Spending is out of control in Washington, and even liberals who
have long supported Keynesian economics are starting to talk
about reducing the national debt. President Obama recognized this
sentiment last month when he created a bipartisan National
Commission on Fiscal Responsibility and Reform.
This commission is tasked with making recommendations to
Congress on how to fully cover the cost of the federal
government’s operations and programs by 2015. In announcing the
details and members of his commission, the President stated: “For
far too long, Washington has avoided the tough choices necessary
to solve our fiscal problems.”
The President is right that many tough choices need to be
made to lower federal spending, balance the budget and bring down
the national debt. But before these tough choices are considered,
why not start out with an easy one?
Right now, Congress can make a singe change to current law
that will save taxpayers $11.4 billion this year. According to
recent Heritage Foundation research,
in 2010 the Davis-Bacon Act will cost taxpayers $11.4 billion in
expensive, artificially inflated wages that benefit a select
group of workers.
The Davis-Bacon Act, a Depression-era wage subsidy law that
is the last remnant of the old racist Jim Crow laws, was designed
to block American blacks from construction jobs in the northeast.
It requires that each public works contract over $2,000 contain a
clause that mandates “prevailing” wages be paid. Contractors and
subcontractors are forced to pay a “prevailing wage” set by the
federal government. However, a recent government study showed
that “prevailing wages,” as determined by the federal government,
were in error 100% of the time.
In fact, these wages rarely resemble local market
conditions. In practice, Davis-Bacon wage scales are inflated
union wages imposed on even the smallest of start-up
companies.
Davis-Bacon wage rates are on average 22% higher than the
standard wage rate in an area. Similar Heritage research
revealed that, under Davis-Bacon law, the government pays
four workers artificially inflated wages the same price it could
pay five workers the local market rate.
This law disproportionately impacts small companies and
rural businesses. Davis-Bacon law discourages small businesses
from bidding on public projects because of the difficulty of
meeting the complex and archaic reporting rules it requires. And,
because it requires the payment of inflated union-scale wages,
most small businesses are often priced out of competition —
leaving large, unionized firms to divvy up the work to be done
under taxpayer funded federal construction contracts.
Requirements in Davis-Bacon law that workers be paid
inflated wages increase the cost of completing federal
construction projects. President Obama’s “stimulus” bill required
the payment of Davis-Bacon wages for all of the construction
projects it funded, thus inflating the cost of these projects to
taxpayers by $13 billion.
Davis-Bacon laws also impact small towns across America.
Some communities decide to forgo federal dollars because a
Davis-Bacon project would inflate the cost of their project by
8-35%, often by an amount that is more than the federal dollars
involved. Davis-Bacon law results in fewer projects being built
and fewer jobs created. The result is only four miles of highway
built rather than five or only four bridges constructed when we
could build five with the same money.
While union bosses may love Davis-Bacon law, it is wrong
for the federal government to impose a union wage scale. Some
Members of Congress have long made the argument that the federal
government has no business interfering in the relationship
between two consenting adults. But Davis-Bacon wage laws will not
allow me to operate one of my son’s excavators for $20 per hour,
even if he and I agree that $20/hr is a reasonable amount.
Young construction workers need an opportunity to develop
their skills. A law requiring that every machine operator earns
only the highest wage locks young workers out of the
trades.
As the President seeks bipartisan solutions to reduce the
deficit and increase America’s competitiveness, he should start
by championing a repeal of Davis-Bacon law. Changing this law
will save taxpayers $11.4 billion this year and even more in
years to come. It will also increase employment in the
construction trades by 22%.
With 20 million Americans looking for work and a crumbling
infrastructure, it does not take a Harvard lawyer to make this
decision. But then again, it does.
