As we all know we are experiencing the worst economic times since the great depression. The unemployment rate is the highest in many years. It is important to understand that unemployment figures are a lagging indicator of a weak economy. The reason is simple. When companies experience weak sales they cut back on manufacturing orders to avoid excessive inventories. When companies cut back on production they lay off workers and increase unemployment. We will not know when the recession will bottom out until we see the unemployment figures decline.
In recessionary times it makes sense for the government to engage in deficit spending to create jobs. The way we get out of these troubling economic times is by putting money into the hands of the workers, build confidence and job security, and encourage consumer spending.
President elect Obama has proposed an economic stimulus plan designed to create 3 million jobs. The plan is relatively simple. Our county’s infastructure needs rebuilding. You may remember about a year ago a bridge in Minnesota collapsed causing death and injury. There are many other bridges that need to be retrofitted in this country not to mention the need to repair roads and government buildings.
The stimulus package is designed to have the government spend money in the form of government contracts. The government plans on spending $700 billion dollars on rebuilding the infrastucture. Presumably some of this money will come from money saved when we withdraw the war effort in Iraq.
When the government awards public contracts the Davis Bacon Act applies. This federal statute requires, among other things, sealed bids and a requirement that each worker be paid what is known as the prevailing wage for each craft or trade. This prevailing wage is comparable to the labor unions collective bargaining wage and is generally much higher than the wage that construction companies could pay if not bound by the Davis Bacon Act.
The effect is that construction workers will earn a decent wage which will put money into the hands of the working man, consumer spending should increase which will benefit local business and consequently will increase the taxes the government will collect.
Construction companies, who have struggled in recent years, will have tremendous opportunities to obtain profitable public contracts.
Also any company that offers a service that will protect the environment and that can be used in the construction of our bridges, roads and government buildings will have these opportunities. A company with this technology should obtain a patent and then seek to have the service included in the federal government’s contract specifications that will require all contractors to utilize that service or technology.