Thursday, August 18, 2011

Unintended Consequences

In spite of what I hear frequently from Conservatives, and often from Liberals, it is extremely rare for anyone in government to set out to do bad things. Neither the "opposition" nor the President is out to "destroy the country." Tweeting it in all CAPS doesn't make it true.

In fact most politicians genuinely want to make things better, at least for the folks who elected them.

So why do we keep hearing the name calling and, often, outright hatred of the so-called "opposition?" To put it simply the philosophical differences between Liberals and Conservatives are sometimes so vast they prohibit common understanding.

Most disputes arise from Liberals belief that business, especially corporations, cannot be trusted, must be regulated, and must be prevented from exploiting both the consumer and the laborer.

Conservatives believe, on the other hand, that Government, especially the Federal Government, cannot be trusted, must be minimized, and must be prevented from exploiting both the consumer and the laborer.

In short Liberals trust the government, conservatives trust the free market.

One of the most obvious laws that has arisen from Liberal's fear of corporations is the demand for competitive bidding on most government projects. These are good laws and good practice. Conservatives agree because corporations themselves engage in competitive bidding. This is exactly as it should be as it saves the taxpayers money and insures fair and open competition.

But here's where Conservatives and Liberals part. While Liberals DEMAND competitive bidding for contracts, the Liberal fear of corporate exploitation actually creates another unbreakable monopoly, fixes prices, stifles competition and insures gross overpayment in another area of commerce: Labor or workers wages. Today thirty-one states and the District of Columbia have "prevailing wage" laws, backed by the depression era Federal Law known as the Davis-Bacon Act. Curiously these laws do not insure workers are paid the actual prevailing wage, but that they are paid significantly more. Instead of looking to the private sector, "prevailing wage "rates are dictated by unelected government boards of bureaucrats, often stacked with union members. These laws only affect wages paid for government contracts and government projects.

Davis-Bacon is a sacred cow among Liberals and especially unions. Every election every effort is made to protect "prevailing wage" laws and Davis-Bacon itself. How else can we Liberals protect the lowly laborers from the evil corporations?

A little history of Davis-Bacon is in order here. Although the law is a child of The Great Depression, it wasn't written or enacted by President Roosevelt and The New Deal Democrats. Instead it was authored by Republican Senator James Bacon of Pennsylvania and Republican Representative Robert Davis of New York and it was signed into law by Republican President Herbert Hoover. Worse yet it was one of the most blatantly racist laws passed by Congress since the end of the Civil War. It's primary purpose was to prevent blacks from working on government projects and to insure skilled trade unions would remain mostly white. Bacon, Davis and others feared an influx of black laborers from the south would stream into the north, willing to work for much less than the white natives. [Does any of this sound vaguely familiar to the current illegal immigration fears being debated in Congress today?]

The law was so distasteful that Congress defeated it for fourteen straight years. But Davis and Bacon reintroduced it in each new session of Congress. The Depression gave Davis-Bacon new life. Hoover believed that the depression might end if we could just raise workers wages. He agreed to lend his support the bill. As The Great Depression deepened, Congress was willing to try anything and finally passed the bill. It certainly didn't save Hoover's job as he was defeated later that year.

As often is the case, the law now has the exact reverse effect from what was originally intended. This morning on National Public Radio's Morning Edition we had this stunning example of the law's failure in Washington State:

A state law that's been on the books for more than a half-century requires Washington companies to pay their workers a prevailing wage — or an hourly rate set by the government — on state-funded projects.

But as Precision's Leighton explains, companies in states like Idaho and Utah, which don't have prevailing wage laws, can pay their workers less.

"It puts us at such a disadvantage," he says. "There could be a project right out on our backdoor out here that I can't get because a company in Utah gets such a competitive advantage by not having to pay these rates."

Prevailing wage rules were put in place so workers would get a living wage, but on a job like this one, Leighton says the difference could be $10 an hour per worker.

State Sen. Steve Conway, a Democrat, agrees that the rules can make it difficult to compete against out-of-state firms.

"It does have unintended consequences," he says. "We need to figure out a solution to this."

For now, at least, Precision is likely to bid on fewer state-funded projects, and that means fewer choices and chances to win large contracts close to home. The company is now looking for projects in places like Alaska and Guam.

A law originally intended to protect local workers instead costs local workers their jobs. And the law also causes the government to overpay for their projects, when compared with similar projects completed in the private sector.


Chris said...

This would be why we don't trust government.

Unknown said...

Excellent post, excellent point. I always enjoy your views.

In regards to the current administration: If you were President and WANTED to destroy the economy, what would you do differently then our current Chief executive?