Competition Is Good for Health Care, but Not Good for Construction?

0 September 10, 2009  Federal Construction, Uncategorized

President Barack Obama’s speech to a joint session of Congress last night revealed parallels between the health care debate and the controversy surrounding the federal government’s promotion and use of discriminatory and costly project labor agreements (PLAs) via Executive Order 13502.

President Obama was quick to extol the virtues of competition in health care,  

“So let me set the record straight. My guiding principle is, and always has been, that consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company. Without competition, the price of insurance goes up and the quality goes down. And it makes it easier for insurance companies to treat their customers badly – by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates.” [Emphasis added] agrees that free and open competition is one of the guiding principles of the free market and a cornerstones of the nation’s economy. Competition serves the interests of consumers and taxpayers. Unfortunately, Executive Order 13502 promotes PLAs on construction projects costing more than $25 million. PLAs also reduce competition from non-union construction companies and their employees, who compose 84.6 percent of the U.S. private construction workforce.

The competitive principles President Obama wants to push on the insurance industry are just as applicable to the construction industry. Without competition, taxpayers suffer as the price of construction goes up and the quality goes down.  And, there is extensive evidence that supports the premise that PLAs reduce competition and increase costs.  For real world examples of PLA beneficiaries “jacking up rates” and “treat[ing] their customers badly,”  review the section on competition in Maury Baskin’s paper, Union-Only Project Labor Agreements: The Public Record of Poor Performance.

So how could competition be good for health care but bad for the federal government and the American taxpayer when procuring construction services?

The answer, of course, is that Americans deserve competition when it comes to who builds the nation’s infrastructure and who provides insurance and health care. 

It is funny how politics clouds fundamental economic judgement.

Big Labor stands to benefit from reduced competition because of PLAs just as much as Big Insurance stands to benefit from less competition in the marketplace.  The difference is that Big Labor is the backbone of the Democrat political machine and helped deliver the election to president Obama. objects to this nonsensical political doublespeak.

If given a chance, would taxpayers agree to death panels for government mandated PLAs? 

With PLAs and health care, competition is always good medicine.

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