The Democratic Party's CBO Problem

On a minimum-wage increase and Obamacare, the left suddenly finds its policy agenda at odds with the respected bipartisan arbiter.
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Doug Elmendorf leads the CBO, which says raising the minimum wage could reduce employment. (Jonathan Ernst/Reuters)

While CBO's analysis on the Affordable Care Act and the impact of raising the federal minimum wage offered plenty of good news for those on the left who support the policies, they offer harder-to-sell news about their impact on the labor market, too. With its report on the minimum wage, released Tuesday, CBO has left Democrats fighting economic battles rather than touting the easy-to-digest numbers their Republican opponents are hammering home.

"With unemployment Americans' top concern, our focus should be creating—not destroying—jobs for those who need them most," Brendan Buck, a spokesman for House Speaker John Boehner, said in an emailed statement.

What CBO really did was lay out a scenario in which the economy had 500,000 fewer workers in 2016, thanks to a three-step increase in the minimum wage to $10.10 from its current level of $7.25, but where there were also 900,000 fewer people in poverty, and at least 16.5 million with higher wages. The bottom line, if you read the report, was that raising the minimum wage offers a trade-off: Higher wages for many, or fewer jobs for some.

And so, as Republicans point to a higher minimum wage as a job killer, Democrats found themselves fighting back against the worst finding.

CBO "goes outside the consensus view of economists when it comes to the impact of the minimum wage on employment," Jason Furman, head of the White House Council of Economic Advisers, said in a call with reporters Tuesday.

In a statement shortly after the CBO report was released, the progressive group Americans United for Change termed the report an "outlier." The group has already released a Web video defending the Democratic plan, entitled: "Earth to CBO."

Sen. Tom Harkin, D-Iowa, who sponsored legislation along with Rep. George Miller, D-Calif., that would raise the minimum wage to $10.10 in three steps and then index it to inflation, said the notion of job losses stemming from a higher minimum wage was "a myth."

"Since the first minimum wage was enacted more than 75 years ago, opponents have argued that a wage floor would cause job loss. But this is a myth. Our own historical experience shows that nothing could be further from the truth," Harkin said in a statement. "Indeed, the newest economic research using the most sophisticated methodologies has demonstrated that modest increases in the minimum wage do not cause job loss."

A similar scene played out when CBO released its analysis of Obamacare two weeks earlier. The budget office said the health reform law would reduce the number of hours worked by the equivalent of 2 million full-time workers in 2017. "The middle class is getting squeezed in this economy, and this CBO report confirms that Obamacare is making it worse," Boehner said in a statement after that report was released.

Democrats didn't dispute the CBO findings on Obamacare, although they did offer clarifications. "It doesn't say 'losing jobs.' It says [full-time equivalents]," said the White House's Furman. "So to some degree, this might be somebody who used to work 60 hours because they needed health insurance and that was the only job that offered it, and now they can get a different job at 35 hours that doesn't offer health insurance, but they're getting it through this and they're switching from one to the other."

And, as with Obamacare, while Democrats can emphasize the positives in the CBO report on the minimum wage—and there are plenty—it can be a hard sell over the "job-killer" moniker.

Furman said he's not worried the new CBO analysis will change the public's perception of the minimum wage; he's confident they'll see the benefit in higher wages for many over the possibility that there will be less work available.

The public has been firmly on the White House's side on the issue. Last month, a poll conducted by Quinnipiac University found that 71 percent of voters support raising the minimum wage from its current level. Twenty states and the District of Columbia have increased their minimum wages higher than the current federal rate.

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Catherine Hollander & Sarah Mimms

Catherine Hollander and Sarah Mimms are correspondents at National Journal.

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