WASHINGTON—Democrats promised last year to raise the federal minimum wage for the first time in a decade if voters gave them control of Congress, but now they're holding it up in a game of chicken between the party's purists and pragmatists.
The Senate voted 94-3 Thursday to increase the minimum wage to $7.25 an hour, from $5.15. The House of Representatives approved such a raise weeks earlier. The sticking point between the two versions is $8.3 billion in Republican-backed tax breaks for small businesses in the Senate version.
House liberals argue that now that they're in charge they shouldn't have to cut deals with the Republicans. Senate Democrats have said that without the tax breaks they can't pass the bill because they don't have a big enough majority to overcome Republican obstruction. And President Bush said that the tax breaks are the price of his support for raising the minimum wage.
"I strongly encourage the House to support this combined minimum-wage increase and small-business tax relief," Bush said in a statement released by the White House after the Senate vote.
AFL-CIO President John Sweeney issued a statement saying, "It's disgraceful that the Senate is still holding the minimum wage hostage to tax cuts for business. . . . In the last 10 years, the Republican-led Congress provided corporations with a whopping $276 billion in tax cuts and provided small businesses with another $36 billion in dedicated tax breaks, while America's lowest paid workers have gotten nothing. . . . It's shameful that they must now wait even longer because of the Senate's insistence on business tax giveaways."
Yet if House and Senate Democrats don't compromise, the minimum-wage increase might die.
Even Sen. Ted Kennedy, D-Mass., the liberal icon who's long championed a minimum-wage increase, said the GOP tax package is one of the "least offensive" possible because it includes incentives for hiring minorities and disadvantaged Americans.
Raising the minimum wage would benefit an estimated 5.6 million workers directly. The annual salary for a full-time minimum-wage employee would rise from about $11,000 a year to about $15,000. Experts say 7 million more who earn slightly more than the minimum wage could benefit from a ripple effect.
The tax-break package contains several provisions. Small businesses would enjoy more liberal rules for depreciating capital improvements, including equipment. Small businesses that can file individual income taxes rather than corporate income taxes would get new breaks. And the Work Opportunity Tax Credit, which offers subsidies for hiring welfare recipients and other disadvantaged Americans, would be expanded.
Democratic leaders say they'll probably keep the legislation in the Senate until some compromise emerges. Meanwhile, minimum-wage workers will get no raise.
"We haven't resolved anything," said Rep. Charles Rangel, D-N.Y., chairman of the tax-writing Ways and Means Committee. Rangel opposes including the tax breaks as part of a minimum-wage increase.
The posturing and uncertainty are frustrating to a broad coalition of organized labor, community and religious activists, which has agitated for years for a wage increase.
But that coalition, too, is splintered over how to react.
"We are so concerned that the minimum wage be raised in support of low-wage working people and families, that although we would prefer a clean bill, we believe this (Senate) bill should be supported," said the Rev. Paul Sherry, the national coordinator of Let Justice Roll, in a telephone interview.
Soon after, Sherry called back to clarify that "we will support reluctantly the $8.3 billion tax package, but if they tack anything else on, we're in a different ballgame."
In a third call, he said he could no longer say with absolute certainty what position his coalition would take. "We haven't been able to make a decision yet," he said.
Senate Majority Leader Harry Reid, D-Nev., hinted Thursday that once House and Senate Democratic leaders sit down together, they may decide to go for broke, strip the tax provisions and dare Republicans to kill the bill.
"The minimum wage will be increased," Reid said. "The question is, do we need all these business pieces of sugar or not? We will see." Asked whether he thought the "sugar" was necessary, Reid said, "No."
As long as the Democrats are fighting among themselves and delaying action on their own campaign pledge, Senate Republicans have little motivation to bargain.
Sen. Charles Grassley, R-Iowa, the ranking minority member of the tax-writing Senate Finance Committee, said the tax package is "peanuts" compared with provisions that President Clinton signed into law a decade ago in the last minimum-wage deal.
"And yet we're having this harangue about it," Grassley said. "Aren't we having a win-win situation in a bipartisan way?"
(c) 2007, McClatchy-Tribune Information Services.
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