A new study by a labor economist at the University of California, Berkeley estimates that raising the national minimum wage to $15 an hour by 2025 would have a positive federal budget impact of $65.4 billion a year, a finding that could bolster progressive lawmakers' push to pass the long overdue pay hike through the filibuster-proof reconciliation process.
"We've got to address the crises facing working families and we're going to pass reconciliation."
—Sen. Bernie Sanders
Under current Senate rules, measures deemed to have a "merely incidental" impact on the federal budget cannot be approved through reconciliation, which requires just a simple majority vote.
But U.C. Berkeley economist Michael Reich, the author of the new research paper (pdf), told the New York Times on Sunday that his analysis shows boosting the federal minimum wage to $15 along the lines proposed by the newly introduced Raise the Wage Act of 2021 would have "pretty substantial budgetary impacts."
Sen. Bernie Sanders (I-Vt.), the incoming chairman of the Senate Budget Committee, pointed to Reich's findings as further evidence that the minimum wage increase would meet the standard required by the so-called "Byrd Rule," which gives senators the ability to block provisions of reconciliation bills that don't have a direct impact on the federal budget.
"We've got to address the crises facing working families and we're going to pass reconciliation," Sanders told the Times.
According to Reich's paper, the Raise the Wage Act of 2021 "would have a positive effect on the federal budget of $65.4 billion per year" through a combination of decreased spending on some social safety net programs—which many workers are forced to rely on due to low wages—and increased tax revenue.
New: A $15 minimum wage would save taxpayers $65.4 billion a year including:
-$32 billion in reduced spending
-$21.2 billion in more revenue
-12.2 billion in Social Security expenditures
If that's not a direct impact on the budget, I don't know what is. https://t.co/enHunY9SSx
— Warren Gunnels (@GunnelsWarren) February 1, 2021
A new report by three experts at the Economic Policy Institute (EPI), a left-leaning think tank, comes to a similar conclusion as Reich. According to the Times, which got a look at the EPI study ahead of its publication, the analysis "found that there would be 'significant and direct effects' on the federal budget by increasing payroll tax revenue by $7 billion to $13.9 billion and reducing expenditures on public assistance programs by $13.4 billion to $31 billion."
"This is a sizable chunk of money, no matter how you look at it," David Cooper, senior economic analyst at EPI, said in an interview with the Times.
"I personally think we ought to be getting rid of the filibuster, but at the very least we ought to be expanding reconciliation to apply to many more prospects."
—Rep. Ro Khanna
The two studies come as progressive lawmakers are ramping up pressure on Democratic leaders to aggressively use the reconciliation process to pass a robust coronavirus relief package, a $15-an-hour federal minimum wage, and other key priorities without having to seek support from hostile and seditionist Republicans.
"I personally think we ought to be getting rid of the filibuster, but at the very least we ought to be expanding reconciliation to apply to many more prospects," Rep. Ro Khanna (D. Calif.) told the Wall Street Journal last week.
The Senate parliamentarian is tasked with deciding whether a provision qualifies under reconciliation—but Vice President Kamala Harris or, in her absence, Senate president pro tempore Patrick Leahy (D-Vt.) have the constitutional authority to overrule the parliamentarian.
Bill Dauster, an expert on federal budget law who served as deputy chief of staff for former Senate Majority Leader Harry Reid (D-Nev.), wrote in an op-ed for Roll Call last month that "as raising the minimum wage is budgetary, the parliamentarian should allow it to be included in reconciliation."
"If the Senate parliamentarian does not advise them that Congress can include the minimum wage in budget reconciliation," added Dauster, "Harris or Leahy should exercise their constitutional authority to say that it can."
Speaking to the Associated Press last week, Sanders said that "my Republican colleagues used reconciliation to give almost $2 trillion in tax breaks to the rich and large corporations in the midst of massive income inequality."
"They used reconciliation to try to repeal the Affordable Care Act and throw 32 million people off the healthcare they had," the Vermont senator continued. "They used reconciliation to allow for drilling in the Arctic wilderness. You know what? I think we can use reconciliation to protect the needs of working families."