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Why a new report on the minimum wage has jolted the political debate

The more likely it is that a minimum-wage increase is included in a reconciliation bill, the more likely it is that it actually becomes law.
Image: CBO to Release Cost and Reach of Republican Health Care Replacement
A sign identifies the offices of the nonpartisan Congressional Budget Office (CBO), which will soon release the projected cost and effect of the Republican bill, called the American Health Care Act, to replace Obamacare in the Ford House Office Building in Washington on March 13.Jim Lo Scalzo / EPA

Shortly before his inauguration, President Joe Biden unveiled an ambitious COVID relief package, which included some surprises. Most notably, the Democrat said he wanted the plan to include an increase to the minimum wage, raising the federal floor to $15 per hour, to be phased in gradually between now and 2025.

Not surprisingly, there's a spirited debate underway on Capitol Hill about the proposal, including this report from the Congressional Budget Office, which was released yesterday. The document presented a predictable tradeoff: doubling the minimum wage would cost some jobs over the course of the next decade, but it would also lift a similar number of Americans out of poverty.

As is always the case with debates like these, it will be up to policymakers to decide whether the projected costs outweigh the benefits.

But it was the New York Times that highlighted the story behind the story:

Raising the federal minimum wage to $15 an hour — a proposal included in the package of relief measures being pushed by President Biden — would add $54 billion to the budget deficit over the next decade, the Congressional Budget Office concluded on Monday. Normally, a prediction of increased debt might harm the plan's political chances. But proponents of the wage hike seized on the forecast as evidence that the hotly contested proposal could survive a procedural challenge under the Senate's arcane rules.

At issue, once again, is the Senate's budget reconciliation rules, which allow the majority to circumvent filibusters. Realistically, there's simply no way Democrats would be able to persuade 10 Senate Republicans to join them in raising the minimum wage, so proponents have been eyeing the procedural tactic as a way of getting the "Raise the Wage Act" past its GOP opponents.

The trouble is, the budget reconciliation process is supposed to be limited to budgetary matters: taxes, spending, government revenue, federal outlays, etc. As we recently discussed, what employers pay their employees would appear to fall outside this framework, suggesting reconciliation may not be an option.

Indeed, when the president sat down with CBS News' Norah O'Donnell, for an interview that aired on Sunday, Biden conceded that he didn't think the minimum-wage provision would "survive" the legislative process and appear in the final COVID relief package. This is precisely what he was referring to: Biden supports his own priority, but he was implicitly suggesting that it might not be possible through reconciliation.

All of which brings us back to the underlying significance of the CBO report: the non-partisan budget scorekeepers concluded that a minimum-wage increase would, in fact, have a budgetary impact.

Sure, it's not the precise kind of impact proponents wanted to see -- the CBO said a wage hike would increase the deficit a bit -- but that's not the part of this equation that matters.

The more a minimum-wage increase affects the budget, the easier it is to justify including the idea in a bill passing via the budget reconciliation process. And the more likely it is that the policy is included in a reconciliation bill, the more likely it is that it actually becomes law.