The latest book review here at Richer by the Day is Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) by David Cay Johnston.

Author David Cay Johnston followed a similar formula that brought success to Perfectly Legal when writing his next book, Free Lunch.  He again uses extensive research, a breadth of topics, and largely maintains political neutrality throughout Free Lunch, which explores the giveaways, tax breaks, and subsidies that are taking away from the majority to make the über-rich even more so.

Free Lunch covers more topics than time permits me to mention, though everything from Profession Sports Franchises to Eminent Domain, Title Insurance to Exploding Student Loan Debt and many topics in between were included.  Many titans of industry, including Buffet, Bush, Hilton, Steinbrenner, and Trump are examined for the ways they manipulate the system.

Some of the topics that prompted further examination on my part are covered below.

Outsourcing
The author makes a strong case for why jobs are going overseas and warns that our political leaders have accepted this as unavoidable.  The lack of a solution presented indicates that even those foreseeing the possible violent panics to come, have no answer to this problem.  As the economy becomes more global, it makes sense that American workers (historically paid more and enjoying a much higher standard of living than workers worldwide) would feel the pain.  The same unions and supporters of minimum-wage increases (which are obviously beneficial to workers) effectively priced American workers out of their own jobs.  The wealth gap within the US is concerning, but the upward pull on Chinese (and other outsourced) wages will make the economic divide in their countries much greater.  Multimillionaires are far from the median American household income ($50,233 in 2007), but much further from the average Chinese income ($2025 in 2006).

Higher Education Costs
On the topic of rising higher education costs, I agreed with the author’s analysis about as often as I disagreed.  Should student loans, which by their nature are near risk free to lenders, have more favorable terms and added transparency?  Of course.  Should students who pick poor careers or can’t find work get better terms than those who find success?  Absolutely not.  In one section of the book the author argues that taxpayers shouldn’t get stuck financing baseball stadiums, but then suggests that we should get stuck paying for Joe Dropout or Suzi Went-to-a-Private-School-and-Majored-in-Something-Useless.  I suppose the argument goes that we already overtax those who make more money so why shouldn’t we overtax them even more for being smart and successful.  Government financing of college expenses for poor students is noble, but only to a point.  Eventually, those unable to pay have to learn to do without.  That’s what I do when I can’t afford something.  I went to college on a full scholarship and my masters degree was reimbursed by my employer.  I did this after obtaining a public education (in NY, no less).  So why should the full cost of others be passed on to me?  Had I not been able to attend college on my merits, and couldn’t afford it otherwise, I might have been forced to forgo the experience.  Perhaps the next collapse will be in the student loan market when we realize how many kids, much like the adults who took on more home than they could afford and caused the housing collapse, took on more education than they could afford.  Some people are crying foul because they didn’t follow the terms of their student loans and got hit with fees and a defaulting interest rate.  I have little sympathy for them, or those who used the same argument about their mortgages.  A related question is: should most kids go to college?  I remember seeing extraordinary success resulting from the excellent trade schools when I lived in Germany.  Pushing everyone towards college doesn’t raise everyone’s education; it dumbs the whole system down.  A college education seems to be the latest entitlement expected in society.

Inequities Based on Wealth
As an example of the inequity between the rich and the poor, the fact that lower income households save less on home mortgage interest deductions was given.  While technically true, the reasons quickly show why this isn’t a true inequity.  First, lower income households likely paid much less in interest because they live in less expensive homes.  Second, they’re in a lower tax bracket.  A lower percentage of a much smaller number is, you guessed it, a smaller amount than a higher percentage of a much bigger number.

Inspiration for Upward Mobility
The book’s research clearly shows that the government has rigged the system to favor those at the top.  More than just a baseless conspiracy theory, relevant examples are given.  While this might inspire you to rally for reform, it should also inspire you to reach for the top.  As you rise things will get progressively easier.  I doubt the author intended this book to inspire upward mobility in the current system, but it does so inadvertently nonetheless.

The overriding theme of Free Lunch is that we should move to change the rules favoring the rich and their actions.  The author again attacks people for doing things that should be illegal, but aren’t.  While it’s only natural to exploit the law to the extent legally allowed, an appeal is made for change on moral grounds even when no change is required on current legal grounds.  With so many issues presented, there were cases where I side with the taxpayers and others where I side with the corporations.  In all cases, there is a delicate balance between taxpayer’s rights and government responsibility.  Give too little and the government is taking advantage of its citizens.  Give too much and we’ll be living in a welfare state that may ultimately cost much more.

Though the research would justify changes to many of the issues presented, another main theme highlighted why change is unlikely to occur:  The members of the donor-class that fund political campaigns and influence elections are the same people benefiting from many of the government handouts.  In other words, those most capable of driving change are the least likely to want any change at all.

Anyone who enjoyed Perfectly Legal will almost certainly enjoy Free Lunch as well.  Though I disagreed with aspects of the book, it was certainly thought provoking and worthy of my time.  I suspect that any additional books written by David Cay Johnson in a similar manner would also be worth reading.

As with all of my reviews here at Richer by the Day, I will be giving away my copy of Free Lunch to one of my readers.  For details on how you can receive my copy, follow the instructions on my free book giveaway post by Dec 1st.