temperature record discussed above.  And, despite the vast amount of discussion all over the web about the data alterations and the fact that they always go one direction and that the alterations turn a record that does not support the government's narrative of unusual warming into one that seemingly does, this brief simply does not mention the subject of the alterations at all.  The altered record is just presented to the DC Circuit as incontestable fact.  Hey, it comes from the perfect, all-knowing government functionaries!

Also somehow completely omitted from the government's brief is any mention of the satellite and balloon data sets that are inconsistent with and contradict the surface temperature record on which the government relies.  In a post on January 22 titled "It's Easy To Prove Your Hypothesis If You Just Pretend That The Adverse Evidence Does Not Exist," I commented on the very NOAA press release now used by EPA as the support for its position in court:

Everybody who follows this also knows that the ground-based thermometer records have been greatly "adjusted" by the people who publish them, and that all or nearly all of the increase in temperatures in recent years is in the adjustments and not present in the raw data.  So wouldn't you think that NOAA in its release would at the minimum acknowledge the existence of the other contrary data and attempt somehow to deal with the contradictions?  Well, take a look at that release; and, if you will, follow the link through to their full end-of-2015 Report.  You will not find the slightest mention that the satellite or balloon data even exist.  And of course that also means that you will not find any attempt to explain the discrepancies between and among data sets, or to justify why one is better than others.

That post also includes a chart of the satellite and balloon temperature data as presented by John Christy of UAH in his recent Congressional testimony.  The chart shows that the satellite and balloon temperature sets agree closely during the periods for which they co-exist.  Now, the satellite and balloon data sets on the one hand, and the altered surface temperature data set on the other hand, cannot both be right.   The government's presentation only of the one record it prefers, known to be filled with massive alterations all going the direction it needs them to go to support the narrative, without any mention or discussion of discrepancies as against other data sets, is the height of unethical conduct.

On the other hand, this approach maximizes the government's chance for success in a huge seizure of power.  Do they really care about anything else but that?  

Science Versus Orthodoxy Enforcement In The World Of Nutrition

Readers interested in the subject of orthodoxy enforcement in fields marching under a supposed banner of "science" are undoubtedly aware that the problem extends far beyond the archetype of anthropogenic global warming (AGW).  I've previously written several times about orthodoxy enforcement in the area of nutrition and dietary guidelines, including in January a review of the recent book by Nina Teicholz called "The Big, Fat Surprise."   

This subject is back in the news.  In early April, something called the Consumer Federation of America has scheduled its big annual National Food Policy Conference.  Ms. Teicholz was to be one of the speakers.  Late last week, she got disinvited.  Politico had the story on Friday:

In a sign that the nutrition space is as defensive as ever, Nina Teicholz, an author who has publicly criticized the science behind the government's low-fat dietary advice, was recently bumped from a nutrition science panel after being confirmed by the National Food Policy Conference. . . .  The event is set to take place in Washington next month. . . .  Teicholz said she was disinvited after other panelists said they wouldn’t participate with her.     

Now, you might ask, how does it even happen that we have something described as "national food policy" that rises to a level that we need to have "national food policy conferences"?  Aren't the American people capable even of eating on their own without incessant meddling from government busybodies?  Really, those are excellent questions.  Nobody even knows where the government claims to have gotten the authority to issue dietary guidelines and otherwise meddle in "food policy."  Try to find that one in the Constitution!  But once they got into the field, you can be sure that the bureaucrats and the lackeys they fund want to crush anybody who dares to undermine their authority and prerogatives. 

It seems that Ms. Teicholz has lined up some funding from something called the John and Laura Arnold Foundation to promote her countering of official government diet dogma.  Is there any problem with that?  Arnold is a former hedge fund guy who seems to have made his money mostly in oil and gas trading -- in other words, not a guy with any particular interest in the food business that he is pushing.  (Although, suppose he had such an interest; why would that be a problem either?)  A prior article from Politico from last October describes the horror of government lackeys and minions that any private actor may get to have some say on their turf.  For example, there's this from former government Dietary Guidelines panel member Barbara Millen:

[Teicholz's] effort is being bankrolled by billionaire Houston philanthropists, John and Laura Arnold. . . .  The lobbying alarms some who fear it will further politicize a process that informs nearly every aspect of how Americans eat, from what millions of school children are fed each day and the advice doctors give to their patients.  “It’s dangerous and it’s harmful,” Dietary Guidelines panel member Barbara Millen said of the campaign.

You see, in the world view of Millen and her ilk, government getting into an area in which it has no business whatsoever is completely apolitical, whereas any private actor trying to make a private pitch to the citizenry is "politicization" that is "dangerous and harmful."  Government meddling, after all, has nothing to do with politics, but is just the perfect, all-knowing experts (such as, of course, Ms. Millen herself) directing the stupid populace to do what the experts know is the right thing.

Or consider this from Marion Nestle of NYU, another draftsperson of the prior criminally-incompetent government dietary guidelines:

Marion Nestle, a New York University nutrition professor who took part in drafting previous guidelines, also questions whether Teicholz, who has staked out such a strong point of view, can be a credible advocate for science.   “How can she be so certain?” Nestle asked, referring to Teicholz’ advocacy of a diet high in saturated fats. “What I find so distressing is that this just further confuses the public.”

Yes, according to Nestle, the mere staking out of a "strong point of view" disqualifies any and all private persons from having a say in the public debate.  On the other hand, being one of the people responsible for prior government guidelines that are now shown to have been dead wrong and to have contributed to epidemics of things like obesity and diabetes -- and having a powerful interest to be sure that your prior incompetent work doesn't lead to professional disgrace -- that's not disqualifying at all!  Hey, Nestle was working for the government at the time.  The government is perfect by definition!

Teicholz had a very apt comment on the situation:

“Silencing the conversation won't work forever.”

She's right about that.  But meanwhile, the taxpayer-funded grants continue to flow to the Millens and Nestles of the world.
 

What Are Illinois's And Chicago's Options After The Latest Pension Ruling?

Last May I reported on a decision from the Supreme Court of Illinois that struck down as unconstitutional (under the Illinois State Constitution) a pension reform law that the Illinois legislature had enacted in 2013 in an attempt to rescue the state's woefully underfunded employee pensions.  A few days ago another Illinois statute, this one enacted in 2014 and intended to effect a similar rescue of various pension plans of the City of Chicago, reached the Illinois Supreme Court, and promptly met the same fate.  Here is a copy of the court's new decision.    

How badly funded are Illinois's employee pension plans?  Even though they put out regular annual reports, it's hard to get an exact handle on that because the reports are so lagged.  This article from Crain's Chicago Business from October 2015 takes numbers from the then-recently-issued annual reports for 2014.  According to the article, as of the end of 2014 the Illinois pension plans were the worst-funded of any state's in the country, at 39.3%.  That's the most recent number we have, now about 15 months old; but that was after the big run-up of the stock market in 2014.  From the beginning of 2015 to now the market has been nearly flat (as against assumed annual returns of 7-8%), and Illinois and its municipalities have continued to fail to put in so-called "actuarially required" contributions.  The funds could easily be less than 35% funded today, maybe even closer to 30%.  At that level, no amount of a booming stock market by itself will ever rescue these funds.

The hurdle that the rescue statutes need to clear is the provision of the Illinois Constitution (Article XIII, Section 5) that reads as follows:

Membership in any pension or retirement system of the State . . . shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.

As I pointed out in the May 2015 article, the best hope the legislature would have of trying to meet the constitutional test would be to pass a statute that explicitly protected all benefits accrued up to the effective date of the statute, and altered only benefits going forward from that date.  But, for reasons that I don't understand, the legislature did not attempt to meet that criterion in its initial 2013 statute, nor did it try to meet the criterion in the 2014 statute at issue in the new case.  For example, as set forth in the Supreme Court's decision,

The provisions in Public Act 98-641 . . . reduce the value of annual annuity increases, eliminate them entirely for certain years, postpone the time at which they begin, and completely eliminate the compounding component. The Act expressly states that these changes “apply regardless of whether the employee was in active service on or after the effective date of this amendatory Act."

In other words, they tried to cut pension payments even for those who had already retired, and therefore whose pension benefits, like it or not, were already fully accrued.  In partial defense of the legislature, this statute had already been enacted at the time of the Illinois Supreme Court's prior decision in 2015.  But still, I would have thought they would at least have made an effort to segregate out those cuts that only applied to as-yet-unaccrued benefits, in an effort to get those sustained; but they did not do that.

And now, with two rather angry and impatient, and unanimous, Illinois Supreme Court decisions on the books, the prospects for getting the court to recognize the already-accrued versus yet-to-be-accrued distinction have to be diminished.  Pension crises move with agonizing slowness, but some are predicting that the earliest of the Illinois funds to run out of money and start bouncing checks could hit that point in the early 2020s.

So Illinois has now lost three full years in its attempts to reform its pensions, and with each passing year its options get fewer and worse.  Of course, what the employee unions want is massive tax increases.  Short of that, what's left?

• A reform that recognizes the already-accrued/yet-to-be-accrued distinction.  At this point, such a reform would basically have to end future accruals, perhaps by replacing the defined benefit plans entirely with defined contribution plans.  The Illinois Supreme Court should approve this, but that doesn't mean that they will.
• Massive firings of senior employees and replacing them with new employees who have only defined contribution plans.
• Or, Illinois and Chicago can just stop putting money into the plans and see what happens.  When New Jersey recently tried that approach, its Supreme Court upheld the governor.  Will Illinois's do the same?

Meanwhile, Chicago's population, after what had seemed to be a turnaround, appears to have resumed its long-term decline.  Chicago's population reached its peak in 1950 at 3,620,962, and then went into an extended decline.  By 1990 it was 2,783,911.  After a small recovery in the 90s, decline resumed.  By 2010 the population was 2,695,598.  The Census Bureau has not yet released a 2015 estimate for Chicago, but just a few days ago it released an estimate for Cook County (the county that includes Chicago) that showed the entire county losing population.  Previously, Chicago's losses had been more than offset by gains in the remainder of Cook County. 

If you move your business into Illinois or Chicago, you voluntarily agree to take on the burden of the underfunded pensions, meaning that you agree to pay taxes now and in the future for services that were rendered in the past when you weren't around.  Now, why would rational people do that?

Review Of Auerbach And Kotlikoff On Income Inequality

In the current issue of The New Republic, economists Alan Auerbach and Laurence Kotlikoff have an article titled "We've Been Measuring Income Inequality Wrong."   The article is a short version of a longer scholarly paper that appeared in February as part of the NBER Working Paper series.  Several readers wrote in to ask me to take a look at A&K work and provide my thoughts, so here goes.

I should begin by summarizing my own views on income inequality.  (You can read all you want by following my Income Inequality tag.)  Basically, I accept that income inequality on the low end, otherwise known as poverty and/or extreme poverty, is at least potentially a problem.  I do not accept that income inequality on the high end, otherwise known as rich people and/or very rich people, is a problem. It's the hope and possibility that one might get rich that drive human ambition and creativity, and that have enabled countries like the United States, that allow private wealth accumulation, to become wealthy, to the benefit of all.  Allow the worst of human instincts like envy and jealousy to get the better of you, and you're going down the road of Venezuela.

Anyway, if you take as your measure of income inequality the numbers put out by, for example, the Census Bureau, you get what appears to be a dire picture for a not-small number of those at the bottom.  Using the yardstick of "income" as Census defines and measures it, there appear to be lots of people down there with little to no income at all.  How are they even eating?  The simple answer is that the Census Bureau doesn't count all kinds of things that represent real  resources to low income people but aren't included in the artificial Census definition of "income."  For lots of detail, read this article I wrote back in 2014.

A&K have undertaken what I would call a serious effort to correct the completely phony Census "income inequality" numbers to account for as many as possible of the redistributions already built in to existing major government programs.  At the top, they make big subtractions, mostly for taxes paid; and at the bottom, they make big additions, mainly for government redistribution programs that Census systematically fails to count.  The results:

First, spending inequality—what we should really care about—is far smaller than wealth inequality. This is true no matter the age cohort you consider. . . .  The fact that spending inequality is dramatically smaller than wealth inequality results from our highly progressive fiscal system, as well as the fact that labor income is distributed more equally than wealth. . . .  To be clear, spending power remains extremely unequal. . . .  Another key finding is that U.S. fiscal policy acts as a serious disincentive to work longer hours or harder for more pay.    

Fair enough.  I would note that people who follow the government numbers on these things would clearly not be surprised that this would be the result, particularly because the BLS puts out numbers independent of the Census Bureau, including something called the Consumer Expenditure Survey, broken down by income decile.  And those numbers have long shown that, for example, those in the bottom decile spend about 4 times as much as their "income."  Here is a BLS chart for 2014.  I would still applaud A&K for doing a lot of detailed and quantitative work, and particularly for quantifying the effects at the bottom of many of the government handout programs that Census systematically omits.

And yet, for all their good and hard work, I would still say that the A&K numbers way overstate income inequality, particularly in under-counting the resources available to those at the bottom.  To get the best indication of their methodology, I went to the NBER paper, which at page 38 contains a lengthy list of all the adjustments they made to government income data:

TFA [the A&K adjustment methodology] also handles all major transfer programs taking full account of their assorted incomes and asset tests. The list here includes Social Security retirement, spousal, child-in- care spousal, divorcee spousal, widow(er), divorcee widow(er), mother (father), child, and child survivor benefits (all subject to the family benefit maximum), Medicare, Medicaid, Food Stamps, Supplemental Security Income, Transitional Aid to Families with Dependent Children, and Social Security Disability benefits. The program also considers in fine detail Social Security’s earnings test, the adjustment of the reduction factor, early benefit reductions for retirees, spouses, widow(ers), the delayed retirement credit, deeming, the re-computation of benefits, the Windfall Elimination Provision, the Government Pension Offset provision, and all other major and minor factors associated with Social Security’s benefit provisions. . . .  

Whew!  That sounds rather comprehensive, doesn't it?  Actually, it's not even close.  The government has so many zillions of handout programs that literally nobody can keep track of them, no matter how hard they try.  If I might point out a few things that A&K do not mention:

• Housing subsidies are of course my favorite, although that may be because I live in Manhattan.  As I pointed out just Tuesday, we have lots of people in Manhattan who get annual housing subsidies of $50,000 and up per family, and some in my own neighborhood who get in excess of $100,000 per family.  I'm measuring this by rental value of nearby apartments, not by the size of the HUD and NYCHA budgets.  
• A&K point out that they have taken account of the Food Stamp (or SNAP) program.  But that's only the start of federal nutrition programs.  SNAP is about $80 billion per year.  How about WIC ("Women, Infants, Children"), which is another $8 billion; and the school lunch program, which is another $13 billion; and the school breakfast program, which is another $4 billion?  And there are plenty more food distribution programs, many funded by state and local governments and/or private charities.  
• How about job training programs?  According to a big government study in 2011 that I cited here, there were 47 such programs in 2009, costing some $18 billion.  Supposedly Joe Biden was going to reform them.  Have you heard anything about that since?  Do these things count as resources available to low income people?  If they don't, why do we have the programs?
• Education aid?  Perhaps it's fair not to count the $80 billion spent by the federal Department of Education on subsidies to state and local K-12 education.  But how about the interest subsidies on student loans for college?  With over $1 trillion of such loans now outstanding, the interest subsidies have to be at least $50 billion annually.  Of course, if you are a low income student, you get a Pell grant.  That's another about $30 billion a year, mostly for the low-income.  Should we mention the value of privately-funded need-based scholarships and fellowships?
• Energy assistance, clothing assistance, etc., etc., etc.
• Dare we mention private charity?  Why doesn't that count as resources available to low-income people.

And yes, I still haven't gotten to the big one, the one that is clearly bigger by a multiple than all the others put together.  I'm talking, of course, about that fact that A&K use as the basis for all their calculations the officially reported government numbers.  And these numbers have two gigantic, enormous, overwhelming holes:

• When the government surveys the people for their income and/or expenditures, they just take the numbers that people put down on the forms, without any kind of double check.  Of course people at the low end massively understate their incomes.  Wouldn't you?  Would you really trust the government not to use your survey response to take away some benefit you are receiving?
• And then there's the whole subject of the illegal and underground economy.  That is completely omitted from all government numbers.  In this post I cited a figure of $2 trillion per year for the illegal and underground economy.  Divide it up equally among all families in the bottom half of the income distribution, and it's around $20,000+ per family. 

My bottom line:  Unlike many people who call themselves "economists" but are really just shills advocating for the growth of the government (Paul Krugman comes to mind), I think that A&K are serious people trying to do a serious job.  But the fact remains that their work is entirely derived from government numbers, and for that reason is subject to the inherent flaws in the government numbers.  And the government and everybody in it is a shill advocating for the growth of the government.  And all government numbers on income and poverty are intentionally designed and constructed to massively overstate poverty and understate income and resources available at the low end in order to further the advocacy for the growth and expansion of government redistribution programs.

So A&K have done a huge amount of detailed work with a great deal of detailed calculations on effects of complex things like the tax structure and the Social Security program, but then they've left out a few trillion of adjustments that are clearly essential to getting the full picture but are not available in any government numbers.  Yes their work is a little useful, but how about getting to the big stuff?  Yes, you need to guesstimate it.  There's no other way.  You might as well admit that the apparent precision of your other calculations is an illusion.

As to the top end of the income distribution, I have no major reasons to believe that the A&K calculations are wildly off.  Basically, the bottom line is, after taxes the rich are only about half as rich as they appeared before, but they are still very rich.  Well, that's what makes capitalism go.  It doesn't bother me.