WASHINGTON – Raising the federal minimum wage to $ 15 an hour – a proposal included in President Biden’s package of relief efforts – would add $ 54 billion to the budget deficit over the next decade, the Budget Bureau concluded of Congress on Monday.
Typically, a prediction of increased debt could hurt the plan’s political chances. Proponents of the wage increase, however, used the forecast as evidence that the hotly controversial proposal could withstand a procedural challenge under the Senate’s secret rules.
Democrats are trying to add the measure to a $ 1.9 trillion pandemic relief package that is progressing through a process called budget balancing, which requires a simple majority instead of the 60-vote margin to overcome a filibuster. However, reconciliation is reserved for matters that have a significant budgetary impact.
Senator Bernie Sanders, the independent Vermonter, said the increased deficit forecast shows the measure passed the test. Raising the federal minimum wage to $ 15 “would have a direct and significant impact on the federal budget,” he said in a statement. “That means we can clearly increase the minimum wage under the rules to $ 15 an hour.”
Critics of the plan noted another element of the report: its forecast that raising the minimum wage to $ 15 would cut 1.4 million jobs if the increase were to take full effect.
“Conservatives have been saying for some time that a recession is absolutely the wrong time to raise the minimum wage, even if it’s slowly being rolled out,” said Brian Riedl, senior fellow at the Manhattan Institute. “The economy is just too fragile.”
He also denied Mr Sanders’ argument that the study increases the likelihood that a wage increase could outlive Senate rules. The study found that the measure would affect private sector wages much more than it would increase the deficit – $ 333 billion versus $ 54 billion – and showed that the impact on the deficit was random, Riedl said.
“I doubt the MP will find that this is primarily budget reform and not economic reform with a secondary budgetary impact,” he said.
The rules state that the budgetary impact cannot be “just random” but does not define the term. While Mr Sanders described $ 54 billion as sizeable, Mr Riedl said it was about half of 1 percent of the projected 10-year deficit.
Congress last passed an increase in the minimum wage in 2007. The current federal minimum of $ 7.25 per hour is 29 percent below its 1968 high, adjusted for inflation, according to the left-wing Institute for Economic Policy. David Cooper, an economic analyst at the institute, said 29 states and the District of Columbia have higher minimums, and seven States and the District of Columbia would have gradually exceeded the $ 15 per hour threshold.
Progressives see wage increases as a key weapon in combating poverty and inequality, while conservatives often warn against cutting jobs.
The report essentially said that both sides were right. It found that a minimum wage of $ 15 would raise 27 million people and bring 900,000 people above the poverty line, but would also cost 1.4 million jobs.
Mr Cooper denied the employment outlook on the grounds that it inconsistent with recent studies showing that increasing the minimum wage had little or no impact on employment. “CBO seems to be going in the opposite direction,” he said.
Progressives like Mr Sanders have argued that increasing the minimum wage would cut federal spending because fewer people would need safety net programs like grocery stamps or Medicaid. However, the Budget Office warned that these savings would be more than offset by the higher cost of providing services such as health care as employers increased their workers’ wages – a finding Mr Sanders continued to reject, citing other studies.
All in all, the report states that the changes would benefit labor versus capital.
“They assume that income is carried over from workers at the top of the income distribution to workers at the bottom of the distribution,” Cooper said. “Hence, they implicitly say that the minimum wage is a tool to fight inequality. That’s probably the most explicit thing you’ve ever seen on this point. “