Stimulus Wimps

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I apologize to readers for technical problems that have made it difficult to find my blog. I am told the problems have been solved.

I want to refer readers to two recent entries on the Becker-Posner blog, dealing with the stimulus program and the president's proposal to double exports in two years, respectively, both relating to the economic crisis. The entries can be found at http://uchicagolaw.typepad.com/beckerposner/

The title of the present entry was suggested by an article that appeared on page A5 of today's Wall Street Journal and is called "Nostalgia for New Deal Job Plan: Mayors Say They can Put Thousands to Work on Infrastructure Projects, as Was Done in the 1930s," by Louise Radnofsky. The article points out that at the outset of Franklin Roosevelt's presidency, in 1933, the government launched a series of public works programs that within a matter of months put literally millions of unemployed persons to work, primarily on infrastructure projects. A number of mayors are urging the administration to provide funds for similar projects today, since the unemployment rate is high although far lower than it was in 1933, when it reached 25 percent of the work force. The administration has poured cold water on the suggestion: "White House officials noted that the New Deal took place in a different world, one without environmental impact statements, complex calculations to determine prevailing wage scales for workers, or extensive public reporting on the use of funds."

That is a pathetic confession of impotence, surprising in an administration that wants to increase the size and complexity of government. The government is already being strangled by bureaucratic hypertrophy and regulatory excess (where we don't need regulation -- where we do need it, we don't have it). In a time of economic emergency, one might expect such regulatory luxuries as environmental impact statements, complex calculations to determine prevailing wage scales, and extensive public reporting on the use of funds, to be, if not suspended, at least scaled back in the interest of expedition. And maybe if we had a stimulus expediter, instead of Vice President Biden (the supremo of the stimulus program), we would have some relief from the red tape in which the government wraps every project ten layers deep.

Let me pause on the middle obstacle to the mayors' proposal -- determining prevailing wage scales. Heaven forbid that unemployed workers be allowed to work for less than overpaid union workers. The reference to "prevailing wages" is presumably to the Davis-Bacon Act of 1931, still in force, which requires that workers employed on federally financed construction projects be paid the "prevailing" wage, which is set by the government equal to or greater than the union wage rate for the locality. Like the minimum wage, of which indeed it is a form, the Davis-Bacon prevailing wage reduces employment by placing an artificial floor under the wages that workers can agree to work for. The current administration is solicitous of unions because of their financial and electoral support of Democratic candidates, notably the president, but it is a solicitude that retards economic recovery by raising the costs of productive activity, such as construction, thus reducing output and therefore the demand for labor and other inputs.

But the most interesting and depressing and ironic aspect of the article is that an administration that is pressing for a radical expansion in government should at the same time be acknowledging constraints that render unthinkable a modest proposal to repeat one of the early successes of the New Deal.

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Richard A. Posner

Richard Posner is an author and federal appeals court judge. He has written more than 2500 published judicial opinions and continues to teach at the University of Chicago Law School. More

Richard A. Posner worked for several years in Washington during the Kennedy and Johnson Administrations. He worked for Justice William J. Brennan, Jr, the Solicitor General of the U.S., Thurgood Marshall, and as general counsel of President Johnson's Task Force on Communications Policy. Posner entered law teaching in 1968 at Stanford and became professor of law at the University of Chicago Law School in 1969. He was appointed Judge of the U.S. Court of Appeals for the Seventh Circuit in 1981 and served as Chief Judge from 1993 to 2000. He has written more than 2500 published judicial opinions and continues to teach at the University of Chicago Law School. His academic work has covered a broad range, with particular emphasis on the application of economics to law. His most recent books are How Judges Think (2008), Law and Literature (3d ed. 2009), A Failure of Capitalism: The Crisis of '08 and the Descent into Depression (2009). He has received the Thomas C. Schelling Award for scholarly contributions that have had an impact on public policy from the John F. Kennedy School of Government at Harvard University, and the Henry J. Friendly Medal from the American Law Institute.
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