Friday, May 19, 2017
Thursday, May 18, 2017
Household Borrowing in Historical Perspective [feedly]
http://ritholtz.com/2017/05/household-borrowing-historical-perspective/
Household Borrowing in Historical Perspective Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw Liberty Street Economics, May 17, 2017 Today, the New York Fed's Center for Microeconomic Data released its Quarterly Report on Household Debt and Credit for the first quarter of 2017. The report shows a rise in household debt balances in the quarter of…
The post Household Borrowing in Historical Perspective appeared first on The Big Picture.
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A Tax on Wall Street Trading is the Best Solution to Income Inequality [feedly]
http://cepr.net/publications/op-eds-columns/a-tax-on-wall-street-trading-is-the-best-solution-to-income-inequality
A Tax on Wall Street Trading is the Best Solution to Income Inequality
Dean Baker
The Hill, May 17, 2017
In the years since the 2008 economic crisis, financial transactions taxes (FTTs) have gone from a fringe idea to a policy that is in mainstream policy debates. They are seen as a way to both raise large amounts of money and to slow the pace of churning in financial markets. For this reason, most progressive Democrats have come out in support, and even the Clinton campaign provided a hat-tip to some form of taxation on high frequency trading.
This is a welcome change from where things stood before the crisis, when the only people supporting FTTs were the far left of the party. As a long-time proponent of an FTT, I welcome this change, but even many of the proponents of FTTs don't realize the full benefits of such a tax.
To get some bearing, it is first worth recognizing how much money is potentially at stake. The Joint Tax Committee projected that a modest tax of 0.03 percent on all trades of stocks, bonds, and derivative instruments, along the lines of a proposal by Representative Peter DeFazio, would raise more than $400 billion over the course of a decade. This is roughly equal to 0.2 percent of gross domestic product (GDP. This would be enough money to cover 60 percent of the cost of the food stamp program.There have been proposals for larger FTTs. The Tax Policy Center of the Urban Institute and the Brookings Institution analyzed an FTT with a varying rate structure on stocks, bonds, and derivative instruments. They calculated that the maximum revenue would be achieved with a rate on stocks of 0.34 percent, with lower tax rates on other financial instruments. This tax would raise more than $800 billion, or 0.4 percent of GDP, over the course of a decade.
Bernie Sanders and Keith Ellison have sponsored bills for a 0.5 percent scaled tax on stocks and other financial instruments. The Congressional Progressive Caucus in its "Better Off Budget" has adopted this tax. Their own estimates put the take from the tax considerably higher than the Tax Policy Center numbers.
Without trying to adjudicate between these estimates, it is clear that there is potentially a large amount of money at stake with an FTT. If we think that the government will want to tax away more money to fund infrastructure, healthcare, and other areas of public spending, FTTs seem like promising way to go. In addition, the idea of reducing some of the short-term trading in financial markets is attractive. The evidence on whether reductions in trading volume can reduce the likelihood of bubbles and crashes is not conclusive, but it seems worth a shot.
However, there is another important aspect of an FTT that has gotten much less attention. The burden of an FTT is borne pretty much in full by the financial sector. The basic story is that trading volume can be expected to decline roughly in proportion to the percentage increase in trading costs. This means that if a tax increases the cost of trading by 40 percent, then can expect trading volume to decline by roughly 40 percent.
This is a very important point. In the case of most items we buy, say food or housing, we value the item itself, so that if we had less food or housing because a tax raised the price, we would feel some loss. That is not the case with trading financial assets. At the end of the day, we don't care how much we traded, we care what happened to the value of our assets after trading. (Let's ignore the possibility that some people see trading like gambling and enjoy the process itself.) If we trade less because of a tax, it doesn't matter to the average consumer, unless it reduces the value of our assets.
In the case where trading volume falls in proportion to the increase in the cost per trade, there would be little change in the total amount spent on trading. If we pay 40 percent more on each trade, but carry through 40 percent fewer trades, the total amount spent on trading would not rise. (Total trading costs actually fall somewhat in this example, but we can ignore that point.)
The issue then is whether our portfolios will be smaller as a result of fewer trades. That seems unlikely. Trading is mostly a zero sum game. If you end up selling your stock at a high price, then some sucker paid too much for it and will incur a loss. On average, there is a loser for every winner, meaning that the trading costs are simply a waste.
There is a story that trading makes the market more efficient, better allocating capital to its best uses. There clearly is something to this story, if there was no market in which to sell Apple stock, no one would ever buy its shares in the first place. This would mean that Apple and other companies would not be able to use the stock market to raise capital.
However we almost certainly reached the point where the markets were deep enough to efficiently allocate capital long ago. Trading volumes have more than doubled in the last two decades and are an order of magnitude larger than they were in the seventies. Someone would be hard pressed to argue that capital was better allocated in the housing bubble years than fifteen or twenty years earlier when volume might have been less than half of its current level.
This means that the only losers from an FTT are the people who earn their money from doing the trades, not the pension funds or middle income people with 401(k)s. In effect, an FTT will allow the financial sector to serve its function of allocating capital from savers to investors more efficiently. If an FTT raises $40 billion a year, then it will reduce the amount of annual revenue of the financial sector by roughly $40 billion. If the tax revenue is $80 billion, then the financial sector will be roughly $80 billion smaller.
However, the really great benefit from these savings is that they will come out of the pockets of many of the richest people in the country: Wall Street traders and hedge fund partners. An FTT will radically reduce the income of a group of people who stand at the very top of the income ladder. By reducing the opportunities to get rich through trading, we will force many of these high flyers to look for jobs in designing software, biotech, or other areas in which their skills may still command a premium, even if they don't provide the millions they could expect on Wall Street.
And, the increased flow of people into these other high-paying professions will put downward pressure on the pay there as well. In effect, we will be reducing the number of very high paying positions in the economy, meaning that these positions will on average pay less as a result. We can think of an FTT as the equivalent of job-killing robots for the very high paid crew.
This is a great example of a clearly defined policy that will directly reverse some of the upward redistribution of income over the last four decades. Of course FTTs still face an enormous uphill battle before they could be implemented. As with other policies that would reverse the upward redistribution the problem is not the difficulty of designing the policy, the problem is the power of the rich people who don't want a fairer and more efficient economy.
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Dietrich Vollrath: Understanding the Cost Disease of Services
Understanding the Cost Disease of Services
As my internal clock is not on internet time, I'm only now getting up a post in reaction to the death of William Baumol, who has been a consistent reference on this blog over the years. My topic page on the productivity slowdown is in many ways an extended riff on his work.
I can share no personal stories about the man, as I never met him. What I can do is spend some time digging through what I consider the key paper of his most famous idea, the "cost disease of services". I'd like to think that as an academic, he'd appreciate this as much as an anecdote.
Before we get started, Baumol was one of the handful of towering figures of economics who recently passed, along with Ken Arrow and Allan Meltzer. In response, I would like to suggest that someone move Robert Solow to a secure underground bunker, and encase him in bubble wrap, just in case.
Back to Baumol. The central paper is "Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis", published in 1967 in the American Economic Review. For me, this contains a handful of insights that allow you to understand much of the story of economic growth in the fifty years since it was published.
To start, Baumol divides economic activity up in the following way:
The basic source of differentiation resides in the role played by labor in the activity. In some cases labor is primarily an instrument - an incidental requisite for the attainment of the final product, while in other fields of endeavor, for all practical purposes the labor is itself the end product.
For the first case, labor as an instrument, you can read "manufactured goods". He uses the example of an air conditioner. Just by looking at the A/C unit, or using it, there is no way for you to assess how much labor went into producing it. The labor is just incidental from your perspective as a consumer of the product.
Contrast that with the following:
On the other hand there are a number of servics in which the labor is an end in itself, in which quality is judged directly in terms of amount of labor. Teaching is a clear-cut example … An even more extreme example is one I have offered in another context: live performance. A half hour horn qunitet calls for for the expenditure of 2 1/2 man hours in its performance, and any attempt to increase productivity here is likely to be viewed with concern by critics and audience alike.
Here, labor is the very essence of the product. If you go see the horn quintet, then you are buying the 1/2 of each of those players time. Likewise, for a class you are in many ways buying the teachers time. At a (nice) restaurant, you are often purchasing the time and attention of a waiter.
The first big conclusion, which is really an assumption of Baumol's, is that labor productivity growth in the first kind of production (goods) is relatively fast, while labor productivity growth in the second kind (services) is relatively slow. This is just due to the nature of the work involved. For most services, you cannot do "more with less". No one wants to see the 1/2 hour horn quintet played in only 12 minutes.
So where does the cost disease come in? The next crucial assumption Baumol makes is that labor costs (wages) in the two kinds of activities move together. To be clear, he doesn't assume (or need to assume) that wages are identical in the two sectors, only that a wage increase in one sector puts upward pressure on wages in the other sector. This would be the case if labor was somewhat mobile between the two activities. Another way of saying this is that workers could work in either sector. (They may not be equally productive in both sectors, as in Alwyn Young's recent paper, which raises the possibility that Baumol is wrong about relative productivity growth. Maybe go read this post and his paper after you finish this one.).
And we're done. Productivity growth in the goods sector raises the wage in that sector, but also raises the output of that sector. So the ratio of wage to output - a measure of the cost of a unit of output - stays constant over time. Higher wages in the goods sector put pressure on wages in the service sector, so wages rise over time there. But (taking the exteme position) productivity is not growing in services, and so output is not growing. The ratio of wages to output in services - a measure of costs - is thus rising over time. This is the "cost disease of services".
The crucial elements are, again, the assumption that labor productivity growth is relatively slow in services, and the assumption that labor is mobile between sectors. Given this, the cost of services will rise over time.
For my money, the biggest insight Baumol had was to to notice the differential in how labor matters to production in goods and services. The subsequent logic is, by itself, not a major breakthrough. The Balassa/Samuelson effect - developed by those authors in articles published in 1964 - is the same idea. They distinguish between tradable and non-tradable goods, rather than goods and services per se, and they are thinking about a cross-sectional comparisons of countries, rather than one country over time, but the outcome is identical. Countries that are very productive in tradable goods will tend to have high aggregate price levels (an empirical regularity known as the "Penn Effect"), as that productivity drives up costs in their non-tradable sectors.
Here it is worth noting that labels matter. If you call this "cost disease", it sounds like a problem. If you call this "the Penn Effect", it means that rich countries have higher prices, and is just an empirical oddity. "Cost disease" sounds bad, but is a lot like dying in your 90's from old age. It's awful that you are dying, but let's not overlook that you made it into your 90's. Baumol's cost disease is a result of incredible affluence.
The precise symptoms of the cost disease depend on further assumptions. Baumol traced out the possibilities in the rest of the paper. We have that the costs (and thus prices) of the service sector are rising relative to the goods sector.
We may inquire what would happen if despite the change in their relative costs and prices the magnitude of the relative outputs of the two sectors were maintained … if the demand for the product in question (services - DV) were sufficiently price inelastic or income elastic.
This is the next essential insight, which is that demand for services is price inelastic and/or income elastic. What this means is that despite the rising costs, people continue to consume services, and may in fact increase their expenditure on services as they get more expensive. Baumol traces out the implications of the demand for services on the aggregate economy. In the following quote, the "progressive sector" is the goods sector, with rising productivity, and the "nonprogressive sector" is services, with slow productivity growth. Italics are Baumol's original.
If productivity per man hour rises cumulatively in one sector relative to its rate of growth elsewhere in the economy, while wages rise commensurately in all areas, then relative costs in the nonprogressive sectors must inevitably rise, and these costs will rise cumulatively and without limit. … Thus, the very progress of the technologically progressive sectors inevitably adds to the costs of the technologically unchanging sectors of the economy, unless somehow the labor markets in these areas can be sealed off and wages held absolutely constant, a most unlikely possibility. We see then that costs in many sectors of the economy will rise relentlessly, and will do so for reasons that are for all practical purposes beyond the control of those involved. … If their relative outputs are maintained, an ever increasing proportion of the labor force must be channeled into these activities and the rate of growth of the economy must be slowed correspondingly.
I tried to summarize this in my own words three or four times, but I don't think I did a better job than Baumol. Many posts on this blog have been about the realization of Baumol's prediction regarding slowing productivity growth as we transition into the non-progressive sectors. I'll just reiterate that the slowdown in aggregate growth implied by Baumol's cost disease is driven by the nature of demand, not a technological limit.
Often people interalize the cost disease part of Baumol's paper, without taking into consideration the second part regarding the effect of the demand for services. Scott Alexander has a recent post on cost disease from a few months ago that demonstrates this. Alexander's post is not unique, it just happened to be the last thing in my reading list on this topic, and so I'm using it to illustrate a point.
It's a (very) long post, but Alexander goes through education, health, and government services, effectively documenting the cost disease. He crystallizes this by asking the following kind of question. "Which would you prefer? Sending your child to a 2016 school? Or sending your child to a 1975 school, and getting a check for $5000 each year?"
He then does this with college; modern college, or your parent's college plus 72,000 dollars? And then with health care; modern health care, or your parent's health care (plus ACE inhibitors and some other now off-patent technologies) plus 8000 dollars each year?
Alexander's implicit answer to all these questions is that you would choose the the second option; the older level of service plus the cash. Much of the post is spent explaining that the service offered today is of no better quality than the service offered a generation ago. And while I'd quibble with that broad conclusion, that's not the point. Let's stipulate that the quality of healthcare and education have not changed in a generation, which is like taking Baumol's thought experiment as a precise statement about the world.
Here's the question that Baumol implicitly asked himself. What do people spend all that extra money on?
They could use it towards a new car or a major appliance, both manufactured goods. Perhaps this is what Alexander has in mind; he never says what he thinks happens to the extra money.
But they might spend that extra five or eight thousand dollars to finally take a well-deserved vacation, meaning it is spent on tourism and hospitality services. Or they may well decide to spend that money sending their kids to a better (and more expensive?) school, or putting them in a full time daycare rather than part-time. Or in sending one of their kids to college who might not otherwise have gone. Perhaps the savings are used to send someone back to get a Master's degree to get a promotion at work, or acquire a new certification that increases their wage.
And some of those savings might be spent on health services. Individuals may undertake procedures to permanently deal with chronic problems rather than only alleviating symptoms. Maybe the kids get full orthodontic treatment, rather than the partial work that only straightened one tooth. The savings Alexander proposes could be spent on seeing specialists to deal with persistent health issues, rather than relying on a GP.
From Baumol's second insight, the demand for these kinds of services is income elastic and price inelastic. Which means that a huge part of the money people get back from Alexander's thought experiment is plowed right back into education and healthcare. What does that do? It shifts the demand curve out for healthcare and education. And then what happens? The price goes up, and the actual amount of new health care or education acquired is not that large. Moreover, there is no appreciable decline - and there may be an increase - in the share of total GDP accounted for by healthcare and education.
This is the same outcome Baumol described, even though for him the origin of this was a productivity increase in the goods sector. But the origin of the productivity increase is unimportant, what matters is the structure of demand for services. So long as our demand for services is income elastic and price inelastic, the share of healthcare and education in GDP are going to rise as we get more productive, no matter where that productivity improvement comes from.
This is not a claim that healthcare or education are efficiently run, by the way. I can list, off the top of my head, a good five or six university administrators that I would get rid of tomorrow without any noticable effect. We could spend the next week swapping stories of ridiculous medical bills for $20 band-aids and the like. But their high costs are not entirely due to deliberate inefficiency, and lowering these costs would not lower their share of GDP.
I think Alexander's post is one example (of many) taking the "disease" part of "cost disease" too literally. Rising costs in education and healthcare do not always represent a pathology. In a lot of ways we are the victims of our own prosperity and preferences here. There is nothing about Baumol's analysis that implies living standards are lower or welfare is impaired by the cost disease. Remember that the cost disease is a consequence of productivity improvements in the first place.
While "cost disease" may not have been the best choice of names, Baumol has to be credited with anticipating the path of economic growth and structural change in developed countries over the late 20th century. He did this without resorting to any math beyond what I could use in an intermediate college course, and in language accessible to anyone. If you're interested in economic growth, it is well worth finding some time to sit down are read through his body of work
Harpers Ferry, WV
Rising capital share and transmission into higher interpersonal inequality
Rising capital share and transmission into higher interpersonal inequality
Branko Milanovic 16 May 2017
Thomas Piketty's bestseller, Capital in the 21st century (Piketty 2014), attracted our attraction to the capital–income ratio. The capital–income ratio increases, by definition, when the rate of return on capital (assuming the return is fully reinvested) is greater than the rate of growth of the economy. This is the famous r > g inequality. If this is the future of the rich world, as Piketty argued, then capital–income ratios will continue to rise.
But will the increase in the capital–income ratio lead to an increase in interpersonal income inequality? The question is seldom asked because the answer seems obvious. If the capital-–income ratio goes up, and if the share of capital in GDP increases, then income inequality is bound to increase. Recent empirical findings of a rising capital share over recent decades in both advanced and emerging economies reinforces this view (Karabarbounis and Neiman 2013, Jacobson and Occino 2013, Elsby et al. 2013).
The three conditions for greater income inequality
The matter, however, is more complicated. True, richer countries have higher capital-income ratios. The recent Credit Suisse (2013) report clearly supports this. Measured by current income, Switzerland is richer than in India – but the ratio of per-adult wealth to income is greater too (Table 1). So, we can expect that as countries grow richer, their capital–output ratio will increase. But, as I recently set out (Milanovic 2017), there are three conditions for this to lead to greater interpersonal inequality.
1. The rate of return must not fall to the point that it offsets the increase in the capital–income ratio.
If it did, would make the capital share in GDP constant (or even decreasing). Most recent data imply that this condition is easily satisfied.
Table 1 Wealth–income ratio in selected countries, 2011
Source: Credit Suisse (2013).
2. Income from capital must be heavily concentrated.
If concentration of income from capital were the same as concentration of income from labour, the rising share of capital would not raise overall inequality. But, of course, this is not the case. The Gini concentration of income from capital in all rich countries is astonishingly high, in the range 0.85-0.95, almost twice as high as the Gini from labour incomes. (Figure 1 shows this comparison for the US and the UK.) Clearly, as a more unequally distributed income source increases in importance, overall inequality will rise.
3. The income source that is more unequally distributed must also be positively correlated with overall income.
To see this, consider income from unemployment benefits. It is also heavily concentrated, with a Gini of about 0.9, just like income from capital. Unemployment benefits, however, are received by the income-poor, and so they push inequality down, while income from capital whereas income from capital is received by the income-rich, and so pushes inequality up. This condition is equivalent to saying that, for overall inequality to increase, the share of capital income in total income must be greater for the income-rich than for the poor. This is self-evidently true: capital income, even if underestimated in household surveys or tax data, is 15% of total income of the highest decile in the US, and is negligible among the bottom deciles (calculated from 2013 'lissified' Current Population Survey). This is true in all rich countries.
Figure 1 Gini coefficients of capital and labour income
Source: Calculated from Luxembourg Income Study data. (http://www.lisdatacenter.org/)
In the real world, all three conditions are easily satisfied. The implication is bleak: if countries want to curb the automatic spillover of greater capital share in GDP to higher interpersonal income inequality, there must be greater redistribution of current income through higher taxes. Politicians have little appetite for this.
An alternative solution: Deconcentrating capital ownership
There is an alternative solution. Go back to condition three. Now suppose that, instead of capitalism – in which the share of capital income increases almost monotonically with income level – disposable income were distributed with a Gini equal to what it is today, but that each individual had the same share of income from capital and labour regardless of where that individual was in the income distribution. The rich person's 100 units of income would be composed of 70 from labour and 30 from capital, while the poor person's income of 10 units would consist of seven from labour and three from capital. Note that the rich would be still as many times richer than the poor as they are today, but their share of income from capital would the same as the share of income from capital that the poor receive. Then an increase in the capital share would increase everybody's income proportionally, and not change the overall Gini.
We can do even better. Suppose that income from labour were distributed the same as today, but that all income from capital were shared equally, on per-capita basis. Then we would move to a world in which an increase in capital share would reduce overall interpersonal inequality.
Therefore we do have an answer to how to offset the quasi-inevitable trend to higher interpersonal inequality that rich countries will face if capital share in GDP keeps on rising – as many economists assure us it will, not least because of the influence of robotics on the labour market. The answer would be a 'deconcentration' of capital ownership. It is remarkable how little – or rather, that nothing – has been achieved in this respect since Margaret Thatcher first called for "popular capitalism" in 1986. The works of Piketty et al. (2017) and Wolff (2010) for the US, Roine and Walderström (2010) for Sweden, Atkinson (2007) for the UK and others, uniformly show that the distribution of capital is now more unequal than it was 30 years ago. Inequality of income from capital has a scarcely believable Gini of 90.
Deconcentrating capital ownership can be done in at least three ways:
- By giving tax preferences to small investors so that they become more likely to own shares. One could envisage a government-funded insurance whereby shares up to a certain amount would have a guaranteed, very modest, real return (say, 1% per year) even in a case of a stock market decline.
- Workers should be encouraged through the existing mechanisms, like employee stock ownership plans, to become the owners of the companies in which they work. Obviously, when they leave they could choose to sell their shares, but the experience of having had some equity (acquired perhaps at preferential rates) may make them more willing to continue investing. In other words, the working class and small investors should enjoy the same tax and other advantages that today are granted only to the rich.
- Using capital grants funded out of inheritance taxes, as suggested by Atkinson (2015), would also broaden the ownership base.
A question of will
Two points need to be made clear. First, if the capital share in GDP keeps on rising, and if rich countries genuinely want to halt further increases in inequality, something must be done. This means either redistributing current income, or equalising asset ownership. Second, equalising asset ownership appears more promising. The tools to do this are well known. Many of them were extensively discussed in the 1970s and 1980s by Meade (1986). More recently, they were also advocated by Atkinson (2015). What we lack is the political will to do it.
References
Atkinson, A (2007), "The Distribution of Top Incomes in the United Kingdom 1908-2000" in A Atkinson and T Piketty (eds) Top Incomes over the Twentieth Century. A Contrast Between Continental European and English-Speaking Countries, Oxford University Press, Chapter 4.
Atkinson, A (2015), Inequality: What can be done? Harvard University Press.
Credit Suisse (2013), Global Wealth Report 2013, Credit Suisse Research Institute.
Elsby, M W L, B Hobijn and A Şahin (2013), "The decline of US labor share", prepared for the Brookings panel on economic activity, September 2013.
Jacobson, M and F Occhino (2013), "Labor's declining share of income and rising inequality", Economic Commentary, Federal Reserve Bank of Cleveland.
Karabarbounis, L and B Neiman (2013), "The global decline of the labor share", Quarterly Journal of Economics, (129)1, 61-103.
Meade, J (1986), Different forms of share economy, Public Policy Center.
Milanovic, B (2017), "Increasing capital income share and its effect on personal income inequality", in Heather Boushey, Brad de Long, Marshall Steinbaum (eds), After Piketty: The agenda for economics and inequality, Harvard University Press, 235-259.
Piketty, T (2014), Capital in the 21st century, Harvard University Press.
Piketty, T, E Saez and G Zucman (2016), "Distributional National Accounts: Methods and Estimates for the United States", NBER Working Paper 22945, December.
Roine, J and D Waldenström (2010), "Top Incomes in Sweden over the Twentieth Century" in Anthony Atkinson and Thomas Piketty (eds.) Top Incomes: A Global Perspective, Oxford University Press, Chapter 7.
Wolff, E (2010), "Recent wealth trends in the household wealth in the United States: Rising debt and the middle class squeeze: an update to 2007", Levy Economics Institute of Bard College, Working Paper 589, October.
Harpers Ferry, WV
Policy Watch: Congress blocks 14 Obama-era rules in an unprecedented blitz of CRA votes [feedly]
http://www.epi.org/blog/policy-watch-congress-blocks-14-obama-era-rules-in-an-unprecedented-blitz-of-cra-votes/
Yesterday was the final day congressional Republicans could use the Congressional Review Act (CRA) to block regulations issued in the final months of the Obama administration. The CRA is a controversial law that gives Congress the power to overturn rules put in place by the previous president for 60 legislative days after the president leaves office—and robs future administrations of the ability to implement new rules. Republicans have used this rather obscure law to block an unprecedented 14 regulations.
The rules blocked by congressional Republicans and President Trump provided important protections ensuring the health and safety of consumers, working people, and the general public. The five labor-related rules that were blocked would have made it harder for companies to get federal contracts if they violated labor laws, made it easier for the Occupational Safety and Health Administration (OSHA) to track workplace injuries, helped people save for retirement, and made it easier for people to collect unemployment insurance.
The blocked Fair Pay and Safe Workplaces rule required companies applying for federal contracts to disclose violations of federal labor laws and executive orders addressing wage and hour, safety and health, collective bargaining, family medical leave, and civil rights protections. Currently, there is no effective system for distinguishing between law-abiding contractors and those that violate labor and employment laws. By blocking this rule, Republicans have ensured that businesses that violate basic labor and employment laws will continue to be rewarded with taxpayer dollars.
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