There will be a minimum wage increase, but it won’t be to $15 an hour. That’s because it won’t be part of the reconciliation bill and will need 60 votes to pass the Senate, instead of 51 votes. And that has something to do with our late Sen. Robert C. Byrd and our federal debt.
Stick with me on this.
Our federal government has been debt-free for less than 12 months (1835-36) since our inception in 1789. Since, we have added to our debt at an ever-increasing rate.
National debt is like our home mortgage. Whether we can afford it is figured as a percentage of income.
The more we earn, the higher debt we can carry. One mortgage website allows a maximum 36% of our monthly gross income for debts (mortgage, student loans, car payments, minimum credit card payments). Some allow up to 43%.
Experience taught that higher percentages are where borrowers run into financial trouble and stop paying.
It’s similar for countries, but it’s our national debt divided by our economy’s size. Size is our gross domestic product, or sales of all firms. It doesn’t include overseas sales of domestic companies but does include U.S. sales of foreign firms.
Prior to the COVID-19 pandemic, the national debt stood at $23.44 trillion. Since the onset of COVID-19, it’s grown to $27.2 trillion.
What’s the problem with too much debt? As David Davenport wrote in Forbes:
- “First, Social Security and Medicare entitlements are threatened. Since it’s nearly impossible to cut federal spending without reducing entitlements, they are at risk if you are younger than a Baby Boomer.”
- Second, although no one knows how much federal debt is too much, a major economic correction (stock market crash) will tell us when other countries quit buying our debt or heavily discount it.
- Third, consuming more government than we pay for shifts costs forward.
- Fourth, the growing debt threatens our ability to defend our country and economy by forcing us to make ever-higher interest payments, leaving less cash.
- And fifth, Davenport writes, we should be concerned because politicians are not.
“If you think you’re too young to worry about the federal debt, you’re precisely the one who should be worried,” he writes.
How’s debt doing?
By 1946, our national debt hit our first peak of 118% of GDP after borrowing for World War I, the Great Depression and World War II.
By 1950, we had paid that down to 86%. By 1960, it was 53% and, by 1974 and the winding down of the Vietnam War, it dropped to 31%, our lowest modern point. This was the same year the federal budget process was adopted. That required Congress to set spending, revenue, surplus or deficit goals and public debt totals.
Each resulting Senate reconciliation bill is considered under expedited procedures, limited debate and amendments. A reconciliation bill needs only a simple majority to pass. However, there are limitations on what can be included.
By the mid-1980s, the reconciliation process still wasn’t yielding optimum results, so then-Sen. Robert C. Byrd, D-W.Va., introduced the Byrd Rule, defining extraneous provisions for elimination.
Primarily to remain, it must affect income or expenses. In the Senate, the parliamentarian rules on the appropriateness. While the vice president may overrule the parliamentarian, this has not happened since 1975.
And that’s what happened to the $15 minimum wage. It didn’t make the cut, as it didn’t produce a change in the budget, rather controlled minimum wage.
Oh yes. You also would have thought the Byrd Rule solved our debt problem. It didn’t.
By 2019, the Trump tax cuts and his trade wars put us at 106%. Then, the COVID-19 pandemic and CARES Act jumped us to 136% by mid-year 2020.
So, if you want the $15 minimum wage, it will need to pass with 60 votes. Because of that, look for a compromise less than $15. And someone needs to figure out how to pay our debt.