The president kicked off 2011 with talk of compromise and progress, as if standing on the precipice of economic catastrophe had ushered in a great new beginning. Unfortunately for Mr. Obama, the new beginning that a GOP-controlled House will make possible is an end to the self-indulgence that has characterized public policy over the past two years.
The word “spending” was used eleven times in the president’s speech, but not once in reference to the union surcharges we pay for infrastructure projects, or the benefits we fund at the behest of teachers’ unions. Instead, Mr. Obama maintained that investments in these areas are essential and that private sector interests have stacked the deck and impeded our progress:
But to help our companies compete, we also have to knock down barriers that stand in the way of their success.
For example, over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all.1
A parade of congressional Democrats required that top dollar be paid for Recovery Act-funded construction projects by including Davis-Bacon prevailing wage requirements in the stimulus bill. The Congressional Budget Office projected as far back as the 1980s that amendment or repeal of Davis-Bacon could save billions,2 but the recession gave Democrats an opportunity to extend the reach of this 1931 law even further. In 2009, thirty-three programs that existed before the Recovery Act, such as the 1976 Weatherization Assistance Program, were required to comply with Davis-Bacon; in all, forty programs fell under the act’s wage restrictions.3 If non-union contractors wish to compete for federal projects against union shops, Davis-Bacon forces them to pay not only the same wages, but also the same fringe benefits as unions. Who sets the inflated prevailing wage rates? The Federal Government.
The image of the over advantaged, wealthy American has persisted even after the tax rate compromise and the president implied that extending the Bush tax rates was at the expense of education:
And if we truly care about our deficit, we simply cannot afford a permanent extension of the tax cuts for the wealthiest 2% of Americans. Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax break.4
Mr. Obama proposed that we “… prepare 100,000 new teachers in the fields of science and technology and engineering and math.” ,5 but made no mention of how we were going to pay for these teachers, given that we spent $10 billion on a teacher bailout in August 2010 because states could not afford to pay the salaries.
The average annual salaries for kindergarten, middle school, and secondary school teachers were in excess of $51,000 in May 2009,6 which makes the president’s proposal an investment of over $5 billion at current pay rates. Union demands for higher wages and benefits have already forced states to look to Washington to pay their teachers, and will absolutely preclude the improvements suggested by Mr. Obama. Our public pension liabilities are over $5 trillion, and are underfunded by as much as $3.23 trillion.7 Benefits required by teachers’ unions under threat of strikes are a large slice of this unfunded liability, so it is mandatory that we wrest financial control of our education system from organized labor, in order to bring benefits in line with the public sector.
Cutting spending means more than just slashing unnecessary programs and implementing freezes that will be circumvented. If we really want to cut spending, we must cease to pay surcharges like Davis-Bacon mandates, or exorbitant, unaffordable benefits for the public employees that we support. Unions are digging us an ever-deepening hole, and responsibilities owed by states will ultimately be added to our federal tax bill. Repealing Davis-Bacon and reforming public sector benefits would send the message that taxpayers and responsible legislators, not organized labor, control where our money goes and what we get for our dollars.