Davis-Bacon

The Failed Stimulus Package Reveals What Economy Really Needs

by Ben Lieberman on September 29, 2010

in Economy, Energy, Regulation, Stimulus to Nowhere

A failure can make for a valuable learning experience, and the stimulus package is no exception. Clearly the stimulus has not worked, and from its inception many economists doubted the wisdom of the federal government trying to spend our way into prosperity. But putting aside questions about the merits of spending as means of sparking an economic recovery, it appears that the feds were not even able to dole out the money in a timely manner. The culprit — regulatory red tape.

Several studies conducted by the Department of Energy’s Office of the Inspector General (here , here , and here) have concluded that many of the stimulus-funded projects related to energy were very slow to get off the ground. For example, DOE’s investigation of one program dealing with block grants for energy conservation projects concluded that “as of August 2010, more than one year after the Recovery Act was passed, grant recipients had expended only about 8.4 percent of the $3.2 billion authorized for the Program.” Not exactly the “shovel ready” boost to the economy we were promised.

Regulatory delays were the reason. In its most recent report, DOE’s Inspector General concluded that “various regulatory requirements had slowed spending,” including “the Davis-Bacon Act, National Historic Preservation Act, Buy American provisions of the Recovery Act, and National Environmental Policy Act (NEPA).”

Granted, the programs funded by the stimulus are a big waste of taxpayer dollars, and it is a good thing that the feds can’t squander our money more quickly. But the point is that even the big government proponents of the stimulus package are finding out what it is like to get tripped up by — big government. Whilst hoisted on their own petard, one can hope that the legislators who supported the stimulus might figure this out.

Perhaps they will learn the critical lesson that can lead to real economic growth. Just as stimulus spending faces a regulatory gauntlet, so does private investment. Efforts by large and small businesses to expand — the real source of an economic recovery and job growth — are hampered by the regulatory state at least as much as are the government projects highlighted in the DOE reports. Streamlining or eliminating these regulatory hurdles would do far more to help the economy than all the stimulus spending in the world.

Stimulus Package Creates Imaginary Jobs, Destroys Jobs in the Real World

by Hans Bader on November 17, 2009 · 4 comments

in Agriculture, Deregulate to Stimulate, Economy, Employment, International, Labor, Legal, Personal Liberty, Politics as Usual, Precaution & Risk, Sanctimony, Stimulus to Nowhere, Trade

President Obama’s $800 billion stimulus package creates imaginary jobs, while destroying ones in the real world.

Billions from the stimulus are being spent on creating tens of thousands of imaginary jobs in 440 phantom Congressional districts, according to the government’s own web site:

Just how big is the stimulus package? Well for one, it has doubled the size of the House of Representatives, according to recovery.gov, which says that funds were distributed to 440 congressional districts that do not exist. . . . The web site operates on an $84 million budget and is tasked with monitoring the distribution of the $787 billion stimulus package passed by Congress–which, for the record, counts 435 members–in early 2009.

The site’s monitors, however, are not too savvy about America’s political or geographic landscape. More than $2 million was given to the 99th District of North Dakota, a state which has only one congressional district. In order to qualify for 99 districts, North Dakota would have to have a population of about 60 million people, almost 24 million more people than California.

From ABC News:

Here’s a stimulus success story: In Arizona’s 15th Congressional District, 30 jobs have been saved or created with just $761,420 in federal stimulus spending. At least that’s what the website set up by the Obama Administration to track the $787 billion stimulus says.

There’s one problem, though: There is no 15th Congressional District in Arizona; the state has only eight Congressional Districts.

There’s no 86th Congressional District in Arizona either, but the government’s recovery.gov Web site says $34 million in stimulus money has been spent there.

In fact, Recovery.gov lists hundreds of millions spent and hundreds of jobs created in Congressional districts that don’t exist.

The Washington Examiner says that “75,000 jobs” Obama has claimed credit for are “clearly imaginary” or “highly doubtful.” Readers can view its interactive map of “Inflated Jobs by State.”

As the Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent this year. The reality is that it passed 10.3 percent in October. So now the stimulus books are being cooked to mollify an anxious public worried that real-world jobs continue to disappear and angry that Obama has thrown almost $1 trillion down the stimulus rathole.”

The stimulus package actually destroyed thousands of real world jobs by triggering trade wars with Canada and Mexico that killed jobs in America’s export sector (the stimulus package barred a measley 97 Mexican truckers from U.S. roads, a minor NAFTA violation that led to massive Mexican retaliation against U.S. exports of 40 farm products and kitchen goods worth $2.4 billion).  It also is wiping out jobs by inflicting costly mandates on state governments (such as repealing welfare reform, and imposing costly “prevailing wage” regulations and expensive racial set-asides).

Obama claimed the stimulus package was needed to prevent the economy from suffering from “irreversible decline,” but the Congressional Budget Office admitted that the stimulus package actually would shrink the economy “in the long run.”  Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.

The stimulus package has since spawned countless examples of government waste and corruption.  Recently, Obama fired an inspector general, Gerald Walpin, who uncovered millions of dollars of waste and fraud in the AmeriCorps program, including by a prominent Obama supporter, endangering the Obama supporter’s ability to administer federal stimulus spending in Sacramento.  Obama’s alleged justification for firing the inspector general turned out to be false.

Green Pork and (Davis) Bacon

by Ivan Osorio on June 26, 2009 · 2 comments

in Economy, Environment, Global Warming, Labor, Regulation

The alliance between organized labor and leftist environmentalists remains as strong as ever. As Carter Wood at Shopfloor.org notes, the Waxman-Markey climate change bill is a great example of this alliance.

From page 78 of the manager’s amendment, concerning state revolving loan funds for small- and medium-sized manufacturers.

(F) COMPLIANCE WITH WAGE RATE REQUIREMENTS.-Each recipient of a loan shall undertake and agree to incorporate or cause to be incorporated into all contracts for construction, alteration or repair, which are paid for in whole or in part with funds obtained pursuant to such loan, a requirement that all laborers and mechanics employed by contractors and subcontractors performing construction, alteration or repair shall be paid wages at rates not less than those determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code (known as the ‘Davis-Bacon Act’), to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the same locality in which the work is to be performed.

The Secretary of Labor shall have, with respect to the labor standards specified in this subparagraph, the authority and functions set forth in Reorganization Plan Numbered 14 of 1950 (15 F.R. 3176; 64 Stat. 1267) and section 3145 of title 40, United States Code.

So that’s one of organized labor’s rewards in the bill, the spreading of above-market wage rates to smaller manufacturers.

Davis-Bacon-like provisions of this sort also make it more difficult for non-union companies to compete for bids. This results in higher costs, which are paid for by taxpayers.

With their share of the private sector work force declining to around 8 percent, unions need such alliances with environmentalists to gain political goods like this. Expect to see more of this.

For more on Davis-Bacon, see here.

Fore more on the labor-green alliance, see here.

Obama’s Job-Killing Stimulus Package Replaced Investments With Welfare, Out of Political Correctness

by Hans Bader on June 25, 2009 · 1 comment

in Economy, Employment, Labor, Politics as Usual, Regulation, Sanctimony, Stimulus to Nowhere

Obama’s $800 billion stimulus package was purged of most investments in roads and bridges, and filled instead with welfare and social spending, out of political correctness, after feminist leaders complained that building and repairing roads and bridges would put unemployed blue-collar men to work, rather than women.

Christina Hoff Sommers points out that “of the 5.7 million jobs Americans lost between December 2007 and May 2009, nearly 80 percent had been held by men. . . .Men are bearing the brunt of the current economic crisis because they predominate in manufacturing and construction, the hardest-hit sectors, which have lost more than 3 million jobs since December 2007. Women, by contrast, are a majority in recession-resistant fields such as education and health care, which gained 588,000 jobs during the same period.”

But when the Administration floated the concept of “an ambitious . . . stimulus program to modernize roads, bridges, schools, electrical grids, public transportation, and dams” as a way of “reinvigorating the hardest-hit sectors of the economy,” “Women’s groups were appalled,” asking “Where are the New Jobs for Women?” and denouncing what they called “The Macho Stimulus Plan.”

The Obama Administration quickly knuckled under to this pressure, replacing its recovery package with an $800 billion stimulus package that instead “skews job creation somewhat towards women” by spending money instead on social services like welfare that are administered mostly by female employees.

“A recent Associated Press story reports: ‘Stimulus Funds Go to Social Programs Over ‘Shovel-ready’ Projects.’ A team of six AP reporters who have been tracking the funds find that the $300 billion sent to the states is being used mainly for health care, education, unemployment benefits, food stamps, and other social services.” Or, as another AP report put it, “Stimulus Aid Favors Welfare, Not Work, Programs.”

The stimulus package also repealed welfare reform, as Slate’s Mickey Kaus and the Heritage Foundation have noted. Obama ran campaign ads claiming to support welfare reform, even though he had actually fought against meaningful welfare reform as an Illinois legislator. The stimulus package largely repeals the welfare-reform law passed by Congress in 1996.

Obama claimed the stimulus package was needed to prevent the economy from suffering from “irreversible decline,” but the Congressional Budget Office admitted that the stimulus package would shrink the economy “in the long run.” The stimulus package has since destroyed thousands of jobs in America’s export sector, and subsidized countless examples of government waste and corruption.

Recently, Obama fired an inspector general, Gerald Walpin, who uncovered millions of dollars of waste and fraud in the AmeriCorps program, including by a prominent Obama supporter, endangering the Obama supporter’s ability to administer federal stimulus spending in Sacramento.

The stimulus package also imposes on states racial set-aside requirements and prevailing-wage requirements, which increase the cost to taxpayers of government contracts. The prevailing-wage requirements will inflate the cost of state construction and transportation projects by at least $17 billion. Racial set-asides also are very costly to taxpayers.

Davis-Bacon from the Pork Barrel

by Ivan Osorio on December 29, 2008

in Economy, Regulation

In today’s Wall Street Journal, the Brookings Institution’s Clifford Winston points out some critical pitfalls likely to face the infrastructure spending element of President-elect Obama’s “stimulus” plan:

One of the biggest killers of all is that states insist on allocating federal transportation funds through a politically devised formula. The result? Smooth, well-paved rural highways and worn-out urban roadways that are paved with a layer of asphalt too thin to withstand heavy use and are therefore in need of excessive, costly maintenance.

But don’t blame the states for all the inefficient use of highway dollars. Federal regulations have also inflated the cost of providing roads, trains and so much more for a public on the move.

It takes the nation’s busiest airports decades and billions of dollars to build new runways, for example, because of onerous regulations imposed by the Federal Aviation Administration and the Environmental Protection Agency. Davis-Bacon mandates, which effectively require that “prevailing” union wages (often much higher than the actually prevailing market wage) be paid to workers on any construction project receiving federal funds, also drive up the costs of roads and other federal transport projects. The Federal Transit Act also makes it extremely expensive to lay off transit employees.

Winston is right to point all this out, and he makes some sensible recommendations, including reform of Davis-Bacon. However, reforming the federal infrastructre spending process can only lessen wasteful spending so much, since as long as government is involved, politics will remain a part of the process. (Still, a light touch is too much to expect from Washington, so Obama taking Winson’s advice into consideration is to be hoped for.) For more on Davis-Bacon, see here.