Why the Senate Parliamentarian made the right call on the minimum wage


The Senate Parliamentarian has ruled that a minimum wage increase cannot be part of the Budget Reconciliation process Democrats are using to pass President Biden's $1.9 trillion coronavirus relief package with a simple majority vote.

Senate rules usually require 60 votes to overcome minority opposition to move a bill to a vote, but once every budget, items that follow 'reconciliation' instructions for that budget and are direct spending or revenue matters can pass with a simple majority vote in one package. Under the Congressional Budget Act, the law governing budget reconciliation, provision of a piece of legislation must meet a three-part test to qualify for a simple majority vote:
  1. The provision must not increase spending or reduce revenue outside of the 10-year budget window.
  2. The provision must have a substantial impact on the revenue, outlays, or both, within the 10-year window.
  3. The impact that a provision has on the revenue or outlay cannot be merely incidental to non-budgetary changes made by the provision.
A provision that does not meet all three tests can still be part of a reconciliation package, but that provision must garner 60 votes to be included, basically defeating the purpose of using reconciliation to pass something in the first place. This is known as the Byrd rule.

It is the last test - that a provision's budgetary changes not be "merely incidental" to its non-budgetary policy provisions - that causes the most confusion, and I am sorry to say, some of that confusion is intentionally sown by ideologues who have no interest in either understanding the rules properly or explaining the rules to their followers.

Clearly, all direct tax and spending changes Congress makes - as long as they limit to the 10-year budget window - are prima facie qualified under that last rule of reconciliation. It's everything else that legislators try to include that spur debate.

For the last month or so, Senate Budget Committee Chairman Bernie Sanders and others have argued that a minimum wage increase should qualify under the reconciliation rules because it clearly has an impact on the revenue and spending of the government - higher wages mean more tax revenue and less use of direct assistance programs for the poor. They have further argued that the changes the minimum wage increase (to $15 an hour) makes to the federal budget is too substantial to be considered "merely incidental."

This is where they are wrong.

Sanders and his allies have run with the understanding that 'incidental' is simply another word for 'unimportant' or 'minor' that the changes in federal revenue and outlays resulting from an increase in the minimum wage are important - or at least, whether such changes are important is simply a matter of opinion - and therefore, the parliamentarian is duty-bound to rule it admissible under the reconciliation rules.

And while that is one definition of incidental, in this case, the word 'incidental' is used to mean 'as an incidence of' or 'as a result of.' If this weren't the case, and 'incidental' had simply meant 'minor', there would be no need for the third rule, as rule #2 makes it clear that the change must be substantial. To qualify for reconciliation, the budgetary change resulting from a provision cannot just be an incidence of that provision's non-budgetary parts. It has nothing to do with how substantial the resulting effect on revenue or spending is. So long that change is 'merely' an incident of the non-budgetary change, the provision does not qualify for reconciliation.

An increase in the minimum wage is, in legislative language, a mandate on employers to pay a certain wage. The increased tax revenue due to increased wages - or the decrease in the use of anti-poverty programs, thereby lowering the Treasury's expenses - is only happening as an incidence of the mandate. The primary purpose is to raise the wage, not to collect additional taxes.

Another way to think about it is this: the minimum wage increase would not go away if the projected revenue gains or savings were not realized.

Which helps us answer some of the questions about how Republicans were able to use reconciliation to affect major policy changes that were not direct tax and spending provisions, like drilling in the Arctic Wildlife Refuge, something Bernie Sanders expressed some bewilderment about in his statement in response to the parliamentarian's ruling tonight.
It is hard for me to understand how drilling for oil in the Arctic National Wildlife Refuge was considered to be consistent with the Byrd Rule, while increasing the minimum wage is not.
- Bernie Sanders
The answer is in the actual legislation that was written about drilling in the ANWR in 2017. The Republican Congress, in that legislation, actually created a direct revenue program. It directed the Departments of Interior and Energy to come up with a leasing program - meaning that companies who lease land for drilling would pay a fee directly into the government's coffers. The flow was this: Congress decided it wanted some extra revenue, and it decided to lease land it already controls to raise the money. In the legislation, it was the drilling that was an incident of the leases Congress raised money from, not the other way around.

Isn't it just semantics? Couldn't we argue that Congress merely wants more tax revenue and that's why it wants to raise the wage? Not really. As noted before, the minimum wage would still increase, whether or not projected revenue gains because of it were realized. But drilling in ANWR would not happen unless a company decided to lease the land, paying money for it.

The alternative Sen. Sanders has proposed after losing his quest with the parliamentarian - taking away tax breaks from large corporations that don't pay a $15 minimum wage - despite having the same primary intent of raising the wage, would be under the rules a plain tax provision, and thus qualified for reconciliation.

But for a straight minimum wage increase, as the legislation is written, there is simply no case to be made that its effects on the budget is anything but an incident of the non-budget policy.

The parliamentarian made the right call under the rules.

Update: This article has been updated to reflect the provisions of the Byrd Rule correctly, as noticed by 'SpiderDan' in the comments.





Like what you read? Leave a Tip. 

💰 Fund the Fight