President Obama told us time and again, when Democrats were winning congressional majorities, “elections have consequences.”
Yet, after the drubbing his party took in the midterm elections, the president oddly pronounced if the GOP has some ideas to fund more infrastructure investment, advance early childhood education or improve ObamaCare, he is open to listening.
That is not quite be what congressional Republicans promised voters, but if I were Senator McConnell or Speaker Boehner, I would work on those issues—but with measures that get to the root of some of country’s growth problems.
America spends plenty on infrastructure but it spends it badly—and that impedes new investments in housing and jobs.
State and local governments, bending to powerful construction and home builder lobbies, place too much emphasis on expanding highways to ever more distant suburbs. Specifically, millennials show a much greater appetite than their parents for living in or near cities and short commutes.
New home construction has shifted towards urban redevelopment, but young folks face daunting transportation problems on overtaxed roads and transit systems.
The “prevailing wage” provision of the Davis-Bacon Act generally requires excessively-high union wages on federally assisted projects. No matter that grossly inflates construction costs and reduces the number of projects undertaken, and organized labor represents only 6.7 percent of the private sector labor force these days.
The gasoline tax was last raised since 1997, and the federal highway trust fund is broke. The GOP leadership should craft a bill that increases the tax in line with inflation but refocuses spending more on relieving congestion and bottlenecks on urban roads and rail, and repeals Davis-Bacon.
Obama always likes more taxes, and he would find the urban emphasis, serving the needs of his young constituents, intriguing—but develop apoplexy about repealing Davis- Bacon.
McConnell and Boehner could refer him to Governor Scott Walker who has cleaned out union obstructions to growth and has Wisconsin’s economy firing on all cylinders. And the governor won his reelection the same day the president took his national shellacking.
Hardly anyone likes the IRS. Junking the federal income tax for a simpler to implement value-added tax would better encourage investment and growth, but that would impose greater burdens on parents of young children who by necessity save less and spend more on items that would be subject to the new levy. To compensate, Congress should also create a childcare allowance, and permit parents to spend that money on pre-school or to defer the cost of “home schooling” for stay-at-home parents.
We could count on the president balking at funding for home schooling, in deference to Democratic-leaning teachers’ unions, but it’s time for the GOP to stand up for America’s moms—including those that stay at home.
The Affordable Care Act states that health insurance subsidies be paid through exchanges “established by the states,” but 36 states have balked at creating on-line marketplaces. The IRS unilaterally decided ACA subsidies may be paid through the federal market-place, despite the fact that law was written to explicitly encourage states to set up exchanges.
The Supreme Court is reviewing legal challenges to the IRS’s peculiar interpretation of the law. Disallowing the subsidies, absent state exchanges, would all but kill the ACA, and Congress should help stiffen the court’s allegiance to the clear reading of statutes by restating its will.
Supporting state governors who have determined the ACA is an unworkable morass, the Congress should quickly put an appropriation bill on the president’s desk that eliminates funding for subsidies in states without exchanges.
It all sounds radical, but it’s time for the president to live by his own admonitions and bear the consequences of a conservative majority in the Congress.
Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.