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Senate Democrats drop $ 1.9 trillion minimal wage plan

Senate Majority Leader Chuck Schumer (D-NY) speaks on the second day of Trump's second impeachment trial in Washington on February 10, 2021 with reporters in the Senate reception room.

Brandon Bell | Pool | Reuters

Senate Democrats will ditch plans to increase wages through tax penalties and other economic incentives that some lawmakers, according to someone familiar with the matter, have considered as an alternative to raising the federal minimum wage.

A handful of lawmakers released a "Plan B" in President Joe Biden's $ 1.9 trillion Covid-19 stimulus plan last week that would have penalized companies that paid workers below a certain threshold.

The Senators released the backup plan Thursday and Friday after the Senate MP ruled that a proposed increase in the federal minimum wage to $ 15 an hour did not meet the requirements Democrats must meet to pass the stimulus bill without Republican support .

The "Plan B," advocated by Senate Finance Chairman Ron Wyden, D-Ore, and Senate Chairman Bernie Sanders, I-Vt., Would have penalized billions of dollars in corporations who made workers not paid enough with various tax incentives.

Legislators considered a number of penalties, including a 5% levy on a large company's total wages, if workers earn less than $ 15 an hour.

The fate of Biden's first landmark bill now rests in the Senate after the House of Representatives passed its version of the $ 1.9 trillion bill largely partisan early Saturday morning.

Democratic lawmakers say urgency is key to providing the big incentive and that they will try to get a final bill to Biden's desk by March 14th when unemployment assistance programs expire. The House bill includes direct checks for $ 1,400 for many Americans, funding for vaccine distribution, and $ 350 billion for state and local governments.

Senators are expected to seriously consider the bill starting this week and propose changes to the legislation they have received from the House of Representatives. Given the backlash with the MP and the tight schedule, party leaders are likely to choose to raise the federal minimum wage in future legislation.

This is likely to please certain outside groups, including trade unions and the Business Roundtable, who had raised concerns that a protracted struggle for a wage increase would delay much-needed relief for workers and industries hardest hit by the coronavirus pandemic.

Given that the lower chamber approved the bill increasing the minimum wage by $ 15 an hour, it is likely that the Senate will pass a different version of the bill. The two chambers would then have to work out a final proposal in a conference committee.

Democrats, who have a thin majority in the House and Senate, decided to pursue the latest stimulus package without input from Republicans through a process known as budget balancing. While reconciliation allows a bill to be passed by a simple majority, it also limits the provisions that can be included in legislation to those that have a significant impact on the federal deficit.

Some progressive lawmakers have called on the Biden administration – notably Vice President Kamala Harris – to override Senate MP Elizabeth MacDonough's decision that would rule out the minimum wage increase.

While some unions and corporate groups may be exonerated, any decision to postpone the wage increase is likely to upset the party's progressive wing and bring them back into conflict with the democratic leadership.

Deputy Caucus MP Ro Khanna and 22 other lawmakers again encouraged the President and Vice-President to challenge the MP's decision on Monday.

"This decision is a bridge too far. We have been politely but firmly asked to compromise almost all of our principles and goals. Not this time," said Khanna in a letter. "If we do not override the Senate MP, we will condone poverty wages for millions of Americans. Therefore, I urge my colleagues to urge the Biden administration to base itself on the clear precedent and override this misguided decision. "

The administrative officer, including White House Chief of Staff Ron Klain, said there were no plans for Harris to override the MP. House spokeswoman Nancy Pelosi, D-Calif., Said Friday that she believes the House of Representatives would "absolutely" pass the relief bill if it comes back from the Senate without a minimum wage increase.

– CNBC's Ylan Mui and Jacob Pramuk contributed to this report.

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