Robert Reich: Wrong About State/Local Bailout
Rafe linked to this essay by Robert Reich. I don’t have much of a problem with his first point backing Obama’s plan to offer a tax credit for hiring. I think temporarily suspending the employer’s share of payroll tax is a better mechanism (as suggested by Bryan Caplan a year ago), but close enough.
However, I think he goes off the rails at the end where he suggests the federal government should prop up spending by state and local governments. No. They’re the problem, not the solution. Fortuitously,m Bryan’s partner Arnold Kling referred just today to this Reason essay by Steven Greenhut revealing that the number of state and local workers per 100 citizens has grown from 2.3 to 6.5 since 1946. Yes, that’s 180% growth in the fraction of people employed by state and local governments.
Recall my own analysis showing that real per capita state and local spending in California increased 38% in the last 10 years and that we would have no budget problem if we had kept real per capita spending at 1999 levels.
The problem is we have more bureaucrats riding on the backs of productive workers. Economic innovation and growth comes from the private sector. Much better to substitute every single dollar Reich wants to give to state and local governments for more tax breaks to private sector employers that hire people.