This is the Cato Daily Podcast for Thursday, August 12, 2010.

I'm Caleb Brown.

It was an odd piece of legislation passed during a time when lawmakers should be out running for re-election,

billions of dollars to keep teachers and other public employees employed.

Neil McCluskey, Associate Director of the Cato Institute's Center for Educational Freedom,

says it's more than just a bailout for teachers.

The main part of the bill is a $10 billion, essentially bailout to states so that they can retain teachers or even hire new teachers.

There's also a $16 billion part of that that has to do with Medicaid, which also would free up money for police officers and

first responders and things like that.

But it seems that the driving force behind this bill was the teacher and public school employee bailout

component. How does this kind of legislation coming from the federal

government alter incentives at the state level to deal with funding issues as well as problems

that have been persistent in education systems. Right. Well first let's set the stage for this.

Over the last 40 years, we've seen massive increases in employment in public school districts

relative to enrollment.

So employment's gone up at about 10 times faster pace

than enrollment has changed.

So we have huge influx of teachers and other employees. Huge increases in expenditures but at the same time

there's been zero upward movement in achievement so we've got nothing essentially back from all

this employment. So clearly we've spent a lot of money in increasing amounts

for years.

What bailouts like this do is enable states to continue to have hugely bloated, I mean

...