Why Democrats Can’t Add A Minimum Wage Hike To Their ‘Stimulus’ Bill

Why Democrats Can’t Add A Minimum Wage Hike To Their ‘Stimulus’ Bill

Senate Democrats likely lack the votes to pull off a major rules change. Still, the fact so many want to do so speaks to the radical nature of their goals.
Christopher Jacobs
By

In an interview with CBS ahead of Sunday’s Super Bowl, President Biden cast doubt on Democrats’ ability to pass a minimum wage increase to $15 per hour as part of their coronavirus package: “My guess is it will not be in it. … I don’t think it is going to survive.”

The former six-term senator has reason to doubt the provision’s inclusion in a partisan “stimulus” bill. Put aside for a minute the policy problems associated with more than doubling the minimum wage many of them outlined in a Congressional Budget Office (CBO) report released Monday: An increase in unemployment of 1.4 million individuals, with “a significant possibility of large reductions in employment” above that number; lower economic growth; higher inflation, particularly for industries reliant upon low-wage work (e.g., restaurants); higher interest rates; and a $54 billion increase in the federal deficit besides.

Senate procedure and precedent strongly suggest that a minimum wage increase has no business on a budget reconciliation bill. If Democrats include it anyway, they will have gone a long way towards abolishing the legislative filibuster, opening the way for a whole host of other radical policies.

‘Byrd Rule’ Implications

Whether Democrats can include a minimum wage hike on their COVID-19 package revolves around interpretations of the “Byrd rule.” This rule, named for former Sen. Robert Byrd. D-W.Va., works to keep “extraneous” material out of budget reconciliation bills.

Because reconciliation bills are subject to strict limits on debate, lawmakers want to pass as many provisions as they can via reconciliation, to avoid the 60-vote threshold needed to break a filibuster on most other legislation. The Byrd Rule, which is a part of federal law, contains a six-part test to define “extraneous” material in budget reconciliation bills, two prongs of which seem particularly relevant to the minimum wage increase.

Incidental to What?

One of the six tests defines “extraneous” material as that which “produces changes in outlays or revenues which are merely incidental to the non-budgetary components of the provision.” Democrats believe “there’s clear, non-incidental budgetary impact, both in terms of directly raising wages for some federal workers, as well as the reduction in welfare utilization and increase in tax receipts, for a $15 minimum wage,” according to an anonymous staffer quoted in Politico.

Sen. Bernie Sanders, I-Vt., the new chairman of the Senate Budget Committee, asked the Congressional Budget Office to produce Monday’s report on the minimum wage’s fiscal impacts, which he believes will bolster his case. The Democratic argument, however, assumes that the phrase “merely incidental” gets framed in absolute, and not relative, terms.

For instance, the CBO report found that revenues will increase by a total of $19.7 billion over ten years — $37.9 billion in increased payroll taxes paid by workers receiving a higher minimum wage, offset by $18.1 billion in lower income taxes paid by corporations or higher-income workers. From one perspective, $19.7 billion represents a substantial and certainly non-incidental sum.

But the total financial impacts of a minimum wage hike on private sector businesses would far exceed $19.7 billion. CBO also estimated that the minimum wage increase would raise wages by $333 billion on net over a decade — $509 billion for workers receiving the higher minimum, offset by $175 billion in foregone revenue by individuals who became unemployed. In relative terms, a provision where only 5.9 percent of the net revenue effects accrue to the federal budget (i.e., $19.7 billion divided by $333 billion) could qualify as “merely incidental to the non-budgetary [i.e., non-federal] components,” even if rather large on an absolute scale.

The Jurisdiction of Committees

Another prong of the Byrd Rule test defines as extraneous “a provision that is not in the jurisdiction of the committee with jurisdiction over said title or provision.” In many ways, this prong represents an even bigger obstacle to including a minimum wage increase on a reconciliation bill.

The supposed fiscal benefits of a minimum wage bill that Democrats have cited — lower welfare spending or higher tax revenue — lie within the jurisdiction of the Senate Finance Committee. But federal law codifies the minimum wage itself in the Fair Labor Standards Act, a law firmly within the jurisdiction of the Senate Health, Education, Labor, and Pensions Committee.

The Byrd Rule prohibits the Finance Committee from amending the Fair Labor Standards Act; if it exceeded its jurisdiction in such a manner, this violation would become fatal to the entire reconciliation bill, not just to the provisions in question. Yet, if the HELP Committee includes a minimum wage hike in their title of a reconciliation bill, it would produce little to no savings within the HELP Committee’s jurisdiction, potentially making it “extraneous.”

Senate Republicans faced a similar catch-22 during the George W. Bush administration nearly two decades ago, when they wanted to enact medical liability reform via budget reconciliation. Liability reform lies within the jurisdiction of the Senate Judiciary Committee, while the savings would have accrued to the Senate Finance Committee via lower Medicare spending on malpractice insurance premiums. The procedural problems associated with this jurisdictional split proved too difficult to overcome, and the liability provisions never made it into law.

Twisted Democratic Logic

Notwithstanding the above, Democrats keep insisting they can raise the minimum wage through budget reconciliation. William Dauster, who worked on the staff of former Senate Majority Leader Harry Reid, D-Nev., and last week joined Sanders’s Budget Committee staff, wrote an op-ed in Roll Call in January making such a case, claiming that “Congress has used the budget reconciliation process to enact [Obamacare]” and “most major economic policy.”

Dauster knows better than to make such tendentious assertions — he just doesn’t want to know. First of all, Congress did not use reconciliation to “enact Obamacare,” although it did subsequently use reconciliation to amend the statute. Furthermore, of the 974 pages of the amended health-care law, a whopping 26 (or 2.7 percent) were enacted via budget reconciliation.

Overruling the Parliamentarian?

The point of Dauster’s specious reasoning? He argues that if the Senate parliamentarian advises that the minimum wage does not qualify for budget reconciliation under the “Byrd Rule,” Vice President Kamala “Harris or [Senate President Pro Tempore Pat] Leahy, D-Vt., should exercise their constitutional authority to say that it can.”

As a matter of law, Dauster makes a perfectly valid point that the Senate’s presiding officer can overrule guidance from the parliamentarian. To both Republicans and Democrats, the idea that an unelected official makes such momentous decisions behind closed doors tends to grate — at least when it means their favored policies get left out of reconciliation legislation as a result.

As a matter of policy, however, his argument quickly turns into the proverbial “slippery slope.” Once either party overrules the parliamentarian on the “Byrd Rule,” both sides would have an incentive to claim just about everything has a fiscal impact, and therefore can remain in budget reconciliation legislation. As Sen. John Cornyn, R-Texas, recently observed, such a move would amount to backdoor abolition of the legislative filibuster, a move that would allow a majority to stuff its entire agenda on to a reconciliation bill that can it ram through with 51 votes.

Thankfully, opposition from Sen. Joe Manchin, D-W.Va., on the minimum wage, abolishing the filibuster, and altering the “Byrd rule” means Democrats likely lack the votes to pull off such a major rules change. But the fact that so many other Senate Democrats want to do so speaks to the radical nature of their agenda.

Chris Jacobs is founder and CEO of Juniper Research Group, and author of the book, "The Case Against Single Payer." He is on Twitter: @chrisjacobsHC.

Copyright © 2021 The Federalist, a wholly independent division of FDRLST Media, All Rights Reserved.