Sensible environmental and safety regulations are good, of course, but it’s fairly clear that U.S. policy since the 1970s has overcorrected.
Ezra Klein has a piece on construction costs for the New York Times. He begins:
Here’s something odd: We’re getting worse at construction.
Let’s pause. Whom does “we” refer to? The paragraph continues in this way:
Think of the technology we have today that we didn’t in the 1970s. The new generations of power tools and computer modeling and teleconferencing and advanced machinery and prefab materials and global shipping. You’d think we could build much more, much faster, for less money, than in the past. But we can’t. Or, at least, we don’t.
“We,” Americans, do have better technology now than in the 1970s. So one would expect productivity to have improved. But it hasn’t. A reasonable question when confronted with those facts is: What’s getting in the way? Klein writes:
Throughout the 1950s and 1960s, productivity in the construction sector — how much more could be done given the same number of workers and machines and land — grew faster than productivity in the rest of the economy. Then, around 1970, it began to fall, even as economywide productivity kept rising. Today, the divergence is truly wild. A construction worker in 2020 produced less than a construction worker in 1970, at least according to the official statistics. Contrast that with the economy overall, where labor productivity rose by 290 percent between 1950 and 2020, or to the manufacturing sector, which saw a stunning ninefold increase in productivity.
So now we know where in history to look. What happened around 1970 that could have created this discontinuity? Klein treats this as though it’s a complete mystery.
He considers a paper from economists Austan Goolsbee (a former adviser to Barack Obama) and Chad Syverson on construction costs. The paper finds that capital investment in construction did not decrease. It finds that the productivity decline isn’t just a statistical artifact; it is a real problem.
Klein then talks to Ed Zarenski, a construction analyst with over 40 years of experience. Zarenski tells him what’s changed in construction over his career:
“When I first started back in the ’70s, you did one estimate on a project,” he told me. “You put it in, you got your bid, and if you won, you began construction. By the time I left in 2014, you did three estimates for every job before you even put the bid in. That becomes part of the cost of the job.”
Or take the job site, he said. “The safety features on jobs when I started in the industry were not even noticeable. Safety on a job today is incredibly different. You don’t walk across a beam, you walk around on a pathway marked for you to stay safe so you don’t fall off the side of the building. By the time I retired, one thing that took place every day, on every job site, was a mandatory 15 minutes of calisthenics before you start your workday. That’s totally nonproductive, but it led to fewer work site injuries during the day.”
And behind all that is paperwork, and paperwork, and more paperwork. “The work we do today takes hundreds more people in the office to track and bring to completion,” he told me. “The level of reporting that you have to send to the government, to the insurance companies, to the owner, to show you’re meeting all the requirements on the job site, all of that has increased. And so the number of people you need to produce that has increased.”
Huh. Paperwork and safety rules. Sounds like the sort of thing government regulation might cause.
But of course, that can’t be the answer. This is the New York Times, and it’s Ezra Klein. The government’s the good guy. So we have to sit around and pretend we don’t know.
Klein even goes so far as to say that “organized groups” opposing new construction are a big part of the problem. Zarenski agrees:
“There are so many people who want to have some say over a project,” he said. “You have to meet so many parking spaces, per unit. It needs to be this far back from the sight lines. You have to use this much reclaimed water. You didn’t have 30 people sitting in a hearing room for the approval of a permit 40 years ago.”
Klein belatedly admits that “some of this is expressed through regulation.” He continues:
Anyone who has tracked housing construction in high-income and low-income areas knows that power operates informally, too. There’s a reason so much recent construction in Washington, D.C., has happened in the city’s Southwest, rather than in Georgetown. When richer residents want something stopped, they know how to organize — and they often already have the organizations, to say nothing of the lobbyists and access, needed to stop it.
This, Syverson said, was closest to his view on the construction slowdown, though he didn’t know how to test it against the data. “There are a million veto points,” he said. “There are a lot of mouths at the trough that need to be fed to get anything started or done. So many people can gum up the works.”
One of the primary reasons there are a million veto points for people to gum up the works is that government, intentionally, created those veto points to give them the ability to do so.
There is no reason, besides the National Environmental Policy Act of (guess which year) 1970, that environmentalist groups should be able to block new construction with endless litigation.
There is no reason, besides the Occupational Safety and Health Act of (guess which year) 1970, that a federal agency in Washington, D.C., should be setting safety rules for every worksite in the entire country.
There is no reason, besides the establishment of the Environmental Protection Agency in (guess which year) 1970, that construction projects should be consumed with years of federal paperwork before a single shovelful of dirt is ever moved.
Then, there’s the Clean Air Act Amendments of (guess which year) 1970, which the EPA has used (and abused) to expand its authority over just about every part of American life. The Clean Water Act came two years later, adding new regulatory hurdles for the EPA to enforce. A year after that came the Endangered Species Act, which explicitly puts “economic growth and development” in opposition to environmental protection in its preamble.
Klein considers state-level regulations and concludes that it “doesn’t lend itself to a clean story of red states and blue states, or urban states and rural states.” It never seems to occur to him that might be because federal regulations are causing the problem, specifically the federal regulations that flow from a series of laws affecting construction all passed right around 1970, when the decline in construction productivity begins.
Sensible environmental and safety regulations are good, of course, but it’s fairly clear that U.S. policy since the 1970s has overcorrected, as Jim Pethokoukis argued at length in his newsletter last year. Conservatives have been making that case since, well, the 1970s. Each of the laws I mentioned was signed by Richard Nixon, and Nixon’s big-government approach was one of the reasons that, for example, this magazine endorsed John Ashbrook for president in 1972 (no left turns!). By 1980, mainstream Republican opinion had shifted against this sort of overregulation, and it remains so opposed.
Democrats, for their part, did lead on some important deregulation efforts under Jimmy Carter, especially in the transportation sector. But they have never been too interested in significant changes to environmental or safety regulations, the ones that most affect construction. And whenever Republicans try to make those changes, they scream to anyone who will listen (i.e., the national media, which then parrots their claims to the public) that Republicans are only doing so because they hate children, the poor, plants, and animals.
That’s why, as Pethokoukis wrote last month, it’s hard to take the “supply-side progressives” seriously. They don’t seem too interested in investigating how their ideological commitments often undergird the laws and regulations that make it hard to build stuff. For example, Goolsbee and Syverson’s paper on construction costs never even mentions the NEPA, OSHA, or the words “regulation,” “law,” or “rule.”
Klein closes with this:
How do we get construction productivity rising again? I have no idea. Construction should become safer, more respectful of community concerns, and more environmentally sustainable as countries become richer and less desperate for growth. But it’s also true that many of the problems America faces — from decarbonization to affordable housing — would be a lot easier to solve if we were getting better at building, rather than worse.
Again, whom does “we” refer to? Klein might have no idea, but conservatives have some ideas, and they have for decades. “We,” Americans, are not worse at building things. The federal government — on purpose, year after year — has made it more difficult for Americans to build things, under the mistaken belief that doing so is necessary to protect the environment. Progressives have cheered every step of the way, and they, not conservatives, are the ones ideologically committed to the regulatory status quo on construction. That’s why Ezra Klein has to pretend construction productivity stagnation is a huge mystery: Answering the question might involve admitting that conservatives have a point.