Sense on Gas and Wages
Slow down, Washington. There are better ways to deal with a momentary gas-price rise and the minimum-wage issue than those being bruited about by Congress and the Clinton administration.
First, gasoline prices.
Everyone (Senator Dole, President Clinton, complaining motorists) seems to have forgotten two of our overriding national goals:
1. To control dependence on imported oil and avoid future oil crises. Also, to stretch petroleum supplies as far into the 21st century as possible until renewable power supplies become economic and widely applicable.
2. To control and reduce the federal deficit.
Given those goals, Mr. Dole's prescription, to repeal the last rise in the gas tax, marches in the wrong direction. So does Mr. Clinton's selling off of some 12 million barrels of oil from the Strategic Petroleum Reserve that is meant as a cushion for national emergencies. This is not, repeat not, an emergency. Besides, that quantity of extra oil will make little dent in pump prices over the month in which it would be fed to refineries.
Selling into a relatively pricey oil market would give the government somewhat higher revenue for deficit-reduction purposes. But this would be a one-time gain, not the permanent deficit-reduction that's needed.
We have no quarrel with Justice Department and congressional investigation of possible oil-industry price-fixing. But all the evidence indicates both branches of government are drilling a dry hole. As we indicated earlier this week, this price spike is caused by a surge in demand. That surge was abetted by a long winter's heating-oil needs, America's increased addiction to gas-thirsty vehicles, oil-industry just-in-time inventory practices, and further delay in United Nations-Iraq negotiations to allow Iraqi oil sales into the world market.
To sum up: A better answer would be hands off from Washington. Gas prices are historically low in real-dollar terms. The price spike will adjust downward, as is already indicated by lower prices on the oil futures market.
Now, the minimum wage.
First, let's separate what's likely to happen from what ought to happen.
What's likely to happen is that the minimum will rise by something like the 90 cents proposed by congressional Democrats. Newt Gingrich has been quietly conceding the point. National polls drive a majority of politicians, and they indicate lopsided approval. And historically, the same time-honored economic debating points have led to a grudging retreat by opponents.
That would mean that a relatively few Americans at or near the poverty line would do marginally better. A few other poor Americans would lose their jobs. A few additional small businesses would teeter toward bankruptcy. And the 4 out of 5 Americans who say they favor a rise (and have nothing at stake) could ease their consciences for several years.
But come, let us reason together. If we want to help impoverished Americans who are trying hard to make their way into the work force, isn't it more sensible to follow the proposal of economists who suggest exempting people in the lowest income brackets from the payroll withholding tax? That tax now cuts 7.65 percent from the take-home pay of even the lowest-paid Americans. And it cuts more low-income wages more inexorably than the minimum wage ever has helped.
This approach would benefit more of the truly needy. It would not damage small businesses, the biggest engine of job growth in America.
Yes, the piper has to be paid. Such an exemption for, say, Americans earning less than $10,000 would mean their eventual Social Security and Medicare funding would have to be met either by way of budget-cutting or from more revenues generated by business and income growth throughout the economy. (It's interesting to note that US incomes are on the rise again.) To the degree such an approach forced budget cutting it would be a blessing. That's because we have a bad national habit of using the Social Security and Medicare trust funds for borrowing and fooling ourselves about the size of deficits.
The total amount needed to pay for such a modest exemption of the working impoverished would, however, be relatively small. And, if fairness is the measure, it should be remembered that the payroll tax falls proportionately far more heavily on these low- wage earners than on those Americans whose pay is partly exempted from the payroll tax when it exceeds $61,200.
One further reminder:
Despite two centuries of becoming relatively more united in accent, economy, job market, and transportation links, these United States still have sharply varied regional standards of living and costs of living. Housing, food, and a host of services cost markedly less in, say, rural Mississippi or North Dakota than in San Francisco, New York, or Seattle. For that reason (rather than any appeal to states' rights) it makes sense to deal with the minimum-wage question on a state-by-state basis. Some states are already recognizing that they have a greater need because of higher costs.