A Vote for Romney/Ryan
By Philip Klein
On the surface, architects may be tempted to re-elect President Barack Obama because he’s vowed that in a second term he’d spend more money “rebuilding roads and bridges; schools and runways.” Such infrastructure projects carry the promise of more work to struggling architects. The problem is, Obama tried to use government spending to stimulate the economy in his first term, and it hasn’t solved the problems facing the architecture industry.
In February 2009, Obama signed his $833 billion economic stimulus package, promising “shovel-ready” projects. Yet between 2009 and 2011, when the bulk of the stimulus money was spent, architecture firm billings dropped 41.3 percent, according to data compiled by the AIA.
For those still drawn by the allure of more government spending despite this track record, the reality is that unsustainable debt levels at the federal, state, and local levels will continue to put pressure on budgets. So, ultimately, the success of the industry hinges not on government, but on broader economic growth in the private economy.
One of the biggest policy contrasts between Obama and Gov. Mitt Romney is on taxes. If re-elected, Obama has vowed to raise the top marginal income tax rate on those earning more than $250,000 per year to 39.6 percent from its current 35.0 percent. His healthcare law also includes $1 trillion in tax increases on top of this, according to the Congressional Budget Office. At the start of 2013, a 3.8 percent surtax on investment income and a 0.9 percent hike in the Medicare payroll tax will hit higher income earners. All told, the changes that Obama has already enacted—or is seeking to enact—will raise the capital-gains tax to as much as 30 percent, or double its current 15 percent. Such tax increases would be detrimental for architects on several levels.
To start, the tax hikes wouldn’t be limited to just wealthy individuals, but would apply to 940,000 small businesses that file individually, according to a 2012 study by the Joint Committee on Taxation. This would punish architecture firms in particular, which tend to be small businesses. According to 2012 AIA estimates, “almost a quarter of architecture firms are sole practitioners, and more than 60 percent have fewer than five employees on their payrolls.”
Beyond the direct effects on architecture businesses, if individuals with income above $250,000 have less disposable income, they may decide to put off building or renovating homes. More broadly, cutbacks by higher income consumers will be a drag on the overall economy.
In contrast to Obama, Romney has vowed to repeal the $1 trillion in tax increases in the healthcare law. Not only will he not increase marginal tax rates, but he’s also proposed reducing them across the board by 20 percent (bringing the top marginal rate to 28 percent) and keeping the capital-gains tax at 15 percent. He’s also proposed cutting the corporate tax rate, which is currently the highest among industrialized nations, to 25 percent, thus encouraging more business activity at home. Romney has said that he would offset these rate reductions by getting rid of various deductions and loopholes in the overly complex tax code.
Beyond taxes, the candidates have articulated different views on regulation. During Obama’s first three years in office, the federal government imposed 106 new major federal regulations, costing over $46 billion per year, according to the conservative think tank the Heritage Foundation. “This was nearly four times the number—and more than five times the cost—of the major regulations issued by George W. Bush during his first three years,” Heritage wrote in its report. The continued implementation of the healthcare and financial regulatory laws would increase this number dramatically if Obama were re-elected.
Romney has vowed to repeal the healthcare and financial regulatory laws, and review and eliminate regulations that place a burden on the economy. Of particular interest to architects who have been hit hard by the housing crisis, Romney has proposed to “replace complex rules with smart regulation to hold banks accountable, restore a functioning marketplace, and restart lending to creditworthy borrowers.” Romney has also vowed to undo Obama’s executive order encouraging federal agencies to use unionized contractors in large-scale construction projects, which hurts non-union businesses and drives up project costs.
None of this is to guarantee that Romney would be the greatest thing to happen to architects since the invention of the blueprint. Obviously, all of his proposals will have to be fleshed out in more detail and will inevitably clash with legislative reality. But at least based on what the candidates are proposing, it’s fair to say that there’s a better chance that taxes would be lower and regulations would be fewer under a Romney administration, which is more conducive to spurring the type of economic growth needed to revive the architecture industry.
Click to the previous page to read Jamelle Bouie's defense of the Obama/Biden ticket.
To read Klein's rebuttal of Bouie's defense of the Obama/Biden ticket, click here.