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Compromises for the President

Opinion pieces and speeches by EPI staff and associates.

Compromises for the President

by Jared Bernstein

After a long campaign and long election full of rhetoric about a new era of bipartisanship, President Bush has not yet proven to be a Compromiser-in-Chief.

He has remained steadfast in his devotion to a tax cut that primarily benefits the rich and to school vouchers.

He has made curtailing abortion rights one of his first agenda items.

He has selected not one, but three, controversial conservative candidates for his cabinet, with his original choice for Labor Secretary withdrawing in scandal.

Whether you agree with him or not, if Bush truly wants to “work to build a single nation of justice and opportunity,” he needs to extend some olive branches. Here are two suggestions for where he might want to start.

First, he should support a raise in the minimum wage. Second, he should double the tax credit for children, while also making that credit refundable, so that even those low-income workers who pay no federal income tax will still reap its benefits.

Democrats in the 106th Congress tried for over a year to raise the minimum wage. A majority of the Republicans also signed on, but by appending excessive and regressive tax cuts, made the bill veto bait for President Clinton.

To reach every wage earner in the bottom ten percent of the wage scale in the United States – a reasonable goal, and one that will not raise unemployment rates – the minimum wage would have to be raised $1.50, to $6.65, over two years, not the $1.00 proposed in the last Congress.

That bottom ten percent includes millions of single mothers struggling to complete the transition from welfare to work. There ought to be a proper incentive for making the move.

A minimum wage increase has broad popular support, doesn’t show up on the government’s budget ledger, and disproportionately benefits racial minorities, who voted against Bush nine to one, and who felt particularly alienated by the allegations of racial intimidation at polling places in Florida.

“We know that deep, persistent poverty is unworthy of our nation’s promise,” said the President in his inaugural address. “And whatever our view of its cause, we can agree that children at risk are not at fault.”

Bush should then like this second idea, which actually builds on one of his own. Today, families in the U.S. can take a $500 credit in federal income taxes for each of their children. As part of his tax plan, the President has proposed doubling that credit, a good way to help families meet the expenses that arrive along with the joys of children.

But unless it’s refundable, the child credit will miss those families and children that need it most.

This wouldn’t be cheap, but it would be cheaper than Bush’s tax cut package (which, depending on how you define it, will cost anywhere from $1.3 to $2.1 trillion over ten years). Dennis Hastert, the Republican Speaker of the House, has himself questioned the size of the package.

Doubling the child credit would cost about $22 billion per year; making it refundable would cost another $22 billion per year. Unlike the President’s plan, which is clearly tilted toward the rich, this plan would introduce a truly universal benefit, one that spans the income range.

The Children’s Defense Fund (from whom Bush adopted the “leave no child behind” slogan) has called this idea a top priority, and estimates that it would lift between two and three million children above the official poverty line, reducing the child poverty rate by as much as 20 percent.

It’s also possible to fit a refundable child credit in with the Earned Income Tax Credit, a federal subsidy for low-wage workers. The solution resides in the Simplified Family Credit, a piece of legislation to be introduced in the House by Representative Dennis Kucinich (D-OH).

The President himself has lamented the high effective tax rates paid by low income families. On both of these counts – the minimum wage and the child credit – compromise is not some unreachable oasis.

“Sometimes our differences run so deep,” President Bush also said in his speech, while standing just steps from his (barely) vanquished opponent, “it seems we share a continent, but not a country.”

These are noble words. But it doesn’t take a cynic to see that semantics aren’t enough to appease those voters – the popular majority – who believe that the new President’s priorities are misdirected.

Working towards compromise solutions like these may have the added benefit of infusing his words with real meaning.

Jared Bernstein is an economist at the Economic Policy Institute in Washington, D.C.


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