The desperately-needed teacher $23 billion teacher bailout I wrote about last week is, of course, a shell game, trying to trick the public with specious forecasts:

Start with that scary number of 300,000 teacher layoffs, which has been bandied about in numerous newspaper articles. The sources for it are interested parties: teachers unions and school administrators, whose national organizations counted layoff warning notices that have already been sent out this spring and extrapolated from there.

. . .

Moreover, springtime layoff notices are a notoriously unreliable guide to actual job cuts in the fall, because rules and regulations in many public school systems require administrators to notify every person who might conceivably be laid off — whether they actually expect to fire them or not. As the New York Times recently reported: “Everywhere, school officials tend to overestimate the potential for layoffs at this time of year, to ensure that every employee they might have to dismiss receives the required notifications.”

The whole thing is a numbers game by the teacher unions to get more of that sweet sweet government cheese. Is anyone surprised? Not really.

Okay, blog post #1 for this article done. Blog post #2: from later in the article:

To be sure, the president and his advisers argue that the bill would pay for itself in part, because teachers and other school employees who are retained would continue to pay taxes and not collect unemployment benefits.

This was just slipped in the article as a relative afterthought, but it jumps out at me as a very dangerous line of reasoning. Things like unemployment insurance and welfare create perverse incentives like this that make it rational in the economic sense to spend money to save money.

In the field of macroeconomics, it is trivial to show that unemployment insurance decreases the costs of being unemployed, increasing the number of people who do it, raising the unemployment rate. From there, Okun’s Law says that a higher unemployment rate is an express elevator to lower GDP. On the macro side, it’s pretty widely accepted that an increase in unemployment benefits is bad for the bottom line.

But now we see that not only does it provide perverse incentives to the individual receiving it, by paying him not to work any job that pays less than unemployment insurance’s weekly wage, but it also provides perverse incentives to the politicians who lobbied for the unemployment insurance in the first place, to justify more bailouts and payoffs.

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