Opening The Locked Door Of Infrastructure With This Hidden Key
With tax reform successfully passed, passing a major infrastructure package would be the next step in furthering the agenda with which President Trump was elected. Initially, then-candidate Trump promised a trillion dollars in new infrastructure spending, a position Democrats seemed eager to support. However, the president’s requests have tempered as of late. The latest proposal put forward by the administration offers only $200 billion in federal spending, with an additional $1.3 trillion theoretically put forward by state and local governments, along with private corporations.
Regardless of whether or not the final funding request is $200 billion or $1 trillion, the Republican Congress ought not add more to the national debt, especially given the grotesquely irresponsible Bipartisan Budget Act. Short of raising taxes (Republicans are unwilling) or cutting spending programs (Republicans seem unable), Congress should help make infrastructure improvements more affordable by lowering input costs.
The first step to lowering infrastructure costs is repealing tariffs on goods such as steel that are crucial inputs for infrastructure projects. As Anthony Kim and Michael Sargeant note in The Hill, not only are tariffs on steel and aluminium regressive and detrimental to the economy as a whole, they pose outsize costs to the construction industry in particular, as 43 percent of steel imports are used in construction. Therefore, even as tariffs will shrink the economy and raise unemployment, all the while favoring politically well-connected industries over productive ones, the revenue they will add will be partially offset by higher costs for government programs.
Reversing these tariffs will make necessary infrastructure reform more affordable. In order to compensate for the lost revenue from repealing tariffs, Congress could reduce the scope of the new deduction for pass-through income or further cap the mortgage interest deduction, measures that would produce the same revenue as the new slate of tariffs while not raising the cost of infrastructure or having a large detrimental impact on the economy.
The second step to lowering infrastructure costs is repealing the Davis-Bacon Act, an old boondoggle program that increases the wages of a few public-sector unions at the expense of the taxpayer. Davis-Bacon is a law mandating that “prevailing,” or union, wages be paid to workers on government projects. It was established in 1931 during the Great Depression and was originally geared towards directing the benefits of government stimulus programs to white workers at the expense of minorities.
Whether or not that discriminatory effect still exists, the program artificially inflates the wages of a handful of well-connected union members at the expense of non-union competitors and without any added benefits to the taxpayer in terms of services provided. Davis-Bacon makes federal construction projects 10 percent more expensive, all the while meaning fewer overall jobs. Not only would a Davis-Bacon repeal save the federal government almost $15 billion over the next 10 years, but it would also create more opportunities for lower-skilled workers.
Repairing and improving public infrastructure should lead to better growth long-term; however, financing it through deficits, especially with the current level of federal debt, will hurt the economy in the long run. Replacing tariffs on goods with less economically costly revenue sources and removing regulations that drive up labor costs on public projects will make infrastructure repairs less burdensome and lead to a stronger economic future.
Alex Muresianu is a Young Voices Advocate studying economics at Tufts University. He is a contributor for Lone Conservative, and his writing has appeared in Townhall and GlennBeck.com.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.