As economic inequality and the plight of the working-poor have suddenly erupted as leading topics in the national debate, the proposed solution of a big minimum wage hike has evoked many varied reactions.
On the Democratic side, the responses have been pretty much what one might expect. In recent decades, liberals had shied away from focusing on the minimum wage as a central economic tool, fearful that there might be widespread job loss among the very workers who were the intended beneficiaries. Just a couple of years ago, prominent liberal pundits denounced proposals to hike the minimum wage hike as evidence of economic ignorance, and even such leading luminaries as Paul Krugman and Joseph Stiglitz had been reluctant to embrace the idea.
But with new research indicating that job losses would be far less severe than previously believed, such positions have naturally evolved, and earlier this year both Krugman and Stiglitz endorsed a much higher minimum wage. Reassured by backers of such intellectual heft, rank-and-file liberals have eagerly signed on to the idea of helping low-wage workers simply by raising their wages.
The huge popularity of the issue certainly hasn’t hurt in this regard. In November a Gallup poll put popular support for a minimum wage hike at 76%, up five points from March and in December, a Reason Foundation poll reported very similar numbers. The Reason Foundation is a libertarian thinktank strongly opposed to minimum wage laws and most other government regulations and if they say that public support for a higher minimum wage is absolutely overwhelming, then it probably is.
Persuading Democrats to back a policy that benefits the underprivileged while also being popular enough to get them victories at the polls isn’t a difficult sell, and the entire Democratic Party apparatus has begun buying into a minimum wage hike as a winning issue for the 2014 elections, especially since it serves as an effective means of deflecting public attention away from the Obamacare debacle. More money for the poor and more votes for Democrats sounds awfully nice to political operatives on the left and the candidates they control, and the fact that the proposal might even make sense as public policy is an added bonus.
But the reaction to this unfolding political issue among conservatives and libertarians has been far more surprising and curious.
The most doctrinaire libertarians, notably Prof. Bryan Caplan of George Mason University, have held fast to their principles and denounced the very notion of a minimum wage as a violation of basic human liberty. If a desperately impoverished Congolese is willing to come to America and work for a dollar a day, then that is his fundamental moral right, at least if he is willing to forego any access to medical care or other normal social benefits as part of the deal.
Such a belief system seems as logical and internally self-consistent as it is unpopular with almost the entire American public.
Among less ideologically rigid conservatives and free market advocates, the general reaction has been far more ironic, especially given the public perception of conservative core-principles. One of their leading figures, Harvard economist and former Reagan Advisor Martin Feldstein recently took to the editorial pages of The Wall Street Journal to explicitly call for the creation of a new economic system that would fully integrate welfare payments and work into a seamless system of government support aimed at ensuring a basic standard of living for everyone in the country.
In effect, he was calling for a huge expansion of the existing Earned Income Tax Credit (EITC), under which the federal government renders impoverished workers slightly less impoverished by sending them annual checks by applying their individual household situation to a hideously complex income formula. The EITC is already America’s largest cash welfare program in slight disguise, though whether the actual beneficiaries are the low-wage workers who receive the government checks or the low-wage businesses who employ them may be subject to dispute. Support for an expanded EITC payments has become the rallying cry for conservatives threatened by talk of hiking the minimum wage.
Indeed, Feldstein argued that once the eligibility of various welfare programs were widened, the minimum wage could reasonably be cut, allowing American workers to take jobs paying just four, five or six dollars per hour, with the ordinary taxpayer making up the difference. The logical endpoint to such proposals would be for businesses to pay their workers absolutely nothing at all, with all employee living expenses and spending money coming from governmental anti-poverty programs. I suspect this arrangement would prove quite congenial to the corporate interests that fund most conservative thinktanks. And unemployment would certainly decline if businesses don’t have to actually pay anything to the workers they chose to hire.
Where would they find the money for these hugely expanded government welfare programs? Well, unless Feldstein and his conservative allies are quietly planning to cut many tens of billions of additional dollars from the defense budget, the only plausible funding mechanism would be higher taxes, presumably on individuals rather than on corporations. Conservatives spent decades accusing liberals of plotting to raise taxes in order to expand welfare, and won many political victories as a result. But it appears that today’s Washington conservatives have decided that their erstwhile opponents had actually been right all along..
One of the more ironic aspects of this situation is that a large hike in the federal minimum wage would be guaranteed to instantly transform many millions of current tax-recipients into net tax-payers, surely reducing Mitt Romney’s notorious “47 percent” by at least ten or fifteen points. But altering the national political landscape into one far less hostile to future Republican candidates is clearly the last thing desired by today’s GOP.
Hence the political rallying cry of America’s conservative Republican leadership: “Higher Welfare Payments for American Workers.” Sounds like a sure-fire winner to me.
(Reprinted from The Unz Review by permission of author or representative)