Keith Hennessey has written two excellent posts keying off of President Obama’s remarks concerning the trajectory of private sector employment and public sector employment. In the first post, Hennessey demonstrates that private sector employment is in very weak shape relative to its peak level. In the second, he describes why the president’s call for renewed federal aid to state and local governments is misguided. Among other things, Hennessey observes that local governments vary widely in terms of efficiency:

Police, firefighters, and teachers are all local government employees, traditionally funded by localities from local revenue sources. Localities vary widely. They have different needs, their tax and spending priorities differ, and they express different degrees of fiscal responsibility. Federalizing this local spending forces taxpayers in one area to subsidize high cost, inefficient, or fiscally irresponsible local governments in another.

Moreover, federalizing this local spending on a temporary basis risks becoming a permanent condition. One is reminded of Edward Glaeser’s distinction between place-based vs. people-based policies, and his arguments regarding the wisdom of focusing on the latter rather than the former:

No mayor ever got reelected by making it easy for his citizens to move to Atlanta, of course, even when that might be a pretty good outcome for the movers themselves. But just because local pols will eagerly seek federal place-based spending doesn’t mean that the feds should comply. A sensible federal approach for upstate New York would invest in people-based policies that improve the economic futures of the children growing up there. Education is the best tool we have to fight poverty. If the children of upstate cities were better educated, then they would earn more as adults—whether they stayed in their hometowns or moved to Las Vegas. And people-based policies may actually motivate states and cities to spend more wisely, in order to retain their newly educated and mobile residents.

Federal cash infusions designed to prevent public sector layoffs at the state and local level are a paradigmatic example of place-based spending designed to help high cost, inefficient, and fiscally irresponsible local governments stave off structural reform and blunt the competitive advantage of low cost, efficient, and fiscally responsible local governments. In effect, the federal government is colluding with state and local governments to form an anti-competitive cartel that works to the detriment of citizens.

This doesn’t mean that public sector hiring is necessarily a bad thing. It can be a very good thing if it is sustainable, e.g., when a region with a flourishing economy decides to upgrade and expand its public services to accommodate a growing population consistent with the ability and willingness of local taxpayers to bear the burden.