A Tool to Advance the Democratic Agenda
By Loren Monroe – Practice Head, State Advocacy and Appropriations, Robb Walton – Principal, Health and Life Sciences Practice
SUMMARY
Reconciliation is a very powerful tool for Congress to use, particularly under one-party control. It allows the majority to pursue budgetary and fiscal policies in Congress virtually unencumbered. Reconciliation is particularly useful in the Senate because it is designed to overcome filibusters and other delaying tactics. Reconciliation was created in 1980 to make it easier for Congress to reduce federal budget deficits. Congress has sent 25 so-called reconciliation bills to the President for signature and 21 of them became law.[1] The current Democratic majority has used it once in 2021, to pass the $1.9 trillion American Rescue Plan, and is attempting to use it for a second time to pass a $3.5 trillion dollar budget deal funding “soft” or “human” infrastructure.
WHAT IS RECONCILIATION?
Reconciliation is a budgetary procedure that allows Congress to bypass regular voting protocols to consider policies that would change the trajectory of the federal government’s debt and deficit path. Only those policies that affect tax revenue, mandatory spending (except for Social Security), and the federal debt limit can be part of reconciliation bills. Mandatory spending programs include entitlement programs such as Medicare, Medicaid and food stamps.
HOW DOES RECONCILIATION WORK?
To use reconciliation, Congress must first pass a budget resolution, which outlines the amount of money that can be spent on various categories of federal programs. The budget resolution is an agreement between the two chambers and therefore does not need to be signed by the President for it to be enforceable. Next, congressional committees that oversee the budget resolution categories must produce legislation that adhere to the budget resolution. Then each chamber must pass its own reconciliation bill that combines the various committee-produced measures into a single package. Those two bills are then reconciled into a single bill that passes both chambers and is signed into law by the president.
Senate Reconciliation Procedure
Reconciliation is an important tool for the majority party in the Senate, in particular, because it allows certain legislation to pass with a simple majority instead of the usual 60-vote threshold. Reconciliation is “privileged” in the Senate, meaning it can be brought up for debate without the need for a 60-vote motion to proceed. However, there are important procedural and substantive limitations to reconciliation in the Senate that can limit the frequency of its use and the substance of policy allowed in reconciliation legislation.
Reconciliation procedures in the Senate are generally governed under Section 310(e) of the Congressional Budget Act. This section states that the considerations of a budget resolution also apply to the consideration of a reconciliation measure, except as specifically provided otherwise. Ultimately this means that motions to proceed on the consideration of budget resolutions, like reconciliation measures, are not debatable (i.e. not subject to the filibuster) in the Senate and can proceed without the need for a 60-vote threshold to cut off debate and move to the bill.
Once a motion to proceed is agreed to (by a 50-vote threshold up/down vote), provisions of the Budget Act place specific time limits on debate of any reconciliation bill. The total time of debate on the measure – including all amendments, motions, or appeals – is 20 hours, divided equally between the majority and minority (10 hours to each side). Each amendment considered during that time has a maximum of 2 hours of debate each.
After time for debate has expired, the process enters the so called “vote-a-rama,” during which Members can continue offering amendments, but with no time allocated to debate them. Generally, the Senate agrees by unanimous consent to consider amendments under the accelerated voting procedures during “vote-a-rama”, allowing a nominal amount of time to identify and explain an amendment and a 10-minute limit for vote time. There is no required time limit on “vote-a-rama,” but in practice amendments are voted on until both sides agree to end it (usually after a very long night of votes).
One of the key substantive limitations during Senate reconciliation is that, with only a few exceptions, amendments to a reconciliation bill on the Senate floor cannot increase the deficit; they must either lessen the deficit or be deficit-neutral. One exception is that amendments striking an entire provision are always in order, even if the provision being removed costs money.
The deficit restriction on amendments falls under what is known as the “Byrd rule”, which applies to the reconciliation measure in total. The Byrd rule prohibits the inclusion of “extraneous” measures in reconciliation, defining “extraneous” as follows:
- measures with no budgetary effect (i.e., no change in outlays or revenues)
- measures that worsen the deficit when a committee has not achieved its reconciliation target
- measures outside the jurisdiction of the committee that submitted the title or provision
- measures that produce a budgetary effect that is merely incidental to the non-budgetary policy change
- measures that increase deficits for any fiscal year outside the reconciliation window
- measures that recommend changes in Social Security
Any Senator may raise a point of order against an extraneous provision in the reconciliation bill, amendments, or the conference agreement. The Senate Parliamentarian then decides whether there is a Byrd rule violation, and provisions struck through a Byrd rule point of order cannot be offered later as amendments. However, Byrd rule points of order can be waived by a vote of 60 Senators.
Historically, the limitation of provisions that are “merely incidental to non-budgetary policy change” has been a key debate point between the parties as to what policies are defined as “extraneous.” For example, when Democrats tried to increase the minimum wage to $15 per hour in reconciliation as part of The American Rescue Plan in early 2021, the parliamentarian struck the provision down under this rule. Both parties made their case as to why they interpreted it either as complying or not complying with this provision of the Byrd rule. Ultimately the Senate parliamentarian interpreted it to be “extraneous” and out of compliance with the rule. Moreover, the Senate parliamentarian is extremely powerful as the final authority on what provisions are compliant.
Once the amendment process is over, a simple majority vote is needed to advance the amended measure.
WHAT CAN RECONCILIATION BE USED FOR?
While reconciliation is primarily used for changes in tax law, there are myriad other public policy areas that could be included in such a bill. These include:
Taxes
Democrats have made no secret about their desire to undo a significant portion of the Republican tax bill that was enacted into law at the end of 2017. This could mean, raising the corporate rate up from the new statutory rate of 21 percent, modifying or eliminating the new pass-through deduction, or re-instating the state and local tax deduction that was repealed by the 2017 law. Most provisions Democrats are interested in pursuing in the tax space will raise significant amounts of revenue that could be spent on other police areas or redirected back into the tax space. Some ideas that have been discussed include universal basic income, tax credit for childcare, and new rates for high-income earners.
Transportation/Infrastructure
Federal transportation projects are largely funded out of the highway trust fund, which is in turn, largely financed through a gas tax. Reconciliation could be used to change the amount of tax collected, the rate at which gasoline and diesel is taxes, and/or impose new funding streams into the trust fund. Then there is a question of how those funds will be spent. In fact, the highway trust fund has been a component of two previous reconciliation bills. However, redirecting that spending or earmarking funds for specific projects would be difficult under reconciliation rules because of potential Byrd challenges.
Health Care
Congress could make significant changes to the three largest federal health care programs: Medicare, Medicaid, and CHIP. All three are considered entitlement programs financed through mandatory spending. As such, they are clearly eligible for inclusion in reconciliation and, like the highway trust fund, have been included in previous bills. For example, the Deficit Reduction Act of 2005 included several hospital quality improvement provisions that tied reimbursement to compliance, added and modified certain medical procedures the program would cover, changed the reimbursement structure for certain covered drugs, and adjusted the amount of federal funding certain states received for their Medicaid programs. Another example is the use of the reconciliation process after the passage of the Affordable Care Act to make additional policy changes.
CONCLUSION
The content of the policies under consideration for the upcoming Democrat reconciliation package are significantly more ambitious in scope and contentious than the American Rescue Plan, because they are considering progressive priorities such as tax increases, climate change policies, health care benefit expansions, and immigration reforms. Some of these such as tax increases are clearly compliant with the rules of the Byrd rule, while others such as immigration reform are more of a stretch. We anticipate a lot of debate over several of these polices on both policy and procedural grounds.
Reconciliation is a powerful and complicated process that can make it easier for Congress to pass significant policy changes. It eliminates several tactics lawmaker’s often use to slow, modify and stop legislation. Reconciliation takes planning and commitment to see the process through. Democrats are considering the use of this fast-track process to get around the filibuster, effectively locking out minority members in the chamber. Reconciliation does not necessarily have to be partisan if both sides agree to an expedited process, however in recent years, the process has increasingly been used to ensure passage of major legislation when Congressional margins are as tight, as they are in the current Congress.
[1] https://crsreports.congress.gov/product/pdf/R/R40480