Why are the stories about U.S. corporate tax avoidance about corporate greed rather than non-corporate greed?


“Ten Percent of S&P 500 Companies Avoid Paying U.S. Taxes” is a Bloomberg story that a friend cited on Facebook in disgust: “Plutocracy on parade.” The article notes that “At 35 percent, the U.S. corporate rate is the highest in the developed world.” (Actually closer to 40 percent if you include state taxes on corporate income; see KPMG and compare to the European average of less than 20 percent) So there are two potential stories here:

  1. American corporations, their owners, and their managers are greedy because they are trying to avoid double taxation of profits by converting to REITs or they are trying to avoid the U.S. corporate tax on worldwide operations by moving to low-tax foreign jurisdictions.
  2. Americans who don’t invest or work in private corporations are the world’s greediest people when it comes to demanding a share of the profits generated by fellow citizens who do invest and work in such corporations.

Story #1 seems to be all that we ever get. Nobody seems to be interested in why Americans who aren’t involved in a company feel entitled to take 40 percent of the company’s profits (and go to the polls to elect politicians who will take it for them) while an uninvolved person in England will content him- or herself with just 21 percent of the profits (KPMG). Nor do reporters interview people in Singapore and Switzerland and ask “Why do you work so hard instead of just helping yourself to more than 17 percent of what your neighbors who are investors or workers in corporations are able to generate?”

How old would you have to be to win an age discrimination lawsuit in Silicon Valley?


As a member of the MIT Class of 1982 my friends are now getting to the age (or beyond) where employers might want to replace them with younger/childless/cheaper/etc. workers. This seems especially likely in Silicon Valley where the cool/valuable companies are seemingly the ones founded by 20-year-olds. Ellen Pao (wrap-up; divorce litigators’ perspective on) started at Kleiner Perkins in 2005. Pao was supposedly 43 in 2012 (Fortune) and thus would have been 36 at the time that Kleiner hired her. Even if she came in with videos of spry 75-year-old relatives doing demanding mental and physical work do we think she would have been hired for that job as a 56-year-old, regardless of race or sex? If not, plainly there is more age discrimination in Silicon Valley than gender discrimination.

The question then becomes what is the threshold age at which a person who had been fired could expect to win a lawsuit under the various federal and state laws that supposedly protect workers from age discrimination? (it is “supposedly” because my business-minded friends say that these laws actually hurt older workers because companies don’t want to hire them and incur the litigation risk)

Universities are doing what they say: Discriminating against white and Asian men


“The myth about women in science” reports on an interesting CNN-conducted experiment. Underneath a photo gallery of mostly childless and/or divorced female scientists and engineers (plus the beyond-awesome Sara Seager, married mother of two!), the article describes how universities actually do what they say they do: discriminate against white/Asian men in favor of hiring female professors in scientific and technical fields. The authors created fictional candidates for academic jobs and got real-world academics to rank them.

In addition to the bias against men the study shows that university employees are thoughtful about avoiding hiring workers whose productivity has been impaired by being on the losing side in the American divorce, custody, and child support system:

When we looked at the effects of lifestyles on hiring, some traditional values emerged. In a competition between a married father with a stay-at-home spouse and an equivalently qualified divorced mother of two preschoolers, female faculty members preferred 4-to-1 to hire the divorced mother, but men felt the opposite. (Note, however, that both genders preferred a divorced mother when she competed against a divorced father.)

(emphasis added) U.S. Census data show that women are more than 90 percent likely to get the children and, with them, the house and the cash going forward. The victorious parent in our winner-take-all system will likely be in a better mood and more productive than the defeated parent. (Also, women are more likely to sue their husbands than vice versa (2.57:1 ratio in the courthouse we surveyed in Massachusetts; closer to a 2:1 ratio elsewhere in the nation), so the divorced woman is, on average, someone who initiated a lawsuit and got what she wanted rather than someone who was sued and lost whatever it was that the plaintiff sought. Why hire a passive loser when you can hire an active winner?)

The article is also interesting because it shows how little faith one should put in what a university professor says:

The prevailing wisdom is that sexist hiring in academic science roadblocks women’s careers before they even start. The American Association of University Professors and blue-ribbon commissions attest to this. An influential report by the National Academy of Sciences in 2006 concluded that “on the average, people are less likely to hire a woman than a man with identical qualifications,”

In other words, people who are paid because they are supposedly wiser-than-average are unaware of basic facts in their own workplace: “the facts tell a different story. National hiring audits, some dating back to the 1980s, reveal that female scientists have had a significantly higher chance of being interviewed and hired than men.”

Maybe this contributes to public skepticism regarding statements by academics regarding the temperature of the Earth 100 years from now. The same eggheads are confidently mistaken about what is going on right in their own building.


America’s Money Newspaper Reports on Child Custody Without Mentioning Money


“Big Shift Pushed in Custody Disputes” is an April 16, 2015 Wall Street Journal article about the potential for states to change how child custody is determined following a divorce, a one-night encounter in a bar, or anything in between. As noted in realworlddivorce.com (rough draft!), most states operate a system in which a judge attempts to figure out who was at least the 51% parent and then designate that person the “primary parent.” The secondary parent will then become a “visitor” with the children every other weekend for a while but, statistically, eventually will lose touch altogether (e.g., after the victorious parent moves to a different corner of the country). This is considered to be “in the best interest of the children.”

We (co-authors of Real World Divorce) discussed this WSJ article and what seems ultimately most interesting is that America’s money newspaper doesn’t mention money. New York and Wisconsin are mentioned. If the plaintiff and defendant parent in those states each make $200,000 per year and there are two children, the winner gets 25% of the loser’s pre-tax income until the children turn 18 (WI) or 21 (NY). Suppose that there are 15 years to go. The winner will be $1.5 million richer at the end of those 15 years than the loser. Maybe it is a lawsuit about what’s best for the children but the WSJ seems curiously blind to the idea that it could be a lawsuit about the $1.5 million.

The financial implications of a change to the system would be enormous. Right now a plaintiff in New York or Wisconsin may get the full cash value out of children while taking care of them only 60 percent of the time, for example. A reduction in care to 50 percent, on the other hand, assuming the equal $200k/year income scenario above, would mean an after-tax loss of $750,000, equivalent to a pre-tax loss of $1.5 million. In other words, those extra 36 days per year right now are yielding nearly $1400/day in tax-free profit.

Victorious litigants are not the only ones who might want to oppose any changes to the states’ systems. In the current winner-take-all states psychologists would hugely suffer from a rule change due to the loss of opportunities to come into court as expert witnesses, Guardians ad litem, etc. Attorneys dependent on custody lawsuits would obviously suffer a large reduction in revenue (though many of the top attorneys that we interviewed were not eager for this money; they get enough business fighting over alimony and other issues and they feel that children are so grievously harmed by custody litigation and financially motivated custody plaintiffs that they would gladly eliminate the entire litigation-based custody and child support system). Divorce is roughly a $50 billion annual industry. In the European countries where children have limited cash value, it is a tiny fraction of that size per capita. How could the WSJ write about the potential for a dramatic change like this without covering the cash angle?

Sony RX100 III


It turns out that the Sony DSC-RX100 III is a significant upgrade from the first version of this camera. Here are the big new features:

  • 24mm wide angle instead of 28mm
  • pop-up/out eyelevel viewfinder for use in bright sun
  • articulating rear LCD (great for tall old people taking pictures of short young people)

Battery capacity was barely dented over 1.5 days and 227 images plus two short videos captured.

Example photos: on Google+ (from a baby shower, a crazy dark and contrasty charity auction for AANE, and a helicopter flight; nearly all using the green idiot mode or yellow double super idiot mode)

California proves that one shouldn’t sweat the small stuff?


I’m wondering if California proves that humans have limited attention and shouldn’t sweat the small stuff. Public health nerds say that clean running water and vaccinated children are the only ways to move the needle on life expectancy. Californians spend more time thinking and talking about health than anyone else in the U.S. except possibly Manhattanites yet they are running out of both of these items.

What did Californians spend their energy on instead? They put signs in all of their restaurants warning patrons that microwave ovens were in use… just in time for the mobile phone revolution and nearly every Californian deciding to hold a microwave emitter up to his or her head. They required all furniture makers to inject upholstery and slather children’s products with fire retardant chemicals (story). Then they decided that these chemicals were toxic and, after four decades of debate, undid the law that had kicked off the nationwide chemical festival.

While draining their reservoirs and ground water, Californians fretted about hazards from gluten, genetically modified foods, childhood nut exposure (what could be worse than a nut rash?), plastic bottles containing BPA, etc. Then they wasted more time, energy, and mental attention reading articles debunking these concerns.

Jobs for people with autism spectrum disorders


Over the weekend I went with friends to a fundraiser for AANE, a group that works “to help people with Asperger Syndrome and similar autism spectrum profiles build meaningful, connected lives.” The focus of this year’s program was on finding jobs for adults. It turns out that TJX, the parent company of Home Goods and T.J. Maxx, has been the regional leader in hiring people with Asperger Syndrome (AS). Most members of the audience were cheering for the young adults who got these jobs and/or the counselors who helped them get and keep them. As someone who has spent time in the business world, I was cheering for TJX management devoting time and resources to integrating the “neurodiverse” into their “neurotypical” workforce.

In a nation where 2.5 million people apply every year for disability payments from one program (SSDI) alone (source), it was startling to hear young adults with AS and ASD stand up and talk about how much it meant to them to have a job, even a minimum wage retail job. With the media full of stories about sex discrimination (see Ellen Pao) and anti-gay discrimination (see Tim Cook), do Americans have any attention left over to think about other kinds of discrimination? Speaker Marie McRae said that the answer is no: “It is easier to be an openly out lesbian than to be out as ‘on the spectrum’ at work.”

There are laws against discriminating against people with disabilities, but they don’t seem to be of much practical help for workers with AS (see this article from 2011, for example). Could it be that the laws actually make it harder to find employers willing to take a chance on a neurodiverse applicant? It seems that most employer-worker matches are unsuccessful. Why incur the litigation risk unless you’re pretty sure that a worker is going to be a long-term success? For an applicant with AS, even advocates for AS/ASD would admit that the chance of a successful long-term career at any given employer is small.

[For those running charities: What kind of auction items did well? Weeks at nearby vacation houses did well. Weeks at far away vacation houses, e.g., in Mexico, did not. Cruises sold at about the same prices you see on the web discount sites. A donated helicopter ride sold in the silent auction for roughly retail price. Sports tickets and “chef coming to your house” sold at substantial markups to retail.]

Book Notes: The Origins of Sex


The Origins of Sex: A History of the First Sexual Revolution covers the changing attitudes toward sexuality that occurred in the 18th Century, plus some spillover before and after.

Prior to this first revolution, the author notes that “Ultimately, the right to have sex, and to form a family, was regulated by the community. … when paupers had children out of wedlock they could be taken away from them.”

Boston was not a great place to party: “In the early seventeenth century, all the colonies of New England enacted harsh laws against unchastity: banishment, imprisonment, severe public flogging, the wearing of scarlet letters and other shaming garments for the rest of one’s life. Many of them, affirming with the founders of New Haven that ‘the Scriptures do hold forth a perfect rule’ of government, followed the Old Testament and made adultery punishable by death.” (Though Glastonbury might have been: “To get a young relative of hers to sleep with men, for example, a bawd called Margery in early seventeenth-century Glastonbury encouraged her ‘that she had a good cunt and bid her make use thereto for if she did not she would do her self wrong, for if ground were not tilled and manured it would be overgrown with thorns and briars’.”)

Commercial sex providers lawyered up:

A deeper problem was therefore the rising legal expertise of hardened sexual criminals. Litigation against such people must always have been particularly difficult; but in the eighteenth century the balance seems to have shifted decisively in their favour. It was dismaying to see how easily lewd and disorderly houses brushed aside justice by ‘the suborning of false witnesses, and perjuries in the open courts’, complained a preacher in 1734. Compared with their opponents, bawds and their associates increasingly had deeper pockets and greater confidence in manipulating the law. An important contributory factor appears to have been the growing involvement of lawyers, whose influence is evident from around the turn of the century in several procedural challenges to the prosecution of whores and bawds.11 By the 1730s it was not uncommon in cases of all kinds for solicitors and barristers to offer themselves for hire to offenders taken before a magistrate, put on trial, wishing to appeal, or looking to sue for damages.

By the middle decades of the century even ordinary street-walkers sometimes had recourse to lawyers, and by the end of the century the legal confidence of some of them was remarkable. In 179I, when one young woman was picked up by Viscount Dungarvan and the transaction between them went wrong, she promptly sued him for theft. She lost, but only after an extraordinarily long trial, lasting almost six hours. For an illiterate London prostitute to have put an aristocratic client on trial for his life over such a matter would have been inconceivable in any earlier age. (Her name was Elizabeth Weldon, alias Troughton, alias Smith. When cross-examined she spoke frankly and confidently about her life and profession. Her attorney had been recommended to her by her hairdresser.)

Gay rights were substantial in the 18th century:

A similar mindset appears to have underlain the first extended public defence of homosexual relations in English, Thomas Cannon’s Ancient and Modern Pederasty Investigated and Exemplify’d (1749), which, disingenuously pretending the custom was now universally ‘exploded … and disowned’, described it as ‘that celebrated passion, sealed by sensualists, espoused by philosophers, enshrined by kings’, and set out to ‘discuss it with freedom, and the most philosophical exactness’. As Cannon pointed out in his introduction, ‘every dabbler knows by his classics … that boy-love ever was the top refinement of most enlightened ages.’ … Especially in private, homosexual freedom was also justified with growing confidence as natural, harmless, and commonplace.

Knowledge of the human body was imperfect:

Because women’s easy arousal was taken for granted, it was also generally believed until the eighteenth century that female orgasm was essential to pregnancy: without it, no child could be conceived.

It equally explains the breathless speech of the maidservant Anna Harrison, who in the 1690s supplemented her income through casual sex with acquaintances. ‘Pray make haste, make haste, make haste,’ she would exclaim, as a man penetrated her body, ‘I am afraid you should get me with child … no, no, I must take care for that, ‘tis a very troublesome thing to have a child, and no father, who owns it.’

By 1800, however, exactly the opposite idea had become firmly entrenched. Now it was believed that men were much more naturally libidinous, and liable to seduce women. Women had come to be seen as comparatively delicate, defensive, and sexually passive, needing to be constantly on their guard against male rapacity. Female orgasm was no longer thought essential to procreation.

Then, as now, cash was exchanged, but attitudes towards vendors varied with the era:

As the East End prostitute Anne Carter put it in 1730, what she did for a living was not the desperate resort of a ruined woman, but simply the exchange of money in return for ‘the satisfaction of her body … according to contract’.

Throughout the nineteenth and twentieth centuries, this new way of regarding prostitutes – not as wilful, independent sexual agents, but as the victims of seduction, entrapment, and impoverishment – was to remain the overriding view of sexual trade.

In the work of more radical thinkers such as Mary Hays and Mary Wollstonecraft the critique went further still, and prostitution sometimes was held up as an epitome of all female suffering. In Wollstonecraft’s unfinished novel The Wrongs of Woman, when the protagonist hears the horrific story of a former prostitute, it makes ‘her thoughts take a wider range … she was led to consider the oppressed state of women’ more generally. Such assertions had particular force in the difficult economic climate of the 1790s. Yet by then the idea that inadequate opportunity of employment was one of the main causes of prostitution had been long established. ‘Women have but few trades and fewer manufactures to employ them’, it was observed in 1758: small wonder that so many ended up as whores.

The rise of the word ‘prostitute’ itself epitomized this development. Before 1700 it was not a term often used, or differentiated from general notions such as ‘whore’ or ‘harlot’. In the course of eighteenth century it took on a much sharper definition. As the focus of public policy narrowed from whoredom in general to the problem of the unchaste poor in particular, ‘prostitutes’ and ‘prostitution’ became pre-eminent categories in the classification of immorality.

The best way into these questions is through one of the most striking novelties of eighteenth-century culture: a growing public fascination with the lives of low-born whores. Around 1700 this would have been unimaginable. Even in London, few prostitutes ever became famous enough to be widely known or written about. By the end of the century, however, even as ever-greater stress came to be placed on the sexual passivity of respectable women, a whole culture of celebrity had grown up around their most immoral counterparts. Their actions were routinely reported in newspapers and magazines, their personalities analysed in pamphlets and poems, their portraits painted, engraved, and caricatured. So ubiquitous did this type of material become that a few decades later it gave rise to a new term, ‘pornography’, literally meaning the description of harlots.

Think that tabloid stories about the sexual escapes of the miscellaneously famous are new?

In the case of sexual celebrities even the most apparently trivial incident could be amplified a hundredfold. When in March 1759 Kitty Fisher was thrown off her horse whilst riding in St James’s Park, it inspired months of public comment, songs, verses, pictures, pamphlets, and entire books

Above all, there was an immense new appetite for biographies of real people. The eighteenth century was the first age of biographical dictionaries, of regular obituaries, of collected letters, and of published memoirs on a large scale.

This was also the age in which scandalous women first published real autobiographies and vindications of their own behaviour. Such writings served a variety of purposes. They allowed the author to present a favourable picture of herself to the world, and to name and shame her enemies. They earned her money from eager readers and booksellers. Most lucrative of all was the practice of blackmailing former lovers and clients, by threatening to publish their names and letters. This was one of the central aims of the serialized Apology of the courtesan Teresia Constantia Phillips, which was a runaway bestseller when it started appearing in 1748. In the same year were published the first two volumes of the Memoirs of Laetitia Pilkington, denounced by her estranged husband as ‘an incorrigible prostitute’. By 1800 the genre had become well established. When Margaret Leeson, the most fashionable prostitute and brothel-keeper of eighteenth-century Dublin, found herself down on her luck in the 1790s, it was thus obvious to her what to do. Like any modern celebrity seeking to capitalize on her moment of fame, she began publishing her memoirs. In three volumes, over several years and several hundreds of pages, she told all, drawing on her extensive private papers, accounts, and correspondence. It was a heady brew. There was the inevitable narrative of her own seduction into unchastity and courtesanship, with vignettes of her many keepers; the even fuller story of her life as a madam to some of the richest and most powerful men in the kingdom; copious tales of high jinks in high society; letters from her lovers; histories of all the famous prostitutes she had known; and endless details of sexual commerce and scandal (see illustration 50). No wonder the work was ‘bought up with the greatest avidity’.3

In 1781, the actress, author, and feminist Mary Robinson, who also happened to be one of the most celebrated courtesans of her day, publicly threatened to publish the letters of her former lover, the Prince of Wales – until she was granted a ‘reward’ of £5,000 and an annuity for life. In 1806, when the Duke of York cast off his mistress, Mary Anne Clarke, without an adequate financial settlement, she likewise threatened to publish details of their affair. … Her reward was a gigantic pay-off from the government (a lump sum of £10,000, and large annuities for life for her and her daughter), in return for the suppression of this dangerous text … The great courtesan Harriette Wilson went further still, maximizing her profits through a combination of extortion and titillation. First she announced the imminent appearance of her memoirs, which caused consternation amongst her innumerable former lovers, not least the king. Next she wrote privately to each man, threatening to expose him unless he immediately sent her hundreds of pounds. This tactic alone netted her several thousand pounds.

The pendulum swung back in the 1800s:

By the 1820s, most commentators agreed that public manners had become more decorous in recent decades, and sexual vice more restrained

And many historians would now concur that this ‘Victorian’ avowal of strict boundaries on sexual freedom, and the repression of various forms of sensuality, lasted well beyond 1901–indeed, that it was a dominant feature of western sexual culture until the 1960s. So pervasive did this outlook become that it gradually affected sexual relations even within marriage. Between 1800 and 1920, for example, rates of childbirth in most western countries plummeted by fifty per cent or more. This was a permanent change, and it appears to have been brought about not principally by any innovation in birth control, but by the mass adoption of techniques of sexual restraint within settled relationships–abstinence, limits on intercourse, the use of coitus interruptus.

A vital component in this re-emphasis on discipline was the relative desexualization of women. This book has tried to explain the eighteenth-century origins of this remarkable trend: but it reached its fullest development in the nineteenth and twentieth centuries. For women of all classes, sexual ignorance and passivity came increasingly to be valued as essential components of respectable femininity and heterosexual love.

The final key feature of modern boundaries on sexual freedom was the growing frequency and harshness with which homosexual men were persecuted, both legally and socially. … Throughout the nineteenth century, there were hundreds of prosecutions and convictions per year [in England] for sodomy and homosexual indecency.

This book came out in 2012, long before publications such as the New York Times became saturated with reports of sexual activities among college students and debates about how to control them. But the text makes it clear that, even within a single society, it is hard to create long-term agreement about what kinds of sexual behavior are acceptable. So we shouldn’t be surprised if we are covering the same ground that the English covered in the 1700s.

More: Read The Origins of Sex: A History of the First Sexual Revolution.

Walter Scott, child support defendant, earned about $800/month


An April 10, 2015 article in The Post and Courier (Charleston, SC) by Lauren Sausser titled “Walter Scott dogged by system that ‘criminalizes’ debt” gives some more information about the man who was murdered by police last week. The victim earned $800 per month in 2003, the last year for which data are available. In other words, the guy was roughly at the poverty line with less than $10,000 per year in income. Perhaps he enjoyed some raises since then, but it seems unlikely that he was the kind of defendant that a typical plaintiff would seek out. Yet the $6 billion state and federal child support enforcement apparatus was after him for cash. This was a sensible strategy for the government workers involved. They all got taxpayer-funded paychecks for pursuing Scott, prosecuting him in front of a judge, ordering him to go to prison three times (a defeated parent in South Carolina can be imprisoned if he or she is five days late paying child support in whatever amount might have been ordered by a court), guarding him in prison, etc.

Despite the fact that child support arrears had accumulated during Scott’s various imprisonments (in most states, a convict is supposed to continue to pay his or her plaintiff every month; if the child support cash is not paid while imprisoned, the money must be paid, plus interest, after the child support defendant is released), times during which presumably he had been unable to earn any income, his total debt was only about $18,000. A stated reason for the government to pursue child support defendants aggressively is that it will reduce welfare expenses, but $18,000 isn’t enough to cover the welfare bill of a typical family for very long (consider subsidized housing, Medicaid, food stamps, home heating assistance, school lunches, plus cash assistance such as TANF; total is about $60,000 per year per family in poverty). But in this case the salaries for the government workers chasing him were higher than the total amount sought (and thus presumably far higher than the total amount that anyone could expect to be collected). Let’s consider just one of Scott’s imprisonments. It was five months in length. The South Carolina Department of Corrections says that it spends about $19,137 per year per inmate. So just that single imprisonment cost roughly $8,000 in today’s dollars.

What about the idea that chasing after Scott for cash was somehow good for his children? The studies cited in our “Citizens and Legislators” chapter concluded that children were actually worse off. Here’s an excerpt from the “Children, Mothers, and Fathers” chapter:

“Child Support and Young Children’s Development” (Nepomnyaschy, et al, 2012; Social Science Review 86:1), a Rutgers and University of Wisconsin study of children of lower income unmarried parents, found that any kind of court involvement was associated with harm to children: “We also find that provision of formal [court-ordered] child support is associated with worse withdrawn and aggressive behaviors.” The authors found that informal (voluntary) support from fathers could be helpful to children living with single mothers but court-ordered support, even when the cash was actually transferred, was on balance harmful.

So the taxpayers funded constant harassment and periodic imprisonment of this guy for more than a decade with no conceivable benefit to anyone except some government workers. Now the taxpayers will have to pay for the murder prosecution of the police officer who shot Walter Scott in the back. If a conviction is obtained, taxpayers will have to work extra hours every year so that the government can handle the typical endless rounds of appeals.


Milton Friedman Interview


As we finish out Passover (scholars have found that “slavery” in ancient Egypt meant being subject to a 20 percent income tax that full citizens did not pay) and prepare to file our tax returns for 2014 it seems like a good time to look back 42 years to Milton Friedman: The Playboy Interview.

Americans today want the government to set wages and, for at least some products, prices. President Richard Nixon made a foray into this area:

I regret that he imposed them; yet in doing so, I think he behaved the only way a responsible leader of a democracy could. He resisted controls for nearly three years when there was strong pressure for their introduction. He tried to make the case against controls, to educate the people about the causes of inflation and the best methods of fighting it— namely, reduced monetary growth and lower federal spending. But he failed and finally gave in to the popular demand for some kind of immediate and extreme measure to halt rising prices, and controls were the measure most people seemed to agree on. As a leader, that was a proper thing for him to do, even though he felt it was the wrong solution. He behaved the same way with regard to the war. Playboy: Aren’t you saying that there’s been a large element of political opportunism in Nixon’s reversals? Friedman: One man’s opportunism is another’s statesmanship. There is a very delicate balance between the two in our society. Good politics is what we should demand from our politicians— to a degree. We don’t want our leaders to charge off in every direction

What about the higher minimum wages that politicians around the country are currently debating and imposing?

A minimum-wage law is, in reality, a law that makes it illegal for an employer to hire a person with limited skills. Playboy: Isn’t it, rather, a law that requires employers to pay a fair and livable wage? Friedman: How is a person better off unemployed at a dollar sixty an hour than employed at a dollar fifty? … the effect of a minimum-wage law is to produce unemployment among people with low skills. And who are the people with low skills? In the main, they tend to be teenagers and blacks, and women who have no special skills or have been out of the labor force and are coming back. This is why there are abnormally high unemployment rates among these groups. …  Blacks get less schooling and are less skilled than whites. Therefore, the minimum-wage rate hits them particularly hard. I’ve often said the minimum-wage rate is the most anti-Negro law on the books. Playboy: Couldn’t those who are hurt by minimum-wage legislation be trained for more skilled jobs at better wages? Friedman: The minimum wage destroys the best kind of training programs we’ve ever had: on-the-job training. … In an attempt to repair the damage that the minimum wage has done to traditional on-the-job training, you now have a whole collection of programs designed to take up the slack. The great proliferation of governmental programs in which employers are subsidized to provide on-the-job training gives employers an incentive to hire people and then fire them in order to get other people for whom they can get more subsidies.

Friedman plainly did not foresee the expansion of the Welfare State or the development of Xbox and Comcast! (Or he would not have asked how a person could be better off unemployed than working at a crummy job!) Why do we have so much poverty after 42 years of expansion of anti-poverty programs since the interview?

the law of supply and demand works very generally. If there is a demand for poor people, the supply of poor people will rise to meet the demand. In setting up programs such as Aid to Dependent Children and all the other welfare programs, we have created a demand for poor people. Don’t misunderstand me. I’m not blaming poor people. You can hardly blame them for acting in their own interest. Take a poor family in the South, working hard for a very low income. They learn that in New York City they can get $ 300 a month— or whatever it is— without working. Who can blame such a family for moving to New York to get that income?

If someone on welfare finds a job and gets off welfare, and then the job disappears— as so many marginal jobs do— it’s going to take him some time to go through all the red tape to get back onto the program.

If a man is working and has an income above the minimum, he’s not entitled to welfare. But if he deserts his family, they can receive welfare. That way, he can continue to earn his income and contribute it to his family, in addition to the welfare they get. Many ADC families are actually created by fake desertions. Of course, you have real desertions, too. If a deserted woman is going to be immediately eligible for welfare, the incentive for the family to stick together is not increased, to put it mildly.

How much inflation has there been since 1973? Friedman estimates the cost of “a survival existence” at $1,600 per person and proposes that this amount be exempt from income tax.

What about the estate taxes that fascinate Thomas Piketty and some American politicians?

There’s no such thing as an effective inheritance tax. People will always find a way around it. If you can’t pass $ 100,000 on to your children, you can set them up in a profitable business; if you can’t do that, you can spend the money educating them to be physicians or lawyers or whatever. A society that tries to eliminate inheritance only forces inheritance to take different forms. The human desire to improve the lot of one’s children isn’t going to be eliminated by any government in this world. And it would be a terrible thing if it were, because the desire of parents to do things for their children is one of the major sources of the energy and the striving that make all of us better off.

After giving about 40 percent of your income to local, state, and federal governments via property, sales, income, excise, and other taxes, are you feeling charitably inclined? Friedman says that, if so, you’re in the minority:

One of the worst features of the current system of Social Security and welfare arrangements is that it has drastically reduced the feeling of obligation that members of society traditionally felt toward others. Children today feel far less obligation toward their parents than they did 50 years ago. If the state is going to take care of the parents, why should the children worry? Similarly with the poor. Who feels a personal obligation to help the poor? That’s the government’s job now.

How about the evil Koch brothers who now use their money to get American voters to dance to their tune?

under capitalism, the power of any one individual over his fellow man is relatively small. You take the richest capitalist in the world; his power over you and me is trivial compared with the power that a Brezhnev or a Kosygin has in Russia. Or even compared in the United States with the power that an official of the Internal Revenue Service has over you. An official of the IRS can put you in jail. I doubt that there is a person in the United States who couldn’t be convicted of technical violation of some aspect of the personal income tax.

Friedman pushes for the elimination of government-run schools and the provision of tuition vouchers to American children partly to achieve integration by race and income class. Friedman asks why the neighborhood in which a family can afford to live should also determine the schools that their children will attend. Friedman thinks that Americans will come around to the idea of shrinking government’s role in society:

Galbraith said a few years ago that there wasn’t anything wrong with New York City that couldn’t be fixed by a doubling of the budget. Of course, that’s happened and things are worse now than when he made the remark. So one of the things that encourage me just a little is the proven inefficiency of government, regardless of how big it gets. I think people are catching on to it.

New York City became insolvent in 1975 and government spending as a percentage of GDP has risen in the years since the Friedman interview.  Did he not foresee any of that?

You have to consider the ideological climate. The spirit of the times has gone against freedom and continues to go against it. There are still intellectuals who believe that concentrated power is a force for good as long as it’s in the hands of men of good will. I’m waiting for the day when they reject socialism, communism and all other varieties of collectivism; when they realize that a security blanket isn’t worth the surrender of our individual freedom even if it can be provided by government.

Log in