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Democrats are scrambling to piece together a backup plan that could save their minimum wage hike from getting tossed out of President Joe Biden’s $1.9 trillion relief package and win over moderates wary of the proposal.
The budget tool that Democrats are using to steer Biden’s plan through Congress without GOP support, known as reconciliation, is laden with thorny restrictions waiting to ensnare the $15 minimum wage boost they've added to the next tranche of coronavirus relief. The wage increase is also running into strong headwinds from two influential Senate Democratic centrists, Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.), who are both resistant to enacting the sweeping policy change through the powerful budget process.
The White House and Democratic leaders have been waiting to see how the Senate's parliamentarian, its official adviser on procedural matters, opines on the wage increase. Both Democrats and Republicans are expected to meet with the parliamentarian on Wednesday to argue their case. Her ruling could follow soon after the arguments.
In the meantime, Democrats are already weighing several options to try to save the wage hike from fully imploding and make it more palatable for moderates in their own party — from whom congressional leaders need lockstep support in order to muscle the Covid-19 aid package through the Senate with a simple majority vote before unemployment benefits expire for millions of Americans in mid-March.
“There are two issues going on right now — one is Byrd Rule problems, one is whip problems,” said House Budget Chair John Yarmuth (D-Ky.), referring in the first case to the procedural hurdle that could quash the wage hike in the Senate. “If Joe Manchin isn’t going to vote for it because of the minimum wage, I assume we have to take it out or compromise in a way that he would accept.”
“Increasing the minimum wage, particularly in the middle of a pandemic when so many small businesses are struggling, would do nothing further than damage the economic welfare of low-income families,” said freshman Rep. Byron Donalds (R-Fla.), who said businesses in his district are concerned about the proposal.
“We know that when government raises the cost of doing business for small enterprises, such as through arbitrary minimum wage increases, the workers at the bottom actually get fewer working hours and fewer job opportunities,” Donalds said.
But progressives on the panel stressed that a wage increase is critical to lifting people out of poverty, especially during a health and economic crisis. Rep. Barbara Lee (D-Calif.), who used to own a small business, said "in many ways, it's like slave labor" to pay workers the current federal minimum wage of $7.25 an hour.
“We know that people of color have been paid poverty wages for too long," Lee said, "which deepens the longstanding racist and economic divisions in this country.”
“Paying more than poverty wages is good for the bottom line. People who are working should not have to go to food lines, should not have to apply for SNAP benefits, should not have to apply for Section 8 or other public benefits," she said. "That’s what happens when you pay $7.25. It’s just wrong.“
To ensure that a minimum wage boost survives, Democrats are discussing the possibility of capping the increase at less than $15 an hour, to possibly $11 or $12, Yarmuth said. Such a move could satisfy wonky Byrd Rule restrictions that constrain the projected cost of the pandemic relief proposal outside of a 10-year budget window, he said.
Budget rules that allow the bill to pass the Senate without the threat of a filibuster essentially require that all pieces of the bigger package have a significant effect on federal spending, revenues and the debt within a decade. If the package increases deficits beyond that window, approval from the Senate parliamentarian can get problematic.
Manchin has previously said that an $11 minimum wage hike, adjusted for inflation, would make more sense for his home state of West Virginia. Sinema's support for any wage hike would likely be harder to win, since she told POLITICO earlier this month that the increase is "not appropriate" as an add-on to the Covid-19 aid bill.
Manchin told reporters on Monday that if the parliamentarian rules favorably on the $15 minimum wage provisions, he will seek to amend the legislation to instead raise the federal hourly minimum to $11.
“$11 is the right place to be,” he said. "Throwing $15 out there right now just makes it very difficult in rural America.”
Notably, some Republicans have backed a wage bump, but with extra strings that would divide Democrats. Sen. Mitt Romney (R-Utah) announced last week that he’ll introduce a bill with Sen. Tom Cotton (R-Ark.) that would raise the minimum wage — although he didn’t specify a number — “while ensuring businesses cannot hire illegal immigrants.”
Progressives aren’t yet ready to ditch the $15 figure. Senate Budget Chair Bernie Sanders (I-Vt.) and his staff have repeatedly contended that the Congressional Budget Office has already produced ample evidence showing that the $15 increase satisfies budgetary rules within the 10-year window. Sanders aides note that raising the wage will produce a much bigger effect on the budget than oil drilling in the Arctic and the repeal of Obamacare health insurance mandate penalties — which were both previously allowed under the Senate's arcane rules.
But to ensure that the $15 wage hike officially checks off all the right boxes, progressives have another idea. They're pushing the possibility of a small business tax relief plan that could be paired with the minimum wage increase in order to alleviate any burdens on businesses required to increase their pay, according to a senior Senate Democratic aide.
Separately, Democrats are exploring other options from the Senate Finance Committee that could include closing “some loopholes that benefit the rich or large corporations,” the Democratic aide said.
Democrats "could certainly repeal" some tax provisions, including one added to last year's pandemic relief measure, "that benefit wealthy real estate owners," the aide added. “There are some other tax provisions that President Biden has supported that would raise more than enough money to cover both the 10-year window and out-year expenses with respect to the minimum wage.”
Senate Finance Chair Ron Wyden (D-Ore.) “is looking at various options to stay within our allocation and support small businesses,” said his spokesperson Ashley Schapitl, noting that he’s previously said “he’s doing all he can" to keep the minimum wage increase in the broader package.
A House Democratic aide, who described the issue as “a Senate math problem,” said additional revenue could also come from cutting one month off the expiration date for unemployment benefits that the House package would extend through August. House Democrats have already lopped a month off Biden’s original unemployment benefits extension, which he proposed to run through September, to offset the cost of pension aid that they included in the Covid-19 aid bill.
Schapitl said she hadn’t heard of any options involving unemployment insurance and raising the minimum wage, but declined to discuss any other specifics.
Biden has privately signaled to governors that the wage hike likely isn’t happening as part of his first Covid-19 aid measure. And while Democrats could technically overrule the parliamentarian on the issue, that's unlikely to happen given that Biden is leaning heavily against the idea, POLITICO reported earlier this month.
Liberals, however, remain confident that the minimum wage boost will survive without any compromises — and they’re confident of a parliamentarian ruling in their favor.
“We’ve made a very, very strong case,” Sanders said Monday. “And hopefully the parliamentarian rules in our favor. I think she should.”
Marianne LeVine contributed to this report.