June 23, 2011
Hon. Robert McDonnell, Governor
Hon. Mark Warner, Senator
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I hope this note finds you well. I write to forward an idea proposed to me by one of your constituents whose family owns a construction firm here in Patrick County.
According to press reports this week (Reuters), existing home sales were down 3.8 percent in May, with no anticipated improvement on the horizon.
Federal Reserve Chairman Ben Bernanke suggested on Wednesday that modifying more mortgage loans and upping the pace of foreclosures would perhaps clear the inventory underbrush clogging the system, and in doing so re-set the housing industry for future growth.
Your constituent has, in my opinion, a better idea:
On an emergency basis-something pegged to the unemployment rate-he proposes a joint federal-state initiative, consisting of a limited waiver of the federal overtime wage requirement-by ten hours per work week-and, simultaneously, a temporary suspension of the state sales tax, as they both apply to the construction trades.
He tells me his company would routinely deploy its workforce 50 hours per week, as opposed to 40, if the company didn’t have to pay time-and-a-half wages for the last 10 hours. Of course, participation in this expanded workweek at straight-time pay would be strictly voluntary.
He believes-and I think he is correct-that such a joint effort would favorably impact the economy of Virginia in several ways:
1. It would increase employment.
2. It would increase individual earnings and spur spending on the margin. At an average local hourly wage of $12, employees-eager for the additional earning opportunity-would put more than $5000, less the normal withholdings, into their pockets each year. These additional earnings would equate, dollar-for-dollar, to additional spending, providing a welcomed nudge to our local economy.
An additional $5000 per year in income would strengthen any mortgage loan application, and go a long ways toward meeting the average monthly mortgage payment.
3. It would, I believe, lower the overall cost of housing, new and renovated, and shorten the housing delivery time.
4. Even with a temporary waiver of construction-related sales taxes, it still would increase the construction-related fees and permits that gird our local government revenues.
5. From a purely political perspective, such an initiative would constitute a wonderful demonstration of Republicans and Democrats working together at the local, state, and federal level in an effort improve our economic prospects.
I personally feel his idea is forward thinking, non-partisan, has considerable merit, and warrants your attention. There may be insurmountable obstacles to it. Worst case, it could spur better, additional thinking, and that would not be a bad thing.
All kind regards.