A Lesson in Government Math

Written by Scott

Topics: Uncategorized

Ok, back to the other issue at hand in the household…the lead and the work on the house.

Today’s lesson is on the Davis-Bacon Act. Short version is this: it was a Republican-sponsored bill in 1931 that requires paying “prevailing wages” on public works or other federally-funded projects over $2000. Sounds as decent as most government matters, no? The issues with it are numerous, and you can read a summary of some of them here. I won’t delve into that, because this is a math lesson, not a history lesson.

In our case, we have available an $11k grant and/or a $20k (or so) low or no interest deferred loan. The grant is subject to Davis-Bacon, and if used, also makes the loan subject to it as well. But if the loan only is used, it is not. And here’s where things get interesting.

Let’s say, conservatively, that Davis-Bacon adds 35% additional cost (or, a better way of thinking about it, is that it reduces the spending power of the sum by 35%).
Grant: $11,000-35%=$7150 effective
Loan: $20000-35%=$13000 effective
Total=$20150 effective, essentially makes the grant money meaningless while funneling the funds into union hands when I’d rather support smaller businesses.*

We’ve chosen to proceed using only the loan.

*Ok, so maybe I clued you in on one of my objections to Davis-Bacon. The problem is this: as opposed to 1931, we now have fairly strict building codes, inspections, and enforcement…furthermore, those writing the contracts can just as easily add in whatever tougher requirements desired that must be met, and then let it be bid or, rather than arbitrarily be inflated. In times like these, requirements like Davis-Bacon kill off small construction businesses. Ironically, the grant money was a part of the “stimulus” funds that are designed to “maximizes job creation and economic benefit”…and it does neither.