The Minimum Wage Bill: Real Reform or More Politics As Usual?

Back in the day, when I was growing up, ant farms were all the rage. I could watch them for hours. Sometimes, I would mark specific ants with paint to track them on their daily lives. Or occasionally, I'd add an interesting outside stimulus — like a grasshopper.

The image comes to mind because I couldn't help thinking about my old ant farm as I watched lawmakers scurrying in Washington over the past two weeks. It was a rare opportunity to see how the newly empowered Democrats would deal with their own grasshopper, otherwise known as the minimum wage bill.

As you may recall, the House leadership made raising the federal minimum wage a top priority. It's a juicy issue that plays to one of their core constituencies, labor unions. But like the grasshopper, it has been far more difficult to pin down, thanks to good old-fashioned politicking. And, in the end, it's become a case study of how good intentions often go awry in Washington.

Once Congress reconvened, the House moved quickly to pass a clean bill that simply raised the wage by $2 to $7.15 an hour. It's been 10 years since it last changed, so it was long overdue. In fact, in several surveys most small business owners were unconcerned about the increase because they typically pay their employees more than that already.

But raising the minimum wage has always been the bête noire of conservatives and groups like the Chamber of Commerce and the National Federation of Independent Business (NFIB). After taking a beating at the polls last year over the administration's botched hurricane relief efforts, Republicans also saw the issue as an opportunity to get back in the good graces of small businesses.

Largely to appease Senate Republicans, who still have the power to block bills through procedural maneuvering, the Senate Committee on Finance came up with its own measure, laden with $8.3 billion in business-related tax breaks. The idea was to help small businesses offset some of the cost of the new minimum wage, estimated to be about $13 billion. Now, here's where things really started going badly.

Senate leaders didn't feel comfortable adding the tax breaks without at least making some effort to pay for them. It's all part of the new Congress's bipartisan pledge to adopt "pay as you go" revenue measures. The Senate added several provisions to close tax loopholes that are near and dear to businesses both large and small.

That sent seismic shockwaves through the ant colony that is Capitol Hill, causing a rare split among business groups. The U.S. Chamber of Commerce quickly disavowed the measure just as the NFIB was embracing it.

In effect, the Senate engaged in a process known as loving a bill to death. That left the House to step into the breach. House leaders introduced their own tax package last Friday. The House Ways and Means Committee, headed by Charles Rangel, D-N.Y., marked up the bill on Monday and the full House approved it on Wednesday.

At a cost of $1.3 billion, it offers fewer tax breaks than the Senate version, but contains almost none of the onerous loophole-closing provisions. In a shocking move, the Chamber of Commerce quickly endorsed the measure and even more astounding, praised Rangel, one of Congress's biggest knee-jerk liberals.

"The business community ... appreciates the restraint you exercised in omitting onerous permanent tax increases from the package," the chamber's top lobbyist, Bruce Josten, wrote in a letter to the committee chairman.

"Who would have thought we'd have an endorsement letter from the Chamber of Commerce on our first bill," committee member Bill Pascrell, D-N.J., joked with reporters. "Try us, you might like us."

The House bill will likely break an impasse with the Senate, which had vowed to block any measure that failed to include tax breaks. Differences will be worked out in an upcoming conference committee. But the controversy is far from over. Now the news media is weighing in.

In a telling article, BusinessWeek charged that the bills were nothing more than political pork. "A closer review shows the tax provisions are clearly more inspired by politics than credible equity considerations or sound economic reasoning," wrote author Max B. Sawicky.

He noted that the tax provisions would apply to all businesses, even if they already pay more than the federal minimum wage. "In fact, the tax cuts could benefit a business with no minimum-wage employees — or one with no employees at all — because they're unrelated to labor costs, past, present, or future," wrote Sawicky.

Whether such media reports spark public outrage remains to be seen. But the public these days has a low tolerance for political back-scratching and favoritism. While small businesses deserve relief from government-mandated wage increases, Congress needs to do a much better job in targeting the relief to make sure it aids those that are truly afflicted.

How it resolves this dilemma will go a long way in shaping public perception about the new Democratic leadership. Is it truly committed to reform, or will it be just more politics as usual? In the meantime, who needs an ant farm when you've got Capitol Hill?