A coalition that believes they helped elect a politician generally has some policy preferences to be enacted if their candidate wins. President-elect Joe Biden is no exception. Unfortunately for working and middle class to upper-middle class Americans, these givebacks will affect your finances in ways you might not have predicted.
You may have seen Joe Biden intends to raise the minimum wage to $15. This is put under the compassionate term of a “living wage.” This is hogwash as the living wage for anyone is highly dependent on where you live. Further, as of the latest report in 2017, a whopping 2.3% of Americans work at or below minimum wage. They tend to be under 25, not married, and work part-time in the foodservice industry. Not a particularly populous coalition there.
The driving force for this is the Service Employees International Union (SEIU). It is a strategic move for their leadership that aligns with Democrat’s needs since almost all union donations go to their candidates. Unions are about two things, density, and dues. The SEIU knows that their employees, at minimum wage and above, are in the jobs that are most likely to be replaced with automation, like kiosks. To preserve their income, made up of dues, they are willing to accelerate a loss of an estimated 2 million jobs to ensure their coffers stay full long term. It has zero to do with advocating for their members.
If this passes, in addition to lost jobs, there will be price increases for everyone. Companies pass these on to their customers as a matter of course. Many people in positions that pay below minimum wage are tip eligible and clear more than $15 an hour regularly. This is why it isn’t easy to get good bartenders and waitstaff to go into salaried management jobs. Some cities have implemented a $15 minimum wage. Restaurant meals cost more to cover labor expense with customers not tipping, or a flat service charge is added and distributed among all staff. Either way, the level of service an employee provides is no longer a factor.
Joe Biden has also pledged to roll back President Trump’s tax cuts by letting them expire. This will affect business owners and individuals, no matter how much you make. The tax rates for everyone will revert to what they were through 2018, and your first paycheck after the expiration will be smaller if you get a paycheck. Employers hired additional staff and raised wages under a lower corporate tax rate. These factors combined may force them to reduce their workforce.
Oddly, letting this tax law expire will remove the one tax law where the wealthy really were obligated to pay higher federal taxes than everyone else. There was a nationwide cap on the SALT deduction at $10,000 under the Trump tax plan. Now wealthy residents will be able to write down their full property and other taxes reducing their federal tax burden. So much for Joe Biden wanting the rich to pay their fair share.
This is in addition to businesses that are not big box stores or online having problems in many areas. At least one-third in New York and up to 40% in California may have closed permanently. Fewer jobs on top of fewer jobs is not a rosy outlook. It will be compounded by inflation due to unprecedented spending and an increase in the money supply to deal with it. Inflation does not hurt wealthy individuals with debt. It hurts regular Americans every time they go to the store. This is generally accompanied by higher interest rates, making large purchases such as homes and vehicles far more expensive.
A third kick will be rising energy prices. Biden has already committed to stopping the Keystone XL pipeline and getting us back into the Paris Climate Accords as his payoff to the Sanders coalition. Once the assault on fossil fuels begins here, they will rise in price. Meanwhile, China’s unenforceable obligation under the accords to reduce carbon emissions is delayed because they are a “developing nation.” So, the cost of doing business in energy-intensive industries will be less expensive to do in China, hollowing out the industrial base once again.
That is until we reach peak stupid like California and can’t keep the lights on. California goes to neighboring states and borrows electricity off of their grids, which is powered by fossil fuels. To meet demand, it is likely we would turn to oil-rich nations in the Middle East. If the Biden administration re-enters the Iran Deal as promised, Saudi Arabia and other oil-producing nations will chill quickly. Where do we go then? The bogeyman, Russia?
I am old enough to remember gas lines, yellow ribbons, eating boxed Appian Way pizza kits, and sky-high mortgage rates. History doesn’t repeat itself, but it often rhymes. And I hear the echoes of 1976. At that time we suffered bad economic policy, horrible energy policy based on the same worn-out promise of union jobs, and horrible foreign policy that does not make clear who the enemies of America and the western world actually are. And the people who will pay for all of that are average Americans.