Money Matters: Financial Decisions that will Busy Congress Next Session

Our Congressional representatives make decisions that affect our everyday lives, including how much money we earn, keep, and pay to taxes.

Next session, Congress will raise the national debt limit and debate the minimum wage, issues that could affect your pocketbook.

Minimum wage matters

Many Americans are in favor of raising the federal minimum wage, which is $5.15 per hour and hasn’t changed since 1997.

Even with two parents working full time, a family earning minimum wage is living far below the poverty line. Minimum-wage workers often work two jobs and overtime in order to make ends meet.

However, almost half of the two-million workers who earned minimum wage in 2004 were single, without children, and under 25 years old, many of them teenagers without a high school diploma. Although these workers are not supporting families, advocates of a higher minimum wage point out that the wage is worth less today than at any time since 1955.

Business owners, on the other hand, complain that a higher minimum wage will raise all labor costs, since a higher minimum bolsters all wages. Many say they cannot afford to pay their workers more and will cut jobs instead.

But supporters of a higher wage argue that raising the minimum will result in less job turnover, higher efficiency and greater productivity, all of which will save employers money.

States show the way

States can raise their minimum wages above the federal limit, and many have. Seventeen states and the District of Columbia require wages to be higher than the federal minimum and many are considering adjusting those for inflation.

Often, minimum wage increases are approved directly by the voters. For example, in 2004, ballot initiatives in Nevada and Florida were approved by a 2-to-1 margin.

So if the people are generally in favor of a higher minimum wage, why hasn’t Congress approved one in more than seven years?

The debate

Ever since the minimum wage was first enacted in 1938 under Franklin D. Roosevelt, economists have argued over its efficacy.

Some believe that a federal minimum is necessary to a fair wage, while others say that it drives up labor costs and keeps unskilled workers out of the market. Those who frown at a federal minimum wage claim that it is an arbitrary number that ignores the market and local labor costs. They believe the market should decide.

In addition to aiding workers, raising the federal minimum wage could result in higher prices and will probably boost inflation.

Another financial matter

In the coming session, Congress will also consider raising the federal debt limit. Passage of a higher limit is likely since a government default would destabilize world financial markets.

But Representative Ron Paul (R-Texas) has argued against raising the limit, saying that increasing the national debt sends a signal to investors that the government is not serious about reining in spending. Paul believes that increasing the debt increases the risk that investors will be reluctant to buy U.S. Savings Bonds.

He further explained that the only reason that the U.S. has been able to endure such large deficits without skyrocketing interest rates is the willingness of foreign nations to buy the federal government's debt instruments. However, the recent fall in the value of the dollar and rise in the price of gold indicate that investors may be unwilling to continue to prop up our debt-ridden economy.

Paul suggests greatly reducing federal spending instead of raising the government’s credit limit. Of course, that is easier said than done. Congress had to postpone its 2004 attempt to cut spending in the budget reconciliation bill because some Republicans joined Democrats in objecting to cuts in programs like Medicare and food stamps.

Your input matters

What do you think we should do about the national debt? Should we raise the credit limit, cut spending, or something else? What is a fair minimum wage? How much do you need to live on and how does that amount compare with the minimum wage?

Your representatives in Congress DO care what you think. Especially now -- 2006 is an election year and many representatives will be looking to reconnect with their constituents. Let your congressmen and women know what you think! Give your senators a piece of your mind! To find your reps, click here.

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Article Posted on: 1/6/2006