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Senate Considers Minimum-Wage Rise, Estate Tax Cut

DON GONYEA, host:

In today's business, the debate over the minimum wage.

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GONYEA: The Senate this week will consider a bill that is aimed at helping some of the lowest-paid Americans, and some of the richest. It would increase the minimum wage for the first time since 1997, and cut the estate tax. The House has already passed the package.

David Wessel, deputy Washington bureau chief of the Wall Street Journal, joins us to explain both the substance and the politics. Good morning.

Mr. DAVID WESSEL (Deputy Washington Bureau Chief, Wall Street Journal): Good morning.

GONYEA: So how did the estate tax and the minimum wage increase get married in this same bill?

Mr. WESSEL: The only way that the Republicans could hope to get the estate tax through the Senate - where they need a couple more Democrats to reach the 60-vote majority you need to get anything done in the Senate - was to package it with something that Democrats love, and that's the minimum wage increase.

On the other hand, there was no way to get a minimum wage increase through the House - where some Republican moderates really wanted to get it done - without giving the conservative Republicans some red meat. And the estate tax cut does that.

GONYEA: Let's break it down. What's the economic argument for raising the minimum wage?

Mr. WESSEL: The minimum wage is $5.15 an hour. It's been there since 1997, even though consumer prices have gone up about 25 percent since then. This bill would raise it over three years to $7.25 an hour. And the argument is that the lowest-paid workers in America have been left out of the recent economic expansion, and only by the government raising the floor will they be able to benefit.

GONYEA: And the argument against it?

Mr. WESSEL: Well, the argument against it is the classic economic argument. Conservatives and many labor economists and former Federal Reserve Chairman Alan Greenspan - among others - have said if you raise the minimum wage, you're just creating more unemployment.

GONYEA: Okay. Let's switch to the estate tax. A stand-alone version of the estate tax bill failed in the Senate just two weeks ago. Does it look like the votes are there to get it done this time?

Mr. WESSEL: It's too early to say. The problem here is the estate tax is a ticking time bomb. Under the Bush tax cuts that were passed at the beginning of his administration, the estate tax comes back to pre-George Bush levels in 2011 unless something is done. The Republicans really want to get something done this year, because they're not confident they'll have as big a majority when they come back to Congress after the November elections.

The question is have they put enough goodies in? The minimum wage, some money for abandoned mines in order to buy just a couple of Democratic senators and get over the 60-vote hump. It's just too early to tell.

GONYEA: If it passes in its current form here, who would be the big winners, economically? It's not a full repeal of the estate tax.

Mr. WESSEL: No. As you know, the Republicans had hoped to repeal the estate tax permanently once and for all, but there's no way that's going to get through Congress. So this is a compromise, which would limit its impact really to the very richest Americans.

Interestingly, though, the way the thing is structured is the super rich - anybody who leaves over $25 million - faces a 30 percent tax rate. The people who get off well are the not-quite-so rich - people who just have a few million dollars. They get a lower tax rate, or exempt altogether.

GONYEA: When the president talks about this, he always talks about family farms.

Mr. WESSEL: Right. Well, you know, the estate tax has become a populist issue, which is an amazing fact given how few people pay it. Family farms and small business are always the preferred slogan: who wants to defend plutocrats? In fact, many family farms and small businesses are much too small to be covered by the estate tax, and even those that are a little bigger usually have found some way around it. So it's really not about those people, despite the argument.

GONYEA: David Wessel is deputy Washington Bureau chief of the Wall Street Journal. Thanks for being here.

Mr. WESSEL: You're welcome.

GONYEA: You can learn more about how the minimum wage works and about who benefits when it goes up at npr.org. Transcript provided by NPR, Copyright NPR.