The Congressional Budget Office returned a mixed verdict with its new report on the effects of a $15 federal minimum wage.
The policy — embraced by nearly all the 2020 Democratic presidential candidates and Congressional Democratic leadership — would boost wages for 17 million workers and lift 1.3 million people out of poverty, the report found. But it also estimated another 1.3 million workers would lose their jobs by 2025, when the hike would be fully phased in.
Presented with this jump-ball on Monday afternoon, Republicans leaped for it, while Democrats mostly didn’t leave the ground.
Top GOPers on Capitol Hill seized on the projected job losses. House Minority Leader Kevin McCarthy (R-Calif.) said the CBO report “reaffirms that a $15 minimum wage would kill American jobs and harm Americans struggling to make ends meet. Under the new Democrat-socialists’ plan, average family income would be reduced and as many as 3.7 million jobs could be lost,” pointing to the budget office’s upper estimate of potential job losses. "Why are Democrats so determined to reverse our progress and hurt American workers?" House Minority Whip Steve Scalise (R-La.) asked in a statement.
Rep. Steve Womack (Ark.), the top Republican on the House Budget Committee, also focused on the 3.7 million jobs figure, urging House Democrats "not to advance a proposal that would unravel [economic] progress and hurt millions of families in the process.”
Yet Democrats from the Hill to the campaign trail were largely mum, even as House Democratic leaders prepare to put the matter to a vote in that chamber. One exception: Rep. Bobby Scott (D-Va.), who introduced the bill the CBO analyzed. He told reporters on a call what the report "makes clear is that the benefits vastly outweigh any cost."
Democrats have long objected to the way the CBO analyzes proposed boosts to the pay floor, charging the agency with ignoring piles of academic research showing wage hikes have had a minimal impact on employment. Plus, polling suggests Democrats pushing for a raise have popular support on their side. Fifty-five percent of those surveyed in a January poll by the Hill backed a $15-an-hour wage, while 27 percent said the minimum wage should be increased, but by less. Only 14 percent said they wanted it to remain at $7.25.
Given that context, Democratic leaders’ decision to effectively cede the argument on Monday was curious. In the party’s presidential field, especially, the candidates setting the terms of the debate have been those offering the boldest proposals, from universal health care to eliminating student debt. Next to those multitrillion-dollar packages, the $15 minimum wage — embraced by progressive and moderate Democratic hopefuls alike, including former vice president Joe Biden, Sen. Kamala Harris (D-Calif.) and South Bend, Ind., Mayor Pete Buttigieg — ranks as relatively modest.
In the immediate wake of the CBO report, it fell to progressive advocates to make the case for a hike. Economic Policy Institute director of policy Heidi Shierholz argued the “key fact” of the report was the CBO’s finding that the benefits of the proposal outweigh the costs. “The report finds that a $15 minimum wage would increase the wages of millions of low wage workers, increase the average incomes of low and lower-middle-income families, reduce poverty, shift money from corporate profits to the wages of low-wage workers, and reduce inequality,” she wrote.
And she argues the CBO is behind the curve by not recognizing that “a new consensus has emerged among economists that minimum wage increases have raised wages without substantial job loss (even the Cato institute acknowledges this ‘new conventional wisdom’).”
That argument is now beyond dispute, according to my colleague Andrew Van Dam. “It’s now evident that, since at least the late 1970s, minimum-wage hikes in the U.S. haven’t reduced employment. Partisans will dispute the details, but the most rigorous research points in the same direction,” he wrote Monday before the release of the CBO report.
Per Van Dam: “University of California at Berkeley economists Anna Godoey and Michael Reich addressed one of the last areas of dispute — the results of hikes as large as those proposed by many Democratic candidates — when they measured the local effect of 51 changes in the minimum wage since 2007 in a working paper circulated last week. ‘We don’t find job losses in places where the local impact of existing minimum wage is similar to what we estimate the impact of a $15 federal minimum wage would be, even in low-wage states,’ Godoey said.”
And Van Dam points to research showing minimum wage hikes have been shown to reduce suicides and recidivism, boost consumer spending, lift worker productivity, and reduce poverty rates, among other secondary benefits. That’s ample ammo for top Democrats looking to make the case for a minimum wage hike, if any care to.
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— Central banks aren't prepared for a global downturn. NYT's Jeanna Smialek, Jack Ewing and Ben Dooley: "Central bankers have a favorite mantra: Patch the roof while the sun is shining. But 10 years after the Federal Reserve worked alongside the European Central Bank and the Bank of Japan to bring the global economy back from the brink, their ability to prevent the next downturn is limited.
"Whether the world’s central banks are prepared to combat another slump is becoming less of a hypothetical question as the global economy shows signs of strain. The chances that the United States will enter a recession by next year have grown as manufacturing weakens and trade uncertainty drags on. In Germany, the unemployment rate has ticked higher, and industrial production is slowing. In Japan, weak factory production and waning exports heighten vulnerability... A recession is far from inevitable — particularly one as deep and painful as the last. But the capacity for the type of decisive response that prevented an even worse outcome in 2008 has been hindered."
Fed chair Jay Powell will give opening remarks at 8:45 this morning at a conference on stress testing hosted by the Boston Fed. Watch a livestream and see the line-up of the day's events here.
— Inflation expectations rise: Reuters: "U.S. consumers in June lifted their inflation expectations for the first time in three months, New York Fed data showed on Monday, reducing pressure on central bankers to cut rates significantly to support economic momentum... The Federal Reserve Bank of New York’s survey of consumer expectations, which the Fed considers along with other data on U.S. price pressures, showed consumers’ one-year inflation outlook rising 0.2 percentage points to 2.7%. Three-year inflation expectations also ticked up to 2.7%. In May, the gauges had hit their lowest levels since at least 2017."
— U.S., China move to restart talks. WSJ's William Maudlin, Josh Zumbrun, and Chao Deng: "Top American and China negotiators are set to speak this week in an effort to revive stalled trade talks, as discord over prior commitments and political considerations threaten to bog down discussions... Senior officials from each side, including Robert Lighthizer, the U.S. trade representative, are set to speak by telephone this week, a U.S. official said. If successful, that could lead to face-to-face talks, likely in Beijing, people following the talks said."
Senior Chinese diplomat warns of ‘disastrous consequences’ for U.S.’s conduct: “A senior Chinese diplomat lashed out at the United States on Monday, saying it had imposed visa restrictions on academics from China and saw the country as ‘an enemy’ — which he said could have ‘disastrous’ consequences,” the South China Morning Post’s Zhenhua Lu and Catherine Wong report.
“Foreign Vice-Minister Le Yucheng said the problems faced by the U.S. were not ‘China’s fault’ and that Chinese people were finding it more difficult to engage in exchanges with their US counterparts. His comment came after [Trump] told China’s leader Xi Jinping that Chinese students were always welcome to study in America, when they met on the sidelines of the Group of 20 summit in Osaka, Japan, last month.”
Heavy debt starts to hurt Chinese companies: “For a generation, China’s explosive growth rewarded bold expansion and many borrowed heavily to seize the moment,” the WSJ’s James T. Areddy reports.
“Full-steam growth also masked companies’ strategic mistakes — in addition to excessive debt, many overexpanded into unfamiliar and crowded business sectors. These problems are becoming increasingly apparent as China’s economy slows to its weakest growth in more than 25 years. The companies’ struggles foretell a further drag on the expansion.”
— German diplomat warns U.S., E.U. not to allow agriculture to block trade progress: “The United States and European Union should use common sense to move forward with formal negotiations about a trade agreement, instead of allowing disagreements over agriculture to block progress, a senior German diplomat told Reuters’s Andrea Shalal.
“Peter Beyer, a member of Chancellor Angela Merkel’s conservatives and the German government’s transatlantic coordinator, said both sides should back away from their rigid positions. The United States has insisted it will not reach a trade deal with the EU if agriculture is not included, but the EU has excluded agriculture from its mandate for the talks.”
— "Federal judge blocks Trump rule requiring drug prices in TV ads": "A federal judge Monday thwarted one of the Trump administration’s key efforts to address rising drug prices by blocking a rule that would have required drugmakers to include the list prices of their medicines in television ads," my colleague Yasmeen Abutaleb reports.
"Three drug manufacturers — Merck, Eli Lilly and Amgen — sued the administration after the Department of Health and Human Services finalized the rule in May, arguing that HHS overstepped its authority because it did not have permission from Congress to impose the requirement ... Slated to go into effect Tuesday, the rule would have required drugmakers to include the list price of their medications if they cost $35 or more for a month’s supply, or for the usual course of therapy."
— Cuomo approves new law allowing the release of Trump’s state returns: “Gov. Andrew M. Cuomo (D-N.Y.) signed legislation Monday that allows Congress to review [Trump’s] state tax returns, giving House Democrats another potential tool for accessing the president’s closely guarded financial records,” my colleague Jeff Stein reports.
“Rep. Richard E. Neal (D-Mass.), chairman of the House Ways and Means Committee, has suggested he will not pursue Trump’s state returns, saying he is focused on obtaining documents held by the Internal Revenue Service. Last week, Neal filed a lawsuit against the IRS and Treasury Department over their denial of his request for Trump’s tax returns.”
— Wharton admissions officer says Trump was 'not a super genius': "James Nolan was working in the University of Pennsylvania’s admissions office in 1966 when he got a phone call from one of his closest friends, Fred Trump Jr. It was a plea to help Fred’s younger brother Donald Trump get into Penn’s Wharton School," my colleague Michael Kranish reports.
"For decades, Trump has cited his attendance at what was then called the Wharton School of Finance as evidence of his intellect... At the time, Nolan said, more than half of applicants to Penn were accepted, and transfer students such as [Trump] had an even higher acceptance rate based on their college experience. 'It was not very difficult,' Nolan said of the time Trump applied in 1966, adding: 'I certainly was not struck by any sense that I’m sitting before a genius. Certainly not a super genius.'"
— WSJ finds Wall Street CEOs pay doesn’t match with the returns: “Wall Street companies delivered significant losses to their shareholders last year, but the pain didn’t spread to the top,” WSJ’s Charlie McGee reports. “The chiefs of banking and financial institutions in the S&P 500 received a median raise of 8.5% last year, compared with 5.6% for CEOs in the broader index, according to a Wall Street Journal analysis.”
“Median pay for finance CEOs was $11.4 million for the year, $1 million below the overall S&P 500 median. The Journal analysis uses total compensation as specified by Securities and Exchange Commission regulations, which includes salary, annual bonuses, and long-term equity and cash incentives. It also includes perquisites and the value of pension gains and some increases in deferred compensation accounts.”
— Epstein charged with federal sex trafficking crimes: “Federal prosecutors unsealed new sex trafficking charges Monday against Jeffrey Epstein, alleging that the politically connected multimillionaire abused dozens of female minors at his Manhattan and Palm Beach, Fla., homes and enlisted his victims to expand a network of possible targets,” my colleagues Matt Zapotosky, Renae Merle and Devlin Barrett report.
“The new charges, described in an explosive 14-page indictment brought by the U.S. attorney’s office in Manhattan, could lead to a much harsher penalty. Epstein is charged in a two-count indictment with sex trafficking and sex trafficking conspiracy, for crimes alleged to have occurred between 2002 and 2005. Epstein pleaded not guilty Monday, and his defense attorney called the case an attempt by prosecutors at a ‘do-over.’ U.S. Attorney Geoffrey Berman said at a news conference that Epstein, now 66, faces the possibility of 45 years in prison and that prosecutors will seek to have him detained pending trial.”
Mystery surrounds how Epstein made his money: “For all his infamy, there are scant details of how he made his money. While he’s frequently been called a billionaire, his net worth is hard to ascertain. He ran a money management firm catering to the ultra-rich, primarily for Victoria’s Secret founder Les Wexner, but its assets were never made public and few on Wall Street have dealt with him as a financier or money manager,” Bloomberg News’s Tom Metcalf, Caleb Melby and Sophie Alexander report.
“According to his lawyers more than a decade ago, he had a net worth in excess of nine figures. Today, so little is known about Epstein’s current business or clients that the only things that can be valued with any certainty are his properties. The Manhattan mansion is estimated to be worth at least $77 million, according to a federal document submitted in advance of Epstein’s bail hearing.”
— Amazon workers in Minnesota plan to strike during Prime Day sale: “When consumers flock to Amazon next week to capitalize on the tech giant’s biggest sale of the year, many of the company’s warehouse workers plan to generate a different kind of buzz,” my colleague Hamza Shaban reports.
“Amazon workers at a fulfillment center in Shakopee, Minn., are organizing a strike during Prime Day, the retailer’s two-day shopping event, to protest what they allege are dangerous productivity quotas and a refusal to convert more temporary workers into employees, Bloomberg News first reported. The planned work stoppage comes as Amazon draws increasing attention in Washington and on the presidential campaign trail in connection with issues tied to corporate taxation, market competition and labor.” (Amazon CEO Jeff Bezos owns The Washington Post.)
— “Deutsche Bank Shares Fall Sharply on Restructuring”: “Deutsche Bank AG was quick to start firing staff from its investment bank on Monday. Its investors will need to wait much longer to discover how the German lender’s radical restructuring will affect them,” WSJ’s Paul J. Davies and Jenny Strasburg report.
“Shares in the troubled global banking group fell sharply as investor skepticism set in during Monday’s trade. The stock was down as much as 7.25% in the afternoon, its biggest one-day fall this year and a big reversal from a rise of more than 4% shortly after the open. It finished the day down 5.4%.”
— Treasury could breach debt ceiling in first half of September: "The U.S. government could run out of money to pay all of its bills by early September if Congress doesn’t rush to raise the debt ceiling, a think tank said Monday, a time frame that could force lawmakers to act much sooner than planned," my colleagues Damian Paletta and Erica Werner report.
"The Bipartisan Policy Center said that the Treasury Department could breach the borrowing limit in two months because the government has brought in far less tax revenue this year than was projected. The BPC uses economic models to forecast the government’s ability to pay its bills, and its estimates are often studied by the White House and congressional leaders."
— Waters threatens Facebook over its cryptocurrency plans: “Facebook's audacious vision for creating its own global currency is at risk of being shredded on Capitol Hill, where the social media giant's attempt to educate skeptical policymakers is doing anything but calming nerves,” Politico’s Zachary Warmbrodt reports.
“Democrats led by House Financial Services Chairwoman Maxine Waters (D-Calif.) and backed by a coalition of watchdog groups are warning that Facebook must put its Libra digital currency on hold so lawmakers and regulators can consider whether it's a new threat to consumers and the global economy.”
— “Warren reports $19.1 million in 2nd-quarter donations”: “Sen. Elizabeth Warren’s campaign said Monday that she had raised $19.1 million in the past three months, the vast majority from first-time donors, drawing a significant haul despite putting herself at a disadvantage by pledging not to court wealthy donors,” my colleague Michelle Ye Hee Lee reports.
“Warren’s second-quarter haul showed that she held her own among the other top-tier Democratic White House hopefuls, despite pledging not to solicit big checks at in-person fundraisers and not having an established small-dollar machine like Sen. Bernie Sanders (I-Vt.) does. Warren outraised both Sanders and Sen. Kamala D. Harris (D-Calif.) in the second quarter. She trailed South Bend, Ind., Mayor Pete Buttigieg, who has announced the largest haul of the quarter so far despite lagging in national polling, and former vice president Joe Biden.”
- The Federal Reserve Bank of Boston hosts a day-long conference on stress testing.
- Fed Chair Jerome Powell testifies in front of the House Financial Services Committee on Wednesday.
- The Peterson Institute for International Economics holds an event on China and world on Wednesday.
- The House Committee on Small Businesses holds a hearing on the role military veteran entrepreneurs serve in the economy on Wednesday.
- Powell testifies in front of the Senate Banking Committee on Thursday.
- Fed Vice Chair Randal Quarles speaks at the Bipartisan Policy Center on Thursday.