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Budget Reconciliation: Is it a Prescription for an Ailing Government?

Following the 2020 election, a procedure known as budget reconciliation has gained increasing attention as a possible avenue for President Joe Biden and congressional Democrats to enact a policy agenda despite narrow majorities in the House and Senate. Far from the textbook legislative process most people have learned, reconciliation can seem like a maze of steps and restrictions. Here we answer six questions about the procedure and how it might impact the 117th Congress.

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Where does reconciliation come from?

Reconciliation is a process integral to Congress adopting a budget blueprint known as a concurrent budget resolution. It is important to first understand the budget, authorization and appropriations processes, and their differences.

The Congressional Budget Act of 1974, the statute that guides the congressional budget process, outlines the steps necessary for Congress to adopt an annual budget. The budget is considered in the form of a concurrent resolution and is not signed by the president, so it does not have the force of law. Rather, the budget is a blueprint that sets overall spending and revenue targets for Congress across all federal government functions. The authorization process then separately determines how much money will be authorized to be spent (annually or permanently), and the appropriations process follows with actual funding for the authorized programs. Separately the tax writing committees determine the amount of revenues to be raised and from what sources.

Reconciliation is a tool that can be used to achieve the aggregate spending and revenue goals established in an adopted budget resolution.

How does reconciliation work?

The first step for budget reconciliation to occur is the adoption of a concurrent budget resolution. In the resolution, Congress may include reconciliation “instructions,” which direct a committee or committees of jurisdiction to report specific changes in law to achieve the levels of spending, revenue, deficits, and debt outlined in the resolution.

The second step has the instructed committees report their legislative language to their respective budget committees, which combines all the committee’s language into one consolidated bill in each chamber. The House and the Senate must agree to one uniform bill for it to pass, and it can then be signed or vetoed by the president.

What are the advantages of using reconciliation?

Reconciliation bills differ from the normal legislative process in that it provides Congress with authority to make significant changes in law through a relatively fast-track procedure that is not available for most legislation. Budget reconciliation legislation is considered under similar procedures as the budget resolution: simple majority adoption with limited time for debate and a restrictive amendment process. Perhaps most importantly, this means that, in the Senate, the bill cannot be blocked by a filibuster.

While reconciliation provides fast-track procedures that can help avoid procedural hurdles that might otherwise stall legislation, it is not a blank check. There are limits on how it can be used.

What are the limitations on using budget reconciliation?

The Budget Act places various limitations on the reconciliation process. Reconciliation can address the statutory debt limit, taxes and revenues, and direct or mandatory spending, like Medicare or Medicaid, but not Social Security. Authorized discretionary spending subject to later congressional action in the appropriations process such as annual appropriations for funding foreign assistance or operating the federal courts are not included in this process.1

A significant limitation is the Senate’s Byrd Rule, named after former Sen. Robert Byrd. This rule allows items that are deemed not to have a direct budgetary consequence, and therefore unnecessary to achieve the budgetary goals of the adopted resolution, to be considered extraneous and removed. Some of the restrictions are broad in scope but the general purpose is to keep reconciliation legislation from ballooning into a vehicle for policy changes that are unrelated to the nation’s finances. The rule was codified into statute in 1985.

Generally speaking, something would be “Byrdable” (a point of order could be raised against it) if it:

  1. Does not result in changes to spending or revenues,
  2. Raises the deficit past the point of the budget window (usually 10 years),
  3. Are “merely incidental” to achieving the budgetary goals, and
  4. Makes changes to Social Security through reconciliation

The rule is not self-executing. Any Senator can raise a point of order that a provision violates the Byrd Rule is extraneous. The Senate Parliamentarian will advise the presiding officer on whether the provision is in violation. The presiding officer typically rules on the matter in line with the parliamentarian’s advice, but in either event, the full Senate can decide whether to uphold the ruling. Appealing the ruling of the presiding officer requires 60 votes to reverse the decision.

Should a provision be ruled extraneous, it is “surgically” removed from the bill, and does not prevent the Senate from proceeding on the remaining bill.

While the Byrd Rule only applies in the Senate, its existence can also discourage the House from attempting to include anything in their version of their reconciliation bill or the final conference committee bill that could be struck down in the Senate.

How often has reconciliation been used?

According to the Congressional Research Service, since 1980, Congress has passed reconciliation legislation 25 times, and 21 were signed into law. The last time it was successfully used was in 2017 to pass the Tax Cuts and Jobs Act during the 115th Congress. Other notable examples include reduced taxes during President George W. Bush administration, significant expansions of health care benefits in the 1980’s and 1990’s. Reconciliation in 2010 also facilitated the passage of the Patient’s Protection and Affordable Care Act during the Obama administration.

What does that mean today?

In the 117th Congress, several items have been discussed as possible legislative provisions to be included in a reconciliation bill to enact President Biden’s American Rescue Plan. Democrats currently have a slim majority in the House, and the Senate is split 50-50 with Vice President Kamala Harris available to break ties. These are challenging circumstances for any party to govern under, especially without support from the other party on their policy agenda. Most other legislation could easily be held up in the Senate if it cannot garner a 3/5 vote to prevent a filibuster, which have become a common foil.

So far, House and Senate budget resolutions for fiscal year 2021 deal primarily with COVID-19 pandemic relief. The Senate adopted its FY2021 budget resolution on February 5. The House followed by adopting the Senate amended resolution, S. Con. Res. 5. The concurrent resolution instructs 12 committees in the House and 11 committees in the Senate to report their legislative language consistent with instructions to the budget committees by February 16. Failure to meet this date does not jeopardize the bill’s consideration once reported.

Topics such as infrastructure, minimum wage, student loan forgiveness, and climate change, among others, have also been floated as candidates for reconciliation, though it remains unclear to what extent they would survive scrutiny under the Byrd Rule. Even if they are not included in this first bill, this entire process may soon repeat again.

Democrats, perhaps not surprisingly, are planning to employ this same budget/reconciliation process once it begins consideration of the FY2022 federal budget given their narrow majorities in both chambers. They may find, however, that it is a limited prescription for the ailments that have made legislating difficult in recent years.

End Notes:

1 Caps on discretionary spending apply to the current fiscal year, 2021. Increasing discretionary spending beyond the current caps would subject legislation (e.g. 2021 reconciliation or supplemental appropriations) to a 60 vote point of order in the U.S. Senate.

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