This is a post from Jim Haughey's blog that covers the US construction industry.

Jim Haughey is the Chief Economist for Reed Construction Data and has over thirty years experience as a business economist, including twenty years monitoring the construction market. He has a Ph.D. degree in economics from the University of Michigan and has previously taught at the University of Michigan, Ohio University, Michigan State University and the University of Massachusetts.

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Construction Industry Forecasts

Notes from Jim Haughey - Jul 01, 2011

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FAA stops works on federally funded runway and control tower projects
Jim Haughey, RCD Chief Economist

This is a preview of a similar difficult negotiation over the much larger Highway Trust Fund later this year. No stop work orders are expected because the authorization for the federal fuel tax is not schedules to expire. But the flow of new project starts will be affected.

The House and the Senate have each passed an aviation tax/fee reauthorization bill but are unable to resolve two key differences. The Senate version includes a provision to change the labor rules that apply to airlines and railroads.  It would permit employees to approve union representation with a vote of 50% plus one of voting employees.  The current law is 50% plus one of all eligible employees.  This is a top demand of labor unions; the National Labor Relations Board has announced that it considering administratively mandating this change for other industries. The House will not accept this change.

Similarly, the House bill includes a provision eliminating the subsidy for passenger air service, paid to airlines so they can reduce ticket prices, for thirteen small rural airports.  This is a $15 Million annual spending cut.  Ten of the airports are within 90 miles of a hub airport. Three others are so small that the subsidy averages over $1,000 per passenger. The Senate refuses to accept this change.

This dispute is trivial compared to the grand debate on the debt limit and deficits. But it does illustrate the ideological divide between the two parties and the recent hardening of positions that is making compromise difficult. Generally, republicans represent the interests of the now minority of voters who pay federal income taxes and do not get a significant share of their income in a monthly government check. Democrats, in general, represent the interests of the now majority of voters who either pay little or no federal income tax or rely on the government, directly or indirectly, for a large share of their income¸ in some cases, nearly all of their income.

This divide has been in the background for several decades but has been overshadowed by divides over foreign policy and domestic social issues. Now it dominates domestic politics after the 50% jump in the accumulated federal debt in last three years. Both sides consider their position essential for the maintenance of the standard of living that their supports now enjoy. Compromise may not be possible.  But there is still a good change that the divide may be papered over and pushed back for a decision after the next election.  Compromise will be much easier if one party controls both houses of Congress. Unfortunately, the price of waiting for a solution is an extended period of subpar economic growth.



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Read Other Recent Jim Haughey Posts

08/15 - Contractor Survey: Work backlog rises in 2nd Q but may fall in the summer
08/09 - Modest construction recovery will be supported by two more years of cheap credit
07/29 - Sour economic growth report threatens construction recovery
07/27 - Worry about the deficit not the debt limit
07/27 - Worry about the deficit not the debt limit
07/27 - Worry about the deficit not the debt limit
07/19 - Housing starts rebound.6% in June after two weak months
07/18 - Congress prepares to postpone resolving the deficit crisis assuring an extended period of subpar eco
07/12 - House Transportation Committee proposes to keep federal highway funding at fuel tax receipt level
07/09 - Don’t count on debt limit deal to restart sustained high economic growth
07/08 - Contractors cut 9,000 jobs in June
07/05 - The cost and frustration of selling a home contributes to the delayed housing recovery
07/05 - May construction spending down 0.6%; recovery still on hold
06/21 - It is not more jobs that will quicken the economic recovery
06/16 - Mays’ 3.5% gain in housing starts does not signal a housing recovery immediately ahead
06/15 - Cautious spending threatens to delay construction recovery
06/10 - Economic and construction recoveries will be subpar for at least another year
06/09 - NYC construction unions may agree to drop expensive work rules to spur more work
06/04 - Contractors add 2,000 jobs in May; overall job gain disappointingly low
05/25 - No consensus for 2nd quarter GDP growth

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