Politics

Senate Democrats to drop minimum wage plan in $1.9 trillion stimulus bill

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Key Points
  • Senate Democrats will abandon backup plans to help raise workers' pay through tax penalties against corporations in their $1.9 trillion stimulus bill.
  • Lawmakers last week floated a "plan B" in President Biden's Covid relief bill that would have punished corporations that paid workers below a certain threshold.
  • Sens. Ron Wyden and Bernie Sanders offered that plan after the Senate parliamentarian ruled a proposed $15 per hour minimum wage could not be included in a bill passed under the budget reconciliation process.
U.S. Senate Majority Leader Chuck Schumer (D-NY) speaks to reporters in The Senate Reception Room during the second day of Trump's second impeachment trial in Washington, February 10, 2021.
Brandon Bell | Pool | Reuters

Senate Democrats will abandon plans to help raise workers' pay through tax penalties and other economic incentives that some lawmakers had considered as an alternative for hiking the federal minimum wage, according to a person familiar with the matter.

Some lawmakers last week floated a "plan B" in President Joe Biden's $1.9 trillion Covid stimulus bill that would have punished corporations that paid workers below a certain threshold.

Senators had floated the backup plan Thursday and Friday, after the Senate parliamentarian ruled that a proposed federal minimum wage increase to $15 per hour didn't meet the requirements that Democrats must follow to pass the stimulus bill without Republican support.

The "plan B," championed by Senate Finance Chair Ron Wyden, D-Ore., and Senate Budget Chair Bernie Sanders, I-Vt., would have punished billion-dollar corporations that didn't pay workers enough using various tax incentives.

Lawmakers were considering a variety of penalties, including a 5% levy on a big corporation's total payroll if any workers earned less than $15 per hour.

The fate of the Biden administration's first major legislation now rests in the Senate after the House passed its version of the bill early Saturday largely along party lines.

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Democratic lawmakers say haste is key in passing the big-ticket stimulus. They are trying to send a final bill to Biden's desk by March 14, when unemployment aid programs are set to expire. The House bill includes direct checks of $1,400 to many Americans, funds for vaccine distribution and $350 billion in aid to state and local governments.

Senators are expected to consider the bill in earnest starting this week and offer amendments to the legislation they received from the House. Given the setback with the parliamentarian and the tight timeline, party leaders are likely to opt to pursue an increase to the federal minimum wage in future legislation.

That's likely to please certain outside group, including unions and the Business Roundtable that had expressed concerns that a protracted battle over a wage increase would delay urgently needed relief to workers and industries hardest hit by the coronavirus pandemic.

Given that the lower chamber approved the bill with a $15 per hour minimum wage increase, it's likely that the Senate will pass a different version of the bill. The two chambers would then have to craft a final proposal in a conference committee.

Democrats, who hold thin majorities in the House and the Senate, decided to pursue the latest stimulus bill without input from Republicans using a process known as budget reconciliation. Though reconciliation enables a bill to pass with a simple majority vote, it also limits the provisions that can be included in the legislation.

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Some progressive lawmakers have urged the Biden administration — specifically Vice President Kamala Harris — to overrule Senate parliamentarian Elizabeth MacDonough's ruling to exclude the minimum wage increase.

While some unions and business groups may be relieved, any decision to postpone the wage increase is likely to anger the party's progressive wing and put it again at odds with Democratic leadership.

Progressive Caucus Deputy Whip Rep. Ro Khanna of California and 22 other lawmakers offered the president and vice president fresh encouragement on Monday to challenge the parliamentarian's ruling.

"This ruling is a bridge too far. We've been asked, politely but firmly, to compromise on nearly all of our principles & goals. Not this time," Khanna said in a letter. "If we don't overrule the Senate parliamentarian, we are condoning poverty wages for millions of Americans. That's why I'm leading my colleagues in urging the Biden Administration to lean on the clear precedent and overrule this misguided decision."

Administration officials, including White House chief of staff Ron Klain, said there are no plans for Harris to overrule the parliamentarian. House Speaker Nancy Pelosi, D-Calif., said Friday she believes the House would "absolutely" pass the relief bill if it comes back from the Senate without a minimum wage increase.

CNBC's Ylan Mui and Jacob Pramuk contributed to this report.

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