Understanding Budget Reconciliation
With slim majorities in the House of Representatives and the Senate, Democrats have had to make use of a Congressional procedure that allows for fiscal policy to be passed with a simple majority. This procedure, known as budget reconciliation, has been important for Democrats to pass some of their agenda and will continue to be useful as they eye to use it in the future. Here is a brief overview of this Congressional procedure.
History of Budget Reconciliation
In order to understand how budget reconciliation came about, we must go all the way back to 1921. It was in this year that Congress passed the Budget and Accounting Act. This bill, among other things, was meant to assist Congress in its appropriations role by requiring the president to submit an annual budget. As time went on, however, this new presidential role became more institutionalized and presidents sought to exert more control over the budgetary process. Out of frustration of the president’s growing power over the budget process, Congress sought ways to reassert their Congressional power over this process in 1974. They accomplished this by creating the Congressional Budget Act of 1974. Among other things, this law established the Budget Committees in the House and the Senate and established the budget process and timeline. This law also said that Congress is supposed to pass a budget resolution that serves as a “blueprint” that guides fiscal policy for the year. These resolutions must be passed by both chambers in Congress, but sometimes this can be difficult because it can be filibustered in the Senate, requiring 60 votes to bypass. Even though it can be filibustered, the Congressional Budget Act also allows for the use of the reconciliation process, which cannot be filibustered.
At the time of writing, reconciliation has led to the enactment of 22 bills, with its first use in 1980. Four additional bills were passed in Congress via reconciliation, but were ultimately vetoed by the president. This process has led to significant pieces of legislation being passed. This includes the Bush tax cuts in 2001 and 2003, the 2017 Trump tax cuts, and, most recently, Biden’s American Rescue Plan. This process was also a key component in creating the Affordable Care Act in 2010. In later years, this process would come back to haunt the Affordable Care Act as Republicans tried to use it to get rid of large parts of the act. These efforts in 2016 and 2017 would ultimately fail, with the former being stopped by a veto and the latter failing due to a divided Republican party.
Brief Overview of Budget Reconciliation
The first step to the budget reconciliation process is passing an identical budget resolution that includes “reconciliation instructions” in both the House and the Senate. These instructions give guidance for committees to raise or lower spending or revenues for a given time. Once this is completed, lawmakers in both chambers begin the legislative process and figure out exactly what will go into the reconciliation bill. Committees in both the House and the Senate play an important role in this process, especially the Budget Committees. After the work is finished, the Budget Committees in the House and the Senate assemble all of the recommendations into a single, reconciliation bill. Under the Congressional Budget Act of 1974, debate on the reconciliation bill is limited to 20 hours, meaning that the bill cannot be filibustered in the Senate. As such, the bill only requires a simple majority in both chambers to pass. Not only does the Budget Act prevent filibusters, but it also prevents any non-germane amendments. These two things together make passing major legislation extremely easy. Once both chambers approve the same reconciliation bill, it is sent to the president for approval.
Budget Reconciliation Limits
Budget reconciliation is a powerful process, but it does come with its limitations. One of these limitations is the number of times that this process can be used in a single year. The Congressional Budget Act of 1974 allows for the separation of three different categories of bills — spending, revenue, and debt — into three separate reconciliation bills every fiscal year (which begins October 1st and ends September 30th). The problem with this is that these issues tend to overlap, which makes it difficult to create a reconciliation bill that addresses only one of the issues. As such, there tends to only be one reconciliation bill every fiscal year, severely limiting the number of times that Congress can use this process to pass legislation.
Recently, however, this limitation has been thrown into question due to a small section in the Budget Act. In April of 2021, Elizabeth McDonough, the Senate Parliamentarian, stated that under Section 304, the budget resolution for the current fiscal year can be revised repeatedly to create additional reconciliation bills. This ruling is important for Democrats as it will allow them to pass things in their agenda that are budgetary in nature, such as their infrastructure bill, without any Republican support. It should be noted that, if the Democrats make use of this section, it will be the first time that it has ever been used on a reconciliation bill.
The next limitation, and perhaps the most prominent one, is the Byrd Rule, named after its chief proponent, the late Senator Robert Byrd. This Senate rule gives senators the right to raise a point of order to any “extraneous” provisions in a reconciliation bill, which requires 60 votes to overturn. Under the Byrd Rule, provisions are considered “extraneous” if it:
- is outside the jurisdiction of the committee recommending the provision,
- changes Social Security,
- increases the deficit outside of the 10-year budget window, or
- does not change the level of spending or revenue, or where the change in spending revenue is “merely incidental”.
The person in charge of determining if a provision falls within any of these limitations or not is the Senate Parliamentarian, which is a nonpartisan position. This task is sometimes difficult for the Parliamentarian, because it is not always easy to determine when certain provisions are allowed or not under the Byrd Rule, even with the limitations outlined above. This difficulty was demonstrated this past February, when the Senate Parliamentarian, Elizabeth MacDonough, was tasked with determining if the Byrd Rule makes it impossible to include an increase in the federal minimum wage in the COVID relief package, which was a reconciliation bill. After many weeks, to the disappointment of the Democrats, MacDonough ruled that the increase in the federal minimum wage was not budget related and, as such, could not be included in the bill.
What can you do?
If this past year has been any indication, budget reconciliation will continue to be used in the future. With IssueVoter, you can receive bill alerts and keep track of key reconciliation bills. You can also contact your representatives via IssueVoter and let them know if you support the bill and/or the use of budget reconciliation to pass legislation.
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