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The Redistribution Recession

There are reasons why five and a half years into the Obama presidency things are still crummy and uncertain.

As I’ve mentioned before, specific statist and redistributionist policies have kept a lid on growth. It’s not an accident that President Obama has been unable to bounce the economy out of recession like Reagan or either of the two Bushes did.

The Wall Street Journal the other day excerpted a speech by University of Chicago economics professor Casey B. Mulligan, given on receiving the Hayek Prize on June 25 from the Manhattan Institute for his book “The Redistribution Recession”.

He provides some illustrations of Obama policies that have kept the economy in neutral. Or in reverse. It’s called “help” by Democrats, and “free stuff” by conservatives, like me. Free stuff is okay when you’re in a fix, but free stuff become deleterious when you keep getting it. Or when you’re not in a fix. And that’s what’s happening to people.

Mulligan writes about Food Stamps:

Participants are no longer required to seek work and are not asked to demonstrate that they have no wealth. Essentially, any unmarried person can get food stamps while out of work and can stay on the program indefinitely.

Mortgage  relief:

People who owed more on their mortgage than their house was worth could have their mortgage payments set at a so-called affordable level—in government-speak, that means that you pay full price for your house only if you have a job and earn money.

Bankruptcy law:

There were new rules for consumer bankruptcy, with special emphasis on the amount that consumers were earning after their debts were cleared.

Unemployment insurance expansion, which adds to unemployment:

The federal unemployment-insurance expansions were paid by taxpayers generally, which means that an employer could lay off as many people as he wanted without adding to his federal tax burden.

Obamacare, which makes it easier to lay people off:

Lay somebody off during the crisis and, for the first time, among other things, the employer wouldn’t have to pay for former-employee health insurance.

These are no doubt just a few examples.

All the “help” increases what Mulligan calls the “marginal tax rate,” or the extra taxes paid and subsidies forgone by people who choose work over welfare.

“Waves of new programs increased the typical marginal tax rate from 40% to 48% in two years,” Mulligan writes.

People are much smarter than policymakers in Washington think. They will make rational decisions about what’s best for them, as opposed to doing what policymakers think is best for them.

Mulligan offers up an odd story to demonstrate the facts on the ground:

I met a recruiter—a man whose job it is to find employees for businesses and put unemployed people into new jobs—and he described the trade-off pretty well. Stacey Reece was his name, and he said that in 2009 his clients again had jobs to fill. But he ran into a hurdle he hadn’t seen before. People would apply for jobs not with the intention of accepting it, but to demonstrate to the unemployment office that they were looking for work.

As Mr. Reece described it, the applicants would use technicalities to avoid accepting a position. The applicants would take Mr. Reece through the arithmetic of forgone benefits, taxes, commuting costs and conclude that accepting a job would net them less than $2 per hour, so they’d rather stay home.

The circumstances we find ourselves in, and have found ourselves in, are not the fault of George W. Bush. They are not mostly due to some unique “financial” recession. They result from the incorrect policy choices made by the current administration.

That is, they are Obama’s fault.

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12 Responses to The Redistribution Recession

  1. Not only are there no work requirements for food stamps, they were made to look like ordinary debit cards. We would never want to make a food stamp receipient uncomfortable.

    • When you are down on your luck, you need people in the store to shame you…You never had to look for work to get “stamps”–that was for unemployment. Also you have to requalify every six mos and at least in AZ show bank stmts etc.

    • Make the EBT cards Dayglo red with a flashing diode or two on them. At least Non EBT patrons will get to see what food they’re buying.

  2. During a time when my late mother lost her job, was down on her luck, and my deadbeat father wouldn’t pay his child support on time, she applied for assistance. I would take her to grocery stores–a different one each shopping day–because she didn’t want anyone to recognize her paying with food stamps.

    My, how things have changed. Last week I saw a woman using an EBT card drive off in her Mercedes.

    • I hear it all the time; two of my kids cashier at local grocery stores. Booze, smokes and luxuries in cash, the rest on the card paid for by us. Not to mention the condescending attitudes.

  3. It’s no surprise that ‘free’ stuff keeps people from hitting bottom or getting desperate. It’s the safety net that keeps beggers from sitting on street corners, and the plate full of food that keeps children from selling matches in the snow, barefooted.
    What isn’t addressed is the underground economy that these ‘free’ safety nets allow.
    If a family is living on the paltry unemployment benefits and food stamps then how in the heck do they pay the rent, gas up the family car, buy new shoes for the kids? They have wi-fi for their computers, cable for the TV, a cell phone and other items that make poor Americans richer than most of the world can imagine.

    Where do they get the money for these extras; do they buy and sell on Craig’s List, are they all selling illegal drugs, robbing stage coaches or are they working ‘under the table’ for employers who are grateful for one less worker on the books?
    There is a great underground economy that avoids taxation, Obamacare regulations, and it’s not ideal, but it allows millions of Americans to maintain some dignity.

    • Not all people on assistance have the frills…I would say it’s a small percentage. But yes, people buy and sell on Craigs and eBay etc. Or do without. Plenty of people use the library computers.

  4. And those policy choices were made by choice, an active decision of the will of Obama and the gaggle of misfits around him. Obama actively and consciously sought out and implemented those policies designed to destroy the middle class. That’s the key political signature of his administration history will ultimately record.

  5. Old Saying: Feed a man a fish, he eats for a day.
    Teach a man to fish, he eats for a lifetime.

    Updated: Feed a man everything he needs, he gets fat and lazy.
    Win a new voter, stay in Congress rest of your life.

    H