If It’s Time To Build In America, These Are The Reforms That Are Needed

A law that makes infrastructure more costly, and was enacted with racist motives nearly nine decades ago, should be an obvious candidate for repeal. But the Davis-Bacon Act has many influential defenders in Congress, including Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.). 

The protectionist and repugnant impetus for Davis-Bacon’s enactment has been well-documented. Personal experience often guides lawmakers’ legislative priorities, and that was the case with enactment of the Davis-Bacon Act in 1931, which hampers the federal government’s ability to fund new infrastructure projects to this day. 

Congressman Robert Bacon, a Long Island Republican, was mad that a construction project in his district back in 1928 went to an Alabama contractor employing African American workers. The legislative response Bacon crafted and ultimately passed to protect northern businesses from such competition culminated in the 1931 enactment of the Davis-Bacon federal wage mandates. 

Davis-Bacon wage requirements, studies show, inflate labor costs approximately 22% above market value. The Congressional Budget Office estimated in 2016 that repeal of Davis-Bacon would save U.S. taxpayers $13 billion on federal construction projects by 2026. 

Back in 1993 the Institute for Justice estimated that Davis-Bacon inflates construction company costs approximately $190 million per year. Adjusted for inflation that equates to more than $330 million today, representing a great deal of potential job creating capacity. 

Given the law’s inflationary effect and unsavory origins, the fact that Davis-Bacon is effectively untouchable politically, even at a time when leading politicians from both parties say infrastructure is a high priority, illustrates the sturdiness of the barriers that must be brought down to achieve the sort of building called for in renowned Silicon Valley investor Marc Andreessen’s much discussed article, titled “It’s Time To Build.”

Though there are many regulatory and political impediments to the sort of building that Andreessen and other people from across the ideological spectrum are calling for, recent years have proved that these barriers, as politically ironclad as they have seemed in the past, can be overcome. 

The following is a rundown of recent progress and what more needs to be done when it comes to reforming or repealing the laws and regulations that make the building of things — be they hospitals, schools, or roads — more costly and time consuming. 

Taxpayers Get Less Bang For The Infrastructure Buck Due To Prevailing Wage Laws 

Nearly 30 states have their own prevailing wage requirements. As Davis-Bacon does for federal projects, state prevailing wage laws artificially inflate the price tag of state and local government-funded construction projects. 

While Davis-Bacon will not be repealed any time soon, given Democratic control of the U.S. House, recent years have seen prevailing wage laws successfully repealed in the states. The most recent state where lawmakers repealed a prevailing wage law was Michigan in 2018. Kentucky’s prevailing wage law was repealed in 2017, preceded by West Virginia’s prevailing wage repeal in 2016, and Indiana’s prevailing wage repeal in 2015. In the first two months following repeal of prevailing wage, West Virginia taxpayers saved $20 million, according to the Associated Builders and Contractors of West Virginia. 

Scott Walker and Wisconsin state lawmakers repealed prevailing wage requirements for local projects in 2015. Two years later they came back and repealed prevailing wage requirements for state projects. Even though Scott Walker is no longer the governor of Wisconsin, prevailing wage repeal is among his many reforms that are still paying dividends for Badger State taxpayers to this day, facilitating billions of dollars in taxpayer savings and relief. 

By fully repealing of prevailing wage mandates in Wisconsin, Scott Walker and state legislators freed up funds for new infrastructure spending without hiking taxes, as some lawmakers in Madison were demanding. There is bipartisan recognition that prevailing wage laws are a problem. Connecticut’s previous governor Dannel Malloy (D), for example, called for reforming his state’s prevailing wage requirements in order to reduce taxpayer costs. 

Closed Competition Laws Make Upgrading U.S. Water Infrastructure More Costly

An often overlooked area of infrastructure where there is great need is water infrastructure. The most recent estimates find it will cost more than $1 trillion to replace, update, and expand aging, near century old in some cases, water infrastructure systems across the U.S. State legislators and governors can reduce those costs by preempting local closed competition laws that were enacted for protectionist reasons and serve to drive drive up the taxpayer cost of water infrastructure.

Across the U.S. there are local restrictions on what piping materials can be used in water infrastructure projects, typically mandating the use of ductile iron. These local closed competition laws mandate the use of iron, even though there are better performing, longer lasting, and less costly materials that can be used. The inflationary effect of locally-imposed closed competition laws for water infrastructure is evident. 

Take Grand Rapids & Port Huron, two Michigan localities that have closed competition restrictions for water infrastructure. Elsewhere in Michigan, such as Livonia & Monroe, have open competition systems. The result is that per mile pipe costs are $114,154 higher on average in closed competition Grand Rapids & Port Huron, than in open competition Monroe & Livonia.

Franklin County, Ohio is another locality with a closed competition system for water infrastructure. Per mile pipe costs are $97,680 higher on average in Franklin County than in Delaware County, a part of Ohio where open competition is permitted for water infrastructure projects. 

Open competition could save federal taxpayers $371 billion in lower water infrastructure maintenance and construction costs, according to estimates from the National Taxpayers Union. A 2017 study found that, on average, open competition laws cut water infrastructure costs for local governments by nearly 25%. 

State legislation to preempt local closed competition laws has been introduced in a number of statehouses across the country, in both Republican and Democrat-run states, but has yet to be enacted. A national reform to address the problem created by closed competition laws has been introduced at the federal level. House Resolution 5310, the Municipal Infrastructure Savings and Transparency Act, is a bill introduced by Congressman Brian Babin (R-TX) that would institute nationwide open competition for federally-funded water infrastructure projects.

“This bill makes a simple but critical reform to our federally-funded procurement and project-development process by returning authority and responsibility to the construction professionals who know best,” Congressman Babin said of his bill. “As we come together on President Trump’s signature infrastructure proposal…this bill will ensure we use the best products and get the best return on investment to the taxpayer.”

These are only a few examples of the statutory and regulatory impediments that hinder the sort of building called for by Andreessen and others. Others policies that unnecessarily impede growth — like state Certificate of Need regulations that prevent the expansion of hospital capacity and environmental regulations that make it harder for energy companies to bring product to the market — have been temporarily suspended during the coronavirus pandemic, by both Democratic and Republican lawmakers. 

In the coming weeks and months lawmakers in state capitals across the country will debate how many of those emergency deregulatory actions should be made permanent. Such reforms could be the first move in the transition to a post-pandemic world that is much more amenable to building.