Budget Chair Sanders Hails CBO Score as Proof Congress Can Pass $15 Minimum Wage Through Reconciliation

Sen. Bernie Sanders on Monday welcomed the Congressional Budget Office’s new estimate that raising the national minimum wage to $15 by 2025 would add $54 billion to the deficit over the next decade as further evidence that the hourly pay increase would have a direct impact on federal revenue and spending—and thus complies with the rules of budget reconciliation.

While casting doubt on the accuracy of the CBO’s finding—just two years ago, Sanders noted, the same agency estimated a $15 minimum wage would increase the deficit by less than $1 million over 10 years—the Vermont senator and budget committee chairman nevertheless argued that the CBO’s analysis bolsters the progressive case for passing the pay raise for 32 million U.S. workers through the expedited reconciliation process.

“The CBO has demonstrated that increasing the minimum wage would have a direct and substantial impact on the federal budget. What that means is that we can clearly raise the minimum wage to $15 an hour under the rules of reconciliation.”
—Sen. Bernie Sanders

“The good news,” Sanders said in a statement, “is that from a Byrd rule perspective, the CBO has demonstrated that increasing the minimum wage would have a direct and substantial impact on the federal budget. What that means is that we can clearly raise the minimum wage to $15 an hour under the rules of reconciliation.”

“I look forward to working with my colleagues in the House and the Senate to end the crisis of starvation wages in America and raise the minimum wage to a living wage of at least $15 an hour,” Sanders added.

Named after the late former Democratic Sen. Robert Byrd, the Byrd rule requires that every individual provision of a reconciliation bill have a direct—not “merely incidental“—budgetary impact. As New York Times columnist Ezra Klein explained last week, “Any senator can challenge any provision of any budget reconciliation bill for violating these rules.”

“The parliamentarian then rules on the question, and if the parliamentarian rules for the challenger, the provision is struck from the bill,” Klein noted.

While the vice president or Senate president pro tempore have the constitutional authority to overrule the parliamentarian, progressives argued Monday that the CBO’s new analysis should lead the parliamentarian to rule in favor of the minimum wage, rendering such a move unnecessary.

Frances Holmes, a member of the union-backed “Fight for $15” movement, told Politico that the CBO report confirms that “the Senate can raise the minimum wage to $15 as part of the Covid relief package.”

“We don’t need excuses from our nation’s leaders,” added Holmes. “We need relief.”

The CBO’s analysis comes days after University of California, Berkeley economist Michael Reich published a paper estimating that raising the minimum wage to $15 by 2025 would actually have a positive federal budget impact of $65.4 billion per year by increasing tax revenue and decreasing spending on programs that low-wage workers are often forced to rely on to make ends meet.

“The benefits of a $15 minimum wage are clear,” Reich wrote in an op-ed for Morning Consult last week. “The raise is long overdue. And with my research showing an increase would have a positive effect of more than $65 billion on the federal budget, $15 an hour might soon be reality for tens of millions of workers who so desperately need a raise.”

On top of its analysis of the potential deficit impact of the proposed pay hike, the CBO also estimated that gradually raising the minimum wage to $15 over the next four years would lift nearly a million people in the U.S. out of poverty and result in around 1.4 million lost jobs by 2025. Additionally, the CBO projected that raising the minimum wage to $15 an hour by 2025 would produce a cumulative pay increase of $333 billion for affected workers over the next decade.

“The facts are undeniable. Raising the minimum wage is good for workers, it’s good for the economy, and it’s good for the country as a whole. There’s no argument otherwise.”
—Morris Pearl, Patriotic Millionaires

The budget agency’s job-loss projection was viewed as extremely questionable by progressive economists and out of line with recent research on the effects of minimum wage increases. Josh Bivens, David Cooper, Heidi Shierholz, and Ben Zipperer of the Economic Policy Institute wrote Monday that “the CBO’s assumptions on the scale of job-loss are just wrong and inappropriately inflated relative to what cutting-edge economics literature would indicate.”

“The median employment effect of the minimum wage across studies of low-wage workers is essentially zero, according to a 2019 review of the evidence. Another recent review found that the median employment effect on workers directly affected by the minimum wage is less than half the size of what CBO assumed in its 2019 analysis. CBO’s exaggerated job loss assumptions account for 80 percent of the total increase in mandatory outlays.”

“In the end,” the economists added, “the CBO analysis confirms what we already knew: A higher federal minimum wage will significantly boost earnings and living standards for low-wage workers—especially those hit hardest by the Covid-19 pandemic—and it will have direct and significant fiscal effects.”

Morris Pearl, chair of the Patriotic Millionaires, said in a statement that “opponents of raising the minimum wage will attempt to twist this report for their own misguided purposes, but even with a deeply flawed methodology that ignores the modern economic consensus on this issue, the CBO’s worst case scenario is still overwhelmingly positive.”

“The facts are undeniable,” said Pearl. “Raising the minimum wage is good for workers, it’s good for the economy, and it’s good for the country as a whole. There’s no argument otherwise.”

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