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First100-020221
A storefront in the United Kingdom where I believe Senators must buy their filibusters.
It’s Groundhog Day, 2021 and welcome to First 100. You can sign up to have First 100 delivered to your email by clicking here.
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The Chief
Six more weeks of winter, sorry, the groundhog said so.
Democrats don’t want to experience 2009 Groundhog Day all over again, which is why, despite the two-hour meeting in the White House between President Biden and Senate Republicans Monday night, they’re moving forward on budget reconciliation for the COVID rescue bill. I noted yesterday that Democrats may have a path to get the entire bill, including the increase of the minimum wage to $15 an hour, through the reconciliation process, because increasing the minimum wage has significant budget effects. I mentioned that there was a forthcoming research paper that would show a $65 billion annual savings to the federal budget from this wage hike.
That paper came out yesterday afternoon. It was from Michael Reich at the Center on Wage and Employment Dynamics at UC-Berkeley. Specifically, he found $65.4 billion per year in savings, through a combination of increased tax revenues on higher wages and reduced federal expenditures on safety net programs due to eligibility thresholds. The $65.4 billion in savings is at full implementation in 2025, so for a “score” of the fiscal impacts of the minimum wage increase over the 10-year budget window (2021-2030), the total would not be just $65.4 billion x 10. I don’t have my fancy calculator on hand, but back-of-the-envelope math says that this would have a fiscal impact of close to half a trillion dollars.
An Economic Policy Institute paper out today backs up Reich’s research. It creates a range of savings across three categories: government expenditures on major safety net programs, increases to FICA revenue, and reductions in spending on the Earned Income Tax Credit and Child Tax Credit. The range falls between $27 billion and $65 billion; the top end is consistent with Reich.
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I should say at this point that this is not necessarily a good outcome. Increased taxes on higher wages still put a worker out ahead, to be sure. But reductions in federal benefits could create a treadmill effect, with the government taking away what the private sector is forced to pay out. As $15 an hour isn’t really a living wage in much of the country, clawing back benefits isn’t a perfect scenario.
It is, however, good because it lets you pass the wage hike with 50 votes. That’s the massive positive in its favor. And it shows the distorting impact of the Senate filibuster on public policy debates. We’re sitting here rooting for workers to earn out of food stamps because it’s the only way for them to get a raise.
You could always backfill this by recalculating the measure of poverty to make more people eligible. But this isn’t the only way where using budget reconciliation leads to harmful side effects.
There’s a law called the Pay-As-You-Go Act of 2010 which creates a process for automatic cuts when the government creates new spending without offsetting it. Congress has done a lot of that in the past year, but every COVID relief package contained a rider that waived the Budget Act, thereby eliminating the automatic cuts. However, you can only waive the Budget Act with 60 votes in the Senate. If you use budget reconciliation, you can’t waive it.
Therefore, a large package using reconciliation would trigger the cuts, which would fall on mandatory spending like Medicare, farm subsidies, and more. This actually happened on the Trump tax cuts, but Democrats joined Republicans to avert $25 billion in cuts to Medicare. I doubt Republicans would return the favor now, though Democrats would probably love to hold that vote so they could say that Republicans are responsible for cutting Medicare. Republicans, of course, would say the same thing, because the reconciliation process created the problem in the first place.
This does argue for a checks and shots strategy, by the way. If you get what you could get quickly, with 60 Senate votes, you can waive the Budget Act in that package. Fully articulated, checks and shots could be half the $1.9 trillion Biden package; even Senate Republicans are offering $600 billion. Then you could do the rest in reconciliation, and if the aforementioned minimum wage hike scores as saving $500 billion, you’d wipe out a lot of that fiscal impact. That would at least minimize any Medicare cuts, while getting checks and vaccine money out quickly.
Of course, we have to step back and say that this whole thing is absurd. Because of an artificial super-majority threshold that sprung from an accidental deletion to the Senate rules, Congress has to think about enacting bad policy so good policy can be enacted. The whole thing can be avoided by just allowing majority rule, which is good enough for practically every government on Earth. Our obsession with the filibuster is actively harming our people.
The absurdity is particularly acute during a national emergency, where these questions of how to end-run the filibuster are happening while thousands are dying daily, millions are at the edge of the financial cliff, and we’re in a race with infectious variants that will re-surge the COVID cases and deaths. Why are we wasting our time with clever concepts to get things passed with a simple majority, instead of just… passing everything with a simple majority?
Full Speed Ahead
As for that two-hour meeting between Biden and the Senate Republicans: All indications are it didn’t do a whole lot. Democrats are still moving ahead on budget reconciliation, and the vibes from the White House were that their plan remains firm and intact. Biden specifically told the Republicans he voted across the aisle for reconciliation bills (which created the CHIP program and the Earned Income Tax Credit). There appears to be wiggle room on the eligibility threshold for the $1,400 checks, though not the size. It would be a mistake to tighten eligibility but a bigger one to make arbitrary cuts to direct payments.
The public, if they matter, is all on the side of getting something big done and using whatever process—including reconciliation—to do it. And when you have West Virginia governor Jim Justice saying publicly that there’s no need to skimp, including on checks, when “people are really hurting,” is a laser shot right at Joe Manchin and the right-most wing of the Democratic Party. There’s no need to deviate the course.
What Day of Biden’s Presidency Is It?
Day 14. Today is the slightly delayed immigration day at the White House, with the president signing some executive orders. With unaccompanied minors massing at the border, it’s about time.
Today I Learned
- Biden is warming to compelling drug manufacturers to assist in vaccine production. (Daily Beast)
- The administration secured 8.5 million rapid at-home COVID tests, which is good until you realize that’s typically how many tests are done nationwide in like four days. (New York Magazine)
- CBO projects good economic news ahead for the next year. All the more reason for a relief bill, to ensure that good news is broadly shared. (CNBC)
- Arkansas’ Republican governor describes Biden’s vaccine rollout as “seamless.” (Associated Press)
- In his first trade move, Biden maintains an aluminum tariff on the UAE. (Whitehouse.gov)
- Sen. Durbin raising alarms about delays to the hearing for Attorney General nominee Merrick Garland. Amazingly, Republicans still control some Senate committees, as the organizing resolution is not complete. (Twitter)
- Will Biden fire two late-appointed inspectors general? (New York Times)
- When I think about Rahm Emanuel, only one word comes to mind: diplomat. (NBC News)
