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CBO Director Fires Back at White House Claims He is Wrong on Minimum Wage

Congressional Budget Office Director Douglas Elmendorf fired back Wednesday morning at criticism from the White House over his most recent economic report. The White House and CBO disagree over the effect raising the minimum wage would have on employment.

The argument is much more than an academic disagreement. Having the President's signature economic proposal labeled a job killer would be another political blow to Democrats already facing an uphill climb in 2014.

Though the idea of raising the minimum wage was not new, President Obama re-upped the idea during his State of the Union. Giving Americans a raise was intended to be a populist message that would help Democrats swim against the electoral tide of the still unpopular Obamacare.

Tuesday the CBO released its analysis of the proposal which found that raising the minimum wage would help about 16 million people but also that it would mean killing about 500,000 jobs. (CBO's estimate was a range between a "very slight decrease" and 1 million lost jobs.) The White House reacted strongly to the report, publishing a blog post critical of the job loss findings:

The bulk of academic studies, have concluded that the effects on employment of minimum wage increases in the range now under consideration are likely to be small to nonexistent. CBO also agrees that the employment effect could be essentially zero, but their central estimates are not reflective of a consensus of the economics profession.

Wednesday morning, CBO Director Douglas Elmendorf responded to the criticism saying "I want to be clear that our analysis on the effects of raising the minimum wage is completely consistent with the latest thinking in the economic profession." Contradicting claims made by the White House, Elmendorf added "A balanced reading of the set of research studies in this area led us to conclude that an increase in the minimum wage would probably have a small negative effect on employment."


This latest argument comes just two weeks after a prior CBO report found that the Affordable Care Act would lead to the equivalent of 2.5 million people leaving their jobs. Democrats spun this as a victory over "job lock" but many Republicans questioned the wisdom of a system which would allow some people to work fewer hours (or not at all) thanks to subsidies from other working people.


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