Biden’s Regulatory Wish List Will Make Infrastructure Projects More Expensive

“It would be terrific if the Biden administration intended to truly “update and modernize” the Davis-Bacon Act, namely by hollowing it out and allowing workers to truly compete for federal construction contracts in a field where wages are not preemptively set, regardless of the applicant’s experience. After passing an infrastructure bill that was considerably smaller than originally proposed, any opportunities to cut costs should be obvious winners. Unfortunately, despite the new rule’s lack of specificity, Biden’s previous rhetoric on the law is discouraging.

“When President Obama put Vice President Biden in charge of the American Recovery and Reinvestment Act (ARRA), Biden made sure that Davis-Bacon Act and Service Contract Act standards were strictly enforced, requiring that the prevailing wage be paid to construction workers and service workers on all projects funded by ARRA,” noted Biden’s campaign website. “As president, Biden will build on this success by ensuring that every federal investment in infrastructure and transportation projects or service jobs is covered by prevailing wage protections.”

In “Executive Order on Tackling the Climate Crisis at Home and Abroad,” signed a week after he took office, Biden stipulated that “agencies shall, consistent with applicable law, apply and enforce the Davis-Bacon Act and prevailing wage and benefit requirements.” And in his February remarks to labor leaders regarding his plans for a future infrastructure spending bill, Biden indicated that he expected the legislation to create “jobs—good-paying jobs, Davis-Bacon and prevailing wage jobs.”

From Biden’s statements on the subject, it’s clear that any of his proposed “updates” to the Davis-Bacon Act would not make it easier to hire contractors at market rates.”

Plans for Extended Unemployment Benefits, Wage Subsidies Risk Creating a Zombie Economy

“the states that have reopened have seen anemic economic recoveries at best.

Slate’s Jordan Weissman, using data from the app Open Table, notes that restaurant reservations are down as much as 92 percent from last year in those states that have allowed dining rooms to reopen.

A ranking of state jobless claims released yesterday by the personal finance website Wallethub finds that the number of people applying for unemployment is especially high in Connecticut, which had a bad COVID-19 outbreaks and a strict shutdown order, but also in Georgia and South Dakota. The former is lifting its shutdown order, and the latter never imposed one.

This matches with new research showing that economic activity declined at similar rates regardless of when states issued formal lockdown orders. Individuals, not the government, shut the economy down. They’ll also decide when, or if, it reopens.”

“if we can’t expect much of the pre-pandemic economic activity to return, that dramatically weakens the case for propping up businesses as Jayapal and Hawley want to do, or paying workers to stay jobless like the HEROES Act does. Both policies stymie markets’ ability to adjust to COVID-19 while shifting resources from those parts of the economy that can be productive during a pandemic to those that can’t. If there’s no demand for air travel, we’d be better off seeing baggage handlers shift to being warehouse workers or grocery delivery drivers. We want cooks and cashiers to move to restaurants that can figure out a way to stay profitable without dining service.

That doesn’t mean the government can’t provide relief. Even if we allow those readjustments to happen, we’ll still probably have a less productive economy for a while, and the negative effects of that will be concentrated on people who aren’t in a position to adapt. So there’s a reasonable case for cash transfers targeting the poorest Americans. But they shouldn’t be conditioned on staying at their current jobs, and—unlike unemployment benefits—they shouldn’t be conditioned on staying out of the labor force altogether.”

Scrapping a subsidy to homeowners

“In the February issue of the American Economic Review, researchers Kamila Sommer and Paul Sullivan consider the implications for the US housing market if this $90 billion subsidy to homeowners were to be scrapped. They find that getting rid of it would actually improve overall welfare by lowering home prices and expanding opportunities for home ownership among younger and lower-income households.
“The people who are the primary beneficiaries of the deduction are the high-income households,” Sommer said in an interview with the AEA. “When you take it away, house prices fall, they consume less housing, live in smaller houses…but the decline in house prices reduces the entry cost for the marginal households that are previously renting. It’s almost like this reallocation of housing from high-income households to low-income households.”

Critics say the mortgage interest deduction is a regressive tax policy that inflates prices and encourages buyers to choose more expensive houses and take on debt rather than sinking money into other investments. It also robs the Treasury of tax revenue that could be used to close the deficit. But real estate lobbyists say its repeal would depress homeownership and negatively impact social welfare.”

“More than half of all existing homeowners — 58 percent — would see their consumption improve after the reform, with most of the benefits going to young, low-income households. Rich homeowners with big properties suffer the most, since they have outsized amounts of mortgage interest that can be deducted from their income tax burden. When that benefit goes away they end up bearing the brunt of the impact.

It’s less certain whether there would be any meaningful impact on tax revenue for the government, the authors say. Getting rid of the deduction leads to a 2.6 percent increase in income tax revenue, but the falling home prices translate to a 7.8 percent drop in property tax revenue. Overall, it’s essentially a wash, with a total revenue gain of just one-half of a percentage point.”