Reconciliation is a powerful tool that Congress has used to enact major deficit-increasing and deficit-reducing legislation, such as the Clinton deficit reduction package, multiple rounds of the Bush tax cuts, the second part of the Affordable Care Act (ACA), the Trump tax cuts, the American Rescue Plan Act, and the Inflation Reduction Act. In today’s era, reconciliation is used exclusively as a mechanism to avoid the filibuster and pass partisan legislation, usually with a slim majority. Indeed, five enacted reconciliation bills have passed the Senate with only 50 senators in support, usually relying on the vice president to break the tie. However, budget law imposes meaningful limitations on what can be included in that legislation.
This column discusses how reconciliation works, as well as its limitations.
What can be included in reconciliation?
Reconciliation legislation can address taxes and spending. It can change existing taxes, create new taxes, or repeal existing taxes, and it can similarly change existing spending, create new spending, or repeal existing spending. Reconciliation can be used to change both mandatory and annually appropriated “discretionary” spending—though annual discretionary appropriations have never yet been included in reconciliation bills—with some exceptions, detailed below.*
Reconciliation legislation can also change the debt limit, though it must specify a dollar level; it may not suspend or repeal the debt limit.
How big a change can reconciliation make?
As noted above, reconciliation has been used to pass major legislation in the past. As long as a reconciliation package adheres to the conditions and constraints set forth in the Congressional Budget Act, it can make dramatic changes to spending and tax policy.
For instance, a reconciliation package could expand Medicaid to cover every person in the country, or it could repeal all federal Medicaid assistance. A reconciliation package could create a new antipoverty program or expand an existing one and eliminate poverty in America, or it could entirely eliminate existing mandatory antipoverty programs and refundable tax credits and lead to a spike in poverty instead. This could be done via changes to Supplemental Security Income; the Supplemental Nutrition Assistance Program; child nutrition programs; veterans’ pensions; the Social Services Block Grant; the Child Care Entitlement to States section of the Social Security Act; Temporary Assistance for Needy Families; child support enforcement and family support; foster care and permanency; the child tax credit; the earned income tax credit; and the American opportunity tax credit. A reconciliation package could cut or add to Medicare, veterans’ compensation or education benefits, farm price supports, civil service and military retirement benefits, and other mandatory spending programs.
A reconciliation package could enact either enormous tax increases or cuts or enormous spending increases or cuts. In 2017, Congress narrowly fell short of repealing large portions of the ACA and permanently destroying Medicaid as it now exists.
What are the constraints on reconciliation? What is the Byrd rule?
Reconciliation is intended to allow Congress to implement budget decisions; it is about getting federal dollars in and out the door. Provisions in a reconciliation bill that do not change spending or revenues, or that are not terms and conditions necessary to define the contours of a provision in the bill that produces budgetary effects, are “Byrdable.”
A Byrdable provision is one that violates the Senate’s Byrd rule, named after former Sen. Robert Byrd (D-WV) and included in the Congressional Budget Act. The provision can be stricken from the reconciliation bill if a senator raises a Byrd rule point of order, unless 60 senators vote to waive that point of order.
It is also not enough for a provision of the reconciliation bill to simply produce budgetary effects. If a provision produces savings or costs but those savings or costs are deemed to be “merely incidental” to a broader policy goal achieved by the provisions, they too are Byrdable.
The reconciliation bill is generally, though not always, organized in titles, with each title containing the recommendations of one committee. Titles of a reconciliation bill may not increase deficits or reduce surpluses in any year beyond the 10-year budget window, so any costs beyond the 10-year window must be offset with at least a commensurate amount of savings beyond the 10-year window. If a title does produce deficits, then any provision within that title that increases out-year costs is Byrdable. This is why both the Bush tax cuts and portions of the Trump tax cuts expire. Because the bills’ supporters were unwilling to find offsets beyond the 10-year window, the bills needed to sunset their provisions—to avoid having any costs in the out-years.
As an exception, reconciliation may not be used to directly affect the Social Security program, including its benefits or its taxes. Determinations about whether provisions are consistent with the rules of reconciliation are made by the Senate parliamentarian.
What are some examples of provisions that cannot make it through reconciliation?
This section provides some specific examples of provisions that can’t make it through reconciliation to help illustrate some of the limitations described in the section above.
Can someone read much into historical precedent when determining what can make it through reconciliation?
The answer to this question depends on whether the provision has been adjudicated before the Senate parliamentarian.
The Byrd rule is not self-enforcing. Provisions that violate the Byrd rule do not automatically fall out of a bill, and a bill that contains them does not lose its privileged status of being filibuster proof. Instead, a senator must actively raise a point of order against a specified provision in the bill, and then the Senate may vote on whether to waive the point of order. If no one raises a point of order, the offending provision will simply remain in the bill. And if 60 senators decide to waive the point of order, the offending provision will similarly stay in the bill.
For instance, when the Inflation Reduction Act was being considered, the Senate parliamentarian determined that capping out-of-pocket insulin prices at $35 per month could only be applied to Medicare, but capping prices for people not on Medicare was Byrdable. The provision was not removed by the parliamentarian’s decision but by a vote. If 60 senators had voted to waive the Byrd rule, the provision would have remained in the reconciliation bill. But 43 Republican senators voted against waiving the Byrd rule, so the insulin price cap was removed from the legislation.
Therefore, in order to determine whether the existence of a provision in a reconciliation bill should count as Byrd precedent, one needs to know if the provision was voted on or if it was argued before the Senate parliamentarian and a determination was made.
Nothing that was enacted in a reconciliation bill prior to 1993 should be viewed as an indication of what is or is not allowed in reconciliation. Before 1993, all reconciliation bills were bipartisan efforts, with many of the bills’ provisions violating the conditions set forth in the Congressional Budget Act. In each case, Congress had the votes to pass the bills through regular order and did not need to use the reconciliation process to avoid a filibuster, but it chose to use the process while including many provisions that violated budget rules.
Partisan reconciliation bills can provide better insight into what is allowed, since the minority is more likely to raise points of order. However, because the Byrd rule is not self-enforcing, there have been provisions included in reconciliation bills that likely violated the Byrd rule but were simply never litigated and therefore made it through. For example, the 1993 Clinton deficit reduction bill included a provision to extend the existing caps on discretionary appropriations. This provision did not yield a CBO score and, had it been challenged, likely would have been found to violate the Byrd rule. However, no senator raised a point of order against it. Reconciliation bills from the past 15 years have been more fiercely fought over, so they provide better insight into what is allowed.
What is the process to enact a reconciliation bill?
The reconciliation process begins with each chamber of Congress eventually passing an identical budget resolution, such as a conference report. This resolution is not a law and is not signed by the president.
The budget resolution will contain reconciliation instructions to some committees instructing them to achieve certain budgetary effects over a specific time period. These instructions solely contain a number for each reconciled committee, not specific policies. They instruct the committee to produce legislation that:
- Increases deficits by no more than a specified amount
- Decreases deficits by at least a specified amount
- Increases spending by no more than a specified amount
- Decreases spending by at least a specified amount
- Increases revenue by at least a specified amount
- Decreases revenue by no more than a specified amount
- Some combinations of the above
These are one-sided requirements. If the instruction would increase deficits, committees may do so by less than the instruction but not more. And if the instruction would decrease deficits, committees may do so by more than the instruction but not less. If a committee’s title is out of compliance with its instruction, any deficit increase in that title becomes Byrdable, and otherwise-nongermane amendments within its jurisdiction that bring it into compliance are nevertheless permitted.
Critically, the reconciliation instruction must be set forth in the budget resolution itself before there is a reconciliation bill. In practice, this means that Congress must have a broad idea of its policy goals and their costs or savings beforehand, or it risks struggling to meet its instructions.***
Committees then write legislation consistent with their instructions. Committees that are not reconciled must not be involved, and committees must not include subject matter outside their jurisdiction. Doing so is a Byrd rule violation, so any offending provision is Byrdable and may be removed without 60 votes to keep it in the bill.
At least one chamber must go through the full committee process of writing and marking up legislation. If the legislation includes tax changes, the Constitution requires that the House go first.
Before the Senate passes the reconciliation bill, there will be an event called “vote-a-rama.” During it, the Senate will consider amendments—notwithstanding the 20-hour debate prior to vote-a-rama—until, finally, no senator offers any further amendment; the Senate will then move to final passage.
The authors would like to thank Brendan Duke, Madeline Shepherd, Emily Gee, and Jessica Vela for their thoughtful comments.
* Discretionary and mandatory are poorly named classifications of funding. Funding being discretionary does not mean it’s unimportant and instead reflects: a) the committee that appropriated the funds; and b) whether entities have a legal entitlement to receive the money even if Congress attempted to underfund the program. If a program is an entitlement, the funding is mandatory. For all nonentitlement programs, if the funding is appropriated by the Appropriations Committees, it is discretionary funding. If it is instead appropriated by any of the authorizing committees, it is mandatory funding. Regardless of the classification, the funding must be prudently obligated and spent.
** Budget points of order that are not related to Social Security—and therefore all numerical reconciliation points of order—are enforced using the on-budget score.
*** Congress could set limits so large that they effectively are nonbinding even if it promises that it intends to do something much smaller, but this has never been done because the politics of asking for tens of trillions of dollars of tax cuts or spending increases are difficult.