Democrats hoping to increase the minimum wage in their COVID relief bill were handed a crushing defeat Thursday night. Senate parliamentarian Elizabeth MacDonough advised that the increase was not allowed in budget reconciliation legislation, the process Democrats are using to bypass a Senate filibuster on their COVID relief bill.
MacDonough’s decision was short and to the point, according to a Senate source. In her view, the budgetary impact of a minimum wage increase was “merely incidental” to its nonbudgetary impact. That would make it a violation of the Byrd Rule, the statute with guardrails on what is and isn’t allowed under reconciliation.
Vermont Sen. Bernie Sanders, as both chairman of the Budget Committee, which manages the reconciliation process, as well as the strongest advocate of a $15 minimum wage in the body, had worked to build a case to the parliamentarian that the increase would pass procedural muster. The Congressional Budget Office showed that it would increase the deficit by $54 billion over 10 years, which Sanders said “demonstrated that increasing the minimum wage would have a direct and substantial impact on the federal budget.” (It doesn’t have to have a substantial deficit reduction impact.) He also requested and received a report from CBO comparing the minimum wage increase’s budgetary impact with that of a couple of items in Republicans’ 2017 tax cut bill, also passed through reconciliation: the zeroing-out of the Affordable Care Act’s individual mandate penalty and the allowance of oil and gas leasing in the Arctic National Wildlife Refuge. CBO found that the minimum wage increase’s budgetary impact was more substantial than the others.
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None of that, however, satisfied MacDonough that the budgetary effect of increasing the minimum wage was more than an “incidental” byproduct of changing labor law.
“We are deeply disappointed in this decision,” Senate Majority Leader Chuck Schumer said in a brief statement after it was announced. “We are not going to give up the fight to raise the minimum wage to $15 to help millions of struggling American workers and their families. The American people deserve it, and we are committed to making it a reality.”
Democrats have a few options about how to proceed next.
They could try to restructure a wage boost under the tax code—incentives for small businesses to increase wages, penalties for large ones—to fit within reconciliation’s tax and spending policy strictures. In a statement following the decision, Sanders said that he would pursue this plan B.
“In the coming days, I will be working with my colleagues in the Senate to move forward with an amendment to take tax deductions away from large, profitable corporations that don’t pay workers at least $15 an hour and to provide small businesses with the incentives they need to raise wages,” Sanders said. “That amendment must be included in this reconciliation bill.” While certainly better than nothing, this fallback would rely on firms’ behavior to get the job done.
Procedurally, Senate Democrats could vote to “overrule” the parliamentarian’s advice and simply include the minimum wage increase in the bill. But the same Democrats who are opposed to eliminating the legislative filibuster—Arizona Sen. Kyrsten Sinema, West Virginia Sen. Joe Manchin, President Joe Biden—are just as firmly opposed to that option, as it could set a precedent for the effective undoing of the filibuster. Democrats could also fire MacDonough and replace her with someone who’s a little more go-with-the-flow on all these tedious “rules” issues. There is precedent for that.
But Democrats most likely will not increase the minimum wage in their final COVID relief product. (The House, which is set to vote on its version of the relief package on Friday, still has a $15 minimum wage in its bill.) And so long as a few Democrats are committed to preserving the legislative filibuster, Democrats will have to horse-trade with Republicans if they ever want to achieve a (smaller) increase in the minimum wage. The parliamentarian’s decision may come as a relief to some Democratic senators who were—some publicly, more privately—uncomfortable with a $15 minimum wage and its potential slashing of over a million jobs. The 27 million Americans who were set to see pay increases will be less relieved.
