Paving the Roads to Economic Ruin

(Michael Chamberlain/Nevada Business Coalition) – The road to hell is paved with good intentions. It is important to keep that old adage in mind whenever a legislator stands behind a microphone to tell you how he or she is going to take more of your money to make your life better.

In the most recent example, legislative Democrats began unveiling a plan they hope will help jump-start the Silver State’s economy. It offers preferences to in-state contractors and creates a fund for public works projects within the state. The majority party demonstrated the bipartisan nature of the announcement by not inviting any Republican legislators to the event.

They did, however, allow Governor Sandoval’s chief of staff, Heidi Gansert, an opportunity to speak. Gansert discussed one of the Governor’s proposals but declined to express an opinion on the Democrats’ plan.

While on the surface it may seem that giving preferences to companies that employ Nevada residents and purchase materials in the state is an unqualified good, there are going to be unintended consequences from this portion of the legislation.

It is certain to increase the costs of construction. The preferences require the state to pay as much as 5% more to hire a contractor who qualifies for preferred status over one who does not. It is also certain that there will be compliance costs involved for both the state and for contractors, who will pass these costs on to the state, as additional steps and documentation will be necessary to verify contractors are living up to their agreement.

No one knows how many out-of-state workers are employed on public works projects in Nevada so there’s no way to know if this will help employ Nevadans. Though they may sound good to some, the preferences in this proposal will result in increased costs to the state while providing few, if any, benefits.

The problem of unemployment in the construction industry in the state is not due to an overabundance of foreign workers but to a lack of demand for construction. Spending more money to discourage out-of-staters or to force-feed the industry are not going to remedy that.

Which brings us to the other part of the proposal. Raising taxes on others to fund additional public works construction will, at best, provide a few obscenely-overpaid construction jobs at the expense of the rest of the state’s workers and businesses.

This proposal is a bad idea whose negative consequences will far outweigh its professed good intentions and may lead us to quite literally pave roads to further economic ruin.

(Michael Chamberlain is Executive Director of Nevada Business Coalition.)