CBO says $15 wage would have bigger budget impact than GOP tax cut provisions

[DonViejo]

Source: RawStory/Common Dreams


Common Dreams
February 16, 2021

The Congressional Budget Office said Monday that raising the federal minimum wage to $15 an hour would have a significantly broader budgetary impact than two provisions of the 2017 Republican tax cut legislation that passed through reconciliation, a finding that provides another boost to Sen. Bernie Sanders' effort to include the pay increase in the Senate coronavirus relief package.

In response to a request by Sanders—the chairman of the Senate Budget Committee—for a comparison of the budgetary effect of the Raise the Wage Act of 2021 with that of the GOP tax bill's zeroing out of Obamacare's individual mandate penalty and the measure's Arctic National Wildlife Refuge (ANWR) drilling provision, the CBO found that the $15 minimum wage legislation would have a more sweeping impact.

"The analysis of the Raise the Wage Act encompasses a much broader range of behavioral effects than that of the 2017 tax act, and the increased minimum wage would in turn affect a broader range of budget functions than CBO estimated that the change in the mandate penalty would," the budget office noted in a letter (pdf) to Sanders. "Increasing the minimum wage would affect more budget functions than CBO estimated that the ANWR provisions would."

Under the Senate's so-called Byrd Rule, each provision of a reconciliation bill must have a direct—not "merely incidental"—impact on the federal spending and revenue. The CBO's latest analysis—which comes a week after the budget office found the wage hike would add $54 billion to the deficit over ten years—was viewed as additional confirmation that the wage increase should qualify under reconciliation.



Read more: https://www.rawstory.com/15-minimum-wage/

[Yeehah]

1. A fair minimum wage will improve the economy

and is the right thing to do.

[MichMan]

2. CBO analysis

A $15 minimum wage would spur job losses but lessen poverty, congressional report finds The CBO found that the raise, supported by Biden, would result in the loss of 1.4 million jobs, but would bring nearly 1 million people out of poverty.

[link:https://www.nbcnews.com/politics/joe-biden/15-minimum-wage-would-spur-job-losses-lessen-poverty-congressional-n1257046|

[frazzled]

4. Yes, not so fast. You have to read what the impacts are. (Actual CBO report here)

I am 100% for raising the minimum wage to $15 (we already have that phasing in in my state, and even faster in my city; many other states and cities have too), but the OP makes it sound like it's all good news and will be easy to pass. All this says is that it has more impacts, not positive or negative impacts. It's about whether the bill can go to reconciliation (based on the number of impacts, yes).

But will it sell in full, even to Democrats? I don't know. Here is the CBO's summary of the impacts, which they will consider. It's a bit mixed, but overall pretty good. I hope it passes:

In this report, the Congressional Budget Office estimates the bill’s effects on the federal budget
.
The cumulative budget deficit over the 2021–2031 period would increase by $54 billion. Increases in annual deficits would be smaller before 2025, as the minimum-wage increases were being phased in, than in later years.

Higher prices for goods and services—stemming from the higher wages of workers paid at or near the minimum wage, such as those providing long-term health care—would contribute to increases in federal spending.

Changes in employment and in the distribution of income would increase spending for some programs (such as unemployment compensation), reduce spending for others (such as nutrition programs), and boost federal revenues (on net).

https://www.cbo.gov/system/files/2021-02/56975-Minimum-Wage.pdf

[rickyhall]

7. Sure, right, whatever. More taxes on the rich, so sorry, I know how tuff they have it.

[frazzled]

22. That was not one of the impacts listed

But whatever.

This is not an argument against passing the MW increase. It’s a technical explanation of what Congress will be weighing and discussing, for better or worse. But whatever.

Whatever seems to be a mantra about everything for those who don’t want to read or consider political realities in Congress. So yadda yadda.

My guess is that there will be a substantive increase, but it may not reach $15. Most states and cities with high costs of living have already passed, or are in the process of passing, $15 minimum wage laws. The other states will argue like hell against that rate. But it will be raised above current levels for sure.

[jorgevlorgan]

31. The good news is it will likely make it into the reconcilliation bill

given that it is more relevant to the budget than the Republican's tax bill. Tee other good news is that raising the wage will have far more of a greater impact , and the likelihood of people actually being hurt from those job losses is quite limited. There are a couple hundred million folks in the workforce, and they estimate that a couple thousand could lose their jobs, but fail to specify what kind of jobs they are, and whether or not they would likely to have better employment after. So far right now, there are millions of folks working poverty wages who this would help tremendously. So if there is a cost benefit analysis, I would consider these realities.

[GopherGal]

6. "Business Climate"

The businesses just love to offer single-digit hourly wages and then complain that they can't find willing workers.
State politicians love to attend business openings and brag about their state's welcoming business climate.

[Bettie]

34. And they are so utterly mystified when

the workers move on very quickly from the no-benefits, extremely low paying, and generally horrific condition jobs.

Imagine, wanting to be treated like a human being while making enough money to actually survive.

And if your business model only works if you treat your workers poorly and don't pay them, then it isn't a successful business model.

[rickyhall]

8. They have, Arkansas is $11 an hour for instance.

[thesquanderer]

23. Individual states could be afraid of losing businesses to neigboring states with lower labor costs.

The federal law not only means they have to raise their minimum wages, but it also means that, in doing so, they are no longer at risk of losing business to a state with a lower minimum.

[CrispyQ]

5. What if we raised the minimum wage AND took back the tax cuts?

I know, the whining from the already wealthy would probably deafen all of us, but I wish someone would run the numbers.

[MichMan]

12. As someone taking the standard deduction (no itemizing), that would raise my tax bill substantually

And I am no where near wealthy

[lagomorph777]

30. I can no longer itemize; Trump's Billionaire Tax Cut was a tax hike for me.

I'd still be OK with only erasing its effects on those making over $500k annually.

Though I'd personally still lose out, society would be happier and that's a good tradeoff.

[Bettie]

35. Chances are you'll be losing any benefit you got from Agent Orange's tax scheme

before long. As I understand it, the small benefit to less wealthy tax payers will be phasing out soon.

[Karma13612]

21. Interesting..

Nah, I’ll pass.

Putting everything on the states will be a disaster. I can just see how spending would go in some states. There would be massive cutting of social services and healthcare programs.

I am only one observer. I will be curious to see what others have to say....

[Rhiannon12866]

27. Right. That's worked out so well handling this horrific pandemic

[Bayard]

9. A couple things I don't understand about this issue

...."result in the loss of 1.4 million jobs, but would bring nearly 1 million people out of poverty over the next four years". How can it bring people out of poverty if they're going to lose their jobs and have nothing?

Also, it is the employer who will be paying the additional wages. So why is this figured into the U.S. budget?

[moose65]

10. Good question

I assume it's because the government will have to pay that wage too (I thought they were already trying to do that anyway).

I suppose they assume that inflation will have an impact on government spending, since government agencies will have to spend more money to purchase items.

What I don't get is this: if raising the minimum wage will lift a million people out of poverty, then won't those people be spending more money, which stimulates the economy and creates more jobs? Maybe that's factored into the score already - I don't know.

Question: which jobs pay minimum wage? I know the joke is that burger flippers don't deserve to be paid more, but I think that most fast food workers already make a lot more than minimum wage. Whenever I see local fast food joints hiring, they advertise jobs for $12 an hour or more. The local Bubbles Car Wash was advertising starting pay at $10.

[stopbush]

13. Most fast food workers are part-time employees. Many are not allowed to work over

a certain number of hours a week lest the employer be on the hook for health insurance, etc.

A starting pay of $10 at 20 hours a week is only $200 before taxes. It’s why many minimum wage earners are forced to work two to three jobs.

[OldBaldy1701E]

24. And

if the minimum wage is raised, the employers will just arrange to have more people working less hours to make up for it. They will always find a way to rig things in their favor, as they hold the ear of government. The people are just afterthoughts for labor.

[lagomorph777]

32. Force employers to pay a proportion of benefits, starting at the first hour.

If the hourly cost is the same, regardless of part/fulll time, then it makes more sense to hire people full-time (less overhead for hiring, etc).

[Sgent]

14. Probably the biggest effect is on government healthcare spending

beyond the VA, the government uses a cost based reimbursement for things like Medicaid and Medicare nursing homes and hospitals, which usually pay close to minimum wage for nonlicensed staff (nursing assistants, food service, facilities, etc.).

[DallasNE]

29. Many Government Agencies Contract Their Work Out

Those contracted workers can earn below $15 an hour so now they will be boosted to $15 an hour. Government now has to pay more to contract the work out. The other point about people already making more than current minimum wage is true but many of them would get a nice boost from their current $10-12 to $15 over a few years. Kind of like a win-win situation.

[stopbush]

11. Look at it this way: a store employs two part-time (30 hour) minimum wage workers,

both earning poverty level wages at the Fed rate of $7.25 per hour.

They fire one employee and keep the other, now paying them $15.

One employee loses their job, one is lifted out of poverty.

[moose65]

15. I understand that, but...

Stores hire people based on demand. If many of their customers suddenly have more money to spend, they will need more employees to handle those customers.

[pandr32]

20. You would think so

But, how about those stores that are full of customers and of the maybe ten cashier stations only two or three are operating? Lines are long and this happens day after day. Clearly the store management/owners are aware. Also, those cashiers are stressed and as well as working hard are taking on the frustrations of the customers.

[Bayard]

16. That's what I was thinking is going to happen

Damned if you do, damned if you don't. And the employer would now expect the employee to do the work of two people.

[stopbush]

17. Yep. "Be happy you still have a job."

[Aussie105]

26. Be happy you still have 3 jobs, you mean?

No text.

[Aussie105]

25. $15 per hour is still only $120 for an 8 hour working day.

And $600 a week for a 40 hours per week job. If you can find one of those.
The basic wage jobs are usually part time jobs.

Some politicians in Australia are shocked - SHOCKED I tells ya! - that some people working in the hotel COVID-19 quarantine system, are actually working multiple jobs, with an increased risk of spreading the virus between work places.
Bit of UBER, a few hours in a pizza shop, that sort of thing.

Classic case of one person working between 3 private hospital facilities!

I guess working multiple jobs just to make ends meet is (was) something unexpected to Australian politicians?

Work your 'main' job in 4 hour shifts 2 or 3 times a week, and you have no choice really.

Put money in the pockets of those low wage job earners, and see how it affects the economy. Only positives, in my view.
But the rich people will whine and complain about wage increases not being affordable.
I guess working for nothing would suit them just fine?

[DallasNE]

28. I Can't Follow The DOts

Here the CBO is saying that the minimum wage increase would add a paltry $5 billion a year to the deficit and that is a greater impact than the 2017 tax cut bill that added about $300 billion a year to the deficit. That is some kind of rounding error.

[lagomorph777]

33. Seriously, WTF?

But, of course, billionaires are 60x more important than the little people.