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77 of 85 people found the following review helpful
Silly cover. Serious book.
on November 11, 2012
Unlike the two previous reviewers I have actually read the book. The author is a professor of economics at the University of Chicago who has written extensively about the gender wage gap, the economics of aging, Social Security, capital and labor taxation and voting. Professor Mulligan is the recipient of numerous awards including the Alfred P. Sloan Foundation, The John M. Olin Foundation and the National Science Foundation. He is not a supporter of Keynesian economics and is considered by many to be the antithesis of Paul Krugman.
The thrust of this book is that the overly generous social safety net programs have caused the lethargic recovery from the recession and intractably high unemployment rate. Mulligan believes that redistribution of wealth undermined the incentive to work and damaged productivity.
The Obama administration's excessive levels of spending, with the complicity of Congress, have caused a rise in unemployment much higher than it would have been otherwise.
Since 2007, many essential traits of the economy and the labor market have changed radically. Congress raised the minimum wage three times in the past five years, thus increasing the cost of labor and decreasing the available number of jobs. With the exception of Medicaid, subsidies bestowed on the unemployed in the forms of loan forgiveness and government transfers almost tripled. The liberality of mean-tested subsidies like food stamps and unemployment insurance has steadily increased. Consumer loans, mortgages, business debts and tax debts forgiveness has been vastly expanded and "government transfers almost tripled". The average yearly benefit for not working rose from $10,000 in 2007 to $16,000 in 2009 and keeps on growing. Unemployment benefits that have now been expanded from six months to two years act as a disincentive to seek work. This is diametrically opposed to the Obama administration theory, that government-provided benefits promote consumer spending, which leads to an improved economy and stimulates more job openings and employment.
Labor economist Casey B. Mulligan argues that it was not a lack of spending that caused the economy to decline and cause lay-offs but that "Businesses perceived labor to be more expensive than it was before the recession began" because of the added generous unemployment benefits shrank the supply of workers. Mulligan showed that " businesses increased their use of production input other than labor hours", meaning that they automated and replaced workers with machines.
Mulligan demonstrates that a combination of higher marginal tax rates and a higher federal minimum wage worsened the unemployment crisis, and, why labor market upheavals suddenly increased, and to what degree those increases were caused by the various measures enacted to boost the labor market. He does not question or deny that a surge in social benefits was necessary to forestall poverty and its devastation of unemployed families. He matter-of-fact analyses the deleterious effect of short-term subsidies on long-term general economic welfare.
Even though I somewhat disagree with the author's unconventional and counter-intuitive conclusions, that were reached by analyzing the labor market at the aggregate level, I recommend "The Redistribution Recession" as an intelligently thought out treatise, concise, well written and researched. Policymakers on both sides of the isle should read this book.