E. J. Dionne mentioned four regular NRO contributors today in his Washington Post column: me, Rich, Reihan, and Ramesh. Dionne noted that we all have called for the GOP to stop focusing nearly exclusively on the glory of the entrepreneur and start focusing its rhetoric and policies on the nobility of work by the average person. That’s all well and good: We’re all on record extensively in that point. But he then jumped into a classic liberal mindset and argued that since we believed that encouraging and assisting work for the average Joe and Jane was a good thing, we should support Senator Patty Murray’s ideas to raise the minimum wage and tweak the tax code to send more money to working-class people. Speaking for myself, I can’t do that, not because I don’t care deeply about the economic straits of the American working class but because I believe Senator Murray’s ideas would not help, even if they are well intentioned.
Take hiking the minimum wage. Most economic evidence, although there are some outliers, suggests that raising the minimum wage will reduce the number of jobs available to the most low-skilled Americans. That troubles me, especially since the modern global economic regime is likely to continue to put economic pressure on Americans who do not have advanced education.
Rather than throw my hands up and say “the market has spoken,” I prefer another approach. I prefer Senator Marco Rubio’s idea of a direct wage subsidy to replace the current Earned Income Tax Credit (and, I suspect, expand it greatly both to treat married couples equally and expand eligibility further up the income scale). I prefer this because I fear that today’s economy places many low-skilled workers in labor markets where their employers must compete ferociously on price, which means any increase in cost must risk damaging the business and, hence, labor-market opportunities for low-skilled, working-class Americans. Walmart, for example, is famous for keeping its cost structure low (even for white-collar workers, as its business-trip policy makes clear); any increase to its cost structure, as a minimum-wage hike would cause, is likely to endanger jobs.
Rubio’s proposal essentially socializes the risk, transferring the cost of ensuring that low-skilled workers take home enough to make ends meet from the fiercely competitive sectors of the economy to the less competitive ones. It essentially shifts money from highly paid executives, who presumably do not face significant risk of joblessness and whose businesses are less price-sensitive than are the down-market sectors of the economy, to low-skilled workers. I think that will let low-skilled workers have their labor-market cake and eat their income increases too with less (perhaps little) economic damage. That should be better for the person I care most about, the low-skilled worker, than would the proposals advanced by Senator Murray and Mr. Dionne.
I also take issue with Senator Murray’s other idea, allowing the second earner in a household not to count some (20 percent) of their earnings as gross income when filing income taxes. While this is a salutary idea in theory, building on critiques conservatives have advanced on how phase outs of government benefits can create high effective marginal tax rates that could discourage work or income advancement, it won’t help the working class because of the specifics of the tax code.
Personal exemptions and the standard deduction already exempt the first $28,200 of a family of four’s income from income tax. That family would then receive $2,000 from the child tax credit, which means that the family would have to earn nearly $50,000 to even begin having any income-tax liability. Senator Murray’s proposal would hold almost no benefit for a family below that amount (i.e., the working class) because they already have no tax liability under the current system.
Senator Murray’s proposal would benefit two-earner families who are solidly in the middle class, but I prefer Senator Mike Lee’s approach to doing the exact same thing. He proposes increasing the existing child tax credit to $2,500 a child, and applying it against Social Security and Medicare taxes paid, which would give a middle-income family more money without implicitly discriminating against a stay-at-home parent.
E. J.’s column gives us yet another example that there is a third principled, effective, and caring path that differs from liberalism and neo-libertarianism. It’s called conservatism.
— Henry Olsen is a senior fellow at the Ethics and Public Policy Center.