What the productivity paradox means for America's housing costs
Plus: The Biden Administration makes a move toward big increases in poverty spending; bipartisan energy reforms make incremental progress; and Freedom Conservatism makes a splash
Factory housing and the productivity paradox: According to the U.S. Bureau of Labor Statistics, construction productivity in 2020 was 40% lower than in 1970, even though productivity in other sectors of the economy more than doubled during that time. While local regulatory policy is unquestionably a factor in this decline, FREOPP Visiting Fellow Jackson Mejia notes that restrictions on the methods of housing production also affect the supply of affordable housing. Prefabricated factory-built housing costs about one-third as much as traditional “stick-built housing,” but it constitutes just 10% of new single-family home construction today. In the 1970s, it was 60%. That dramatic decline is thanks to monopolistic government policies, from mortgage subsidies to federal safety standards, that irrationally favor stick-built methods over factory-built. To make more housing available to more Americans at lower prices, the federal government must get out of the way and allow housing construction to modernize the same way other sectors of the economy have.
Biden Administration considers stealth increase in poverty spending: Eligibility for most major welfare programs in the U.S. is tied to the federal poverty standard. That’s why the Biden Administration’s potential change to the Census Bureau’s supplemental poverty measure (SPM) from the current official poverty measure (OPM) is so important. FREOPP Senior Fellow Michael Tanner writes that, while the OPM is flawed, the SPM does a worse job of identifying the Americans most in need. What’s more, Michael cites our friends at the American Enterprise Institute, who estimate that a switch from OPM to SPM could effectively raise the poverty line by 20 percent in 2024 alone. This change would prompt commensurate multi-billion dollar increases in spending on Medicaid and other programs, as well as a shift in federal funding from low-cost states like West Virginia to high-cost states like California—effectively rewarding state policies that drive up housing and other expenses. With consequences this significant, any change to poverty measures must be made in the context of a full and open debate, not a stealth change in funding formulas.
Debt limit deal shows promise of bipartisan energy reforms: When President Biden signed the debt-ceiling deal into law in June, both parties found plenty to dislike in the final product. A silver lining to the bill, which Visiting Fellow Grant Dever describes on FREOPP’s OPPBlog, are provisions that reduce regulatory barriers to new critical energy infrastructure projects. One change is to streamline processes for National Environmental Protection Act reviews, which will speed up agency approvals for new infrastructure and help reduce costs and uncertainty for project owners. The law also mandates fact-finding and reporting on grid reliability, as well as approval for the Mountain Valley pipeline, all with the goal of strengthening electrical grid capacity and lowering energy costs. The bottom line? Although Washington once again missed an opportunity to pass the kind of significant reform that will reduce inflation, spur economic growth, and bolster our energy security, these provisions are still worthwhile steps in the right direction.
Avik on Freedom Conservatism: In case you missed it, FREOPP President Avik Roy took to FREOPP’s Substack to share his reasons for signing—and helping to draft—the Freedom Conservative Statement of Principles. The piece provides context for and expands on points he made in National Review a few weeks earlier. It also makes the case that the free-market reforms that FREOPP scholars have developed can only succeed if we build a network of alliances with those in both parties who share our mission.
→ Read the full Statement of Principles, learn more about Freedom Conservativism, and sign up for updates directly from the FreeCons at freedomconservatism.org.
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