The inconvenient truth about why a minimum wage hike probably won't survive in reconciliation

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President Biden told a hard truth to CBS News, and he's catching a considerable amount of flack on social media for it.

The President, appearing in an interview with Norah O'Donnell, admitted that raising the minimum wage to $15 an hour will likely not be included in the reconciliation bill that will carry virtually everything else in the President's COVID relief proposal, the American Rescue Plan. "My guess is it will not be in it," Biden said, "Apparently that's not going to occur because of the United States Senate." Biden said it should still be a standalone bill for Congress to pass.

What Biden said is the truth. It' not a truth anyone has to like, and he certainly did not like it. But just like it's a fact that Joe Biden and Kamala Harris won 306 electoral votes, it is also a fact that the rules of the Senate are what they are.

Sen. Bernie Sanders (I-VT), now the Chairman of the Senate Budget Committee, really wants to push through the minimum wage increase through reconciliation, and many of the people who had supported his runs for president are trying to find reasons that it can be. Robert Reich, for example, tweeted an article by fellow Berkeley economics professor Michael Reich that argues reconciliation can be used to pass a minimum wage hike, because a minimum wage hike will impact the budget.

I have no reason to doubt the latter (Michael) Reich's analysis and fully accept that raising the minimum wage will result in additional tax revenue for the federal government (both income and payroll), strengthen the Social Security trust fund, and reduce federal spending on antipoverty programs.

But simply having a budgetary effect is not enough to qualify something to go through reconciliation.

The reconciliation process is governed by something called the Byrd rule, named after the Late Democratic Sen. Robert Byrd. The Byrd rule is set up to make sure that only budgetary decisions are allowed to pass through reconciliation and that it cannot be abused to pass other policy changes that would otherwise require 60 votes to break a filibuster.

Under this rule, not only must a provision of legislation produce changes in federal revenue or spending, but those changes cannot merely be incidental to non-budgetary components of the provision. There's only one component to raising the minimum wage, and it is to raise the minimum wage. Every budgetary impact of raising the minimum wage is incidental to the increase in wage. The federal government would collect more tax revenue as a result of wages going up. It would spend less as a result of wages increasing. The act of increasing the minimum wage itself is not a budget-related action, so budgetary results incidental to it do not qualify for reconciliation.

This provision - that the budgetary changes stemming from a provision of law could not simply be incidental to non-budgetary provisions - is there to stop the use of the reconciliation process from being used to any law whatsoever, thereby essentially eliminating the filibuster.

One question that often arises here is this: if legislation that merely have an incidental budgetary impact is disallowed under reconciliation rules, how was the GOP allowed to get a vote on repealing the Affordable Care Act through the reconciliation process?

To answer that, a little trip down memory lane can help. Once they consolidated control over the House, the Senate, and the White House in 2017, they set out to fulfill their campaign promise of repealing Obamacare through three (3) bills as their leadership realized that there would be significant defection in their ranks to taking away health care from 20 million people and undoing all the patient protections that came with the ACA: a full repeal bill, a partial repeal bill, and a 'skinny' repeal bill.

The full repeal proposal was just as it sounds: it would fully repeal President Obama's crowning achievement and replace it with a Republican plan that would essentially return the system to the pre-2010 status quo. Because this bill made changes to the structure of Obamacare - like rescinding minimum coverage requirements for insurance plans, protections for pre-existing conditions, etc., it did in fact violate the Byrd rule and therefore required 60 votes to waive it (basically bringing it to the status of any other legislation). That was the case even though it could easily be argued that rescinding the employer mandate, for example, would result in reduced health care costs for large corporations and therefore raise their corporate incomes and allow that extra income to be taxed, 'impacting' the budget. This vote failed 43-57.

Then the Republicans tried the partial repeal and the 'skinny' repeal bills. Both qualified under the Byrd rule to go through reconciliation, because in both of these, Republicans gave up on changing the regulatory structure of Obamacare and focused just on the funding instead. In the partial repeal bill, Republicans took away the funding for expanded Medicaid and premium subsidies for individuals and small businesses, but did not get rid of the exchanges themselves or alter any insurance regulations. The 'skinny' repeal bill would repeal the individual and employer mandates (which were both penalties and thus a budget matter entirely) and make it easy for states to waive requirements under Obamacare in their marketplaces and still receive federal subsidies. It is this last vote that John McCain became famous for dooming with 'thumbs down' vote.

Without the Byrd rule, the legislative filibuster would become meaningless because just about anything could be described to have an effect on the budget and therefore eligible for reconciliation. Republicans (when they had power) could codify migrant family separations by simply claiming that the 'deterrent' effect prevents some people from presenting asylum claims, which saves immigration courts - and thus the federal budget - money. They could pretty much eliminate all environmental protection laws through reconciliation by claiming that oil companies will make more money and therefore pay more into the federal coffers. Democrats, likewise, would be able to enact minimum wage hikes, major civil and voting rights legislation, etc.

The Byrd rule is essential to preserving the legislative filibuster, whatever your opinion on the legislative filibuster is (mine is that it is antidemocratic and should be eliminated). And the filibuster and the Byrd rule aren't going anywhere, because even if Democrats tried to use the nuclear option to change the rules, the attempt would fail in a 50-50 senate. Democratic Sen. Joe Manchin, who now holds the seat once held by Robert Byrd himself, would vote to preserve it.

These are just realities. We don't have to like it - I certainly don't - but the fact that the reality is inconvenient does not make it any less of a reality. As the president said, we will likely have to find another way to raise the minimum wage with some Republican support. And that may mean settling for an amount lower than the full $15. Again, not a reality we have to like but a reality nonetheless.

But this does not have to end here. 29 states and the District of Columbia already have minimum wages above the federal minimum wage of $7.25 an hour and many of them - including California and Florida - are working their way up to $15. If Republicans refuse to allow a vote on raising the minimum wage, 2022 will be a ripe time to take it to the ballot in every state that does not already have a pathway to a $15 minimum wage on the books. It's popular. It passes. And it will bring Democrats to the poll in a midterm year traditionally difficult for the party in the White House.

With President Biden already taking executive action to raise the minimum wage for federal workers and federal contractors to $15 an hour, a federal minimum wage of $7.25 will become meaningless if every state raises their state minimums to a higher level.

Unless of course, the Chairman of the Senate Budget Committee, one Bernie Sanders, has a trick up his sleeve no one sees coming. But I somehow doubt a stroke of genius is hiding in a desert of legislative accomplishments Bernie has built over 30 years in Congress.

Hope I'm wrong.