Five Factors to Watch in the Reconciliation Process

Justin Headshot

By Justin Rzepka, BGR Commerce & Infrastructure Practice Co-Head

After a year of back and forth between Senate Democrats, they are on the precipice of advancing a $700 billion plus reconciliation package dubbed the “Inflation Reduction Act of 2022” and focused on climate, taxes, and health care subsidies. The reconciliation process allows for legislation to pass with a simple majority. All 50 Senators will need to be on board to move the package forward. Democrats in the House and Senate are walking an extreme tightrope to get this package to the President’s desk. Here are five factors to watch as the process moves forward.


The House approved a much larger budget reconciliation package earlier in the Congress but has not yet transmitted the vehicle to the Senate. House and Senate Democratic leaders will have to time this transmission carefully to ensure all 50 Senate Democrats are present, accounted for, and in favor of the package. If they are not, Republicans could call up the legislation and defeat it, essentially quashing it. The package must also go through a vote-a-rama, in which an unlimited amount of amendments can be offered and must be voted on. This process could take nearly a full day. With limited time before the August recess and a hard deadline of September 30th, the end of the fiscal year, Democrats surely want to start the process sooner rather than later.


As mentioned above, Senate Democrats will need all 50 of their members, plus the Vice President, present to vote for the package to proceed. This will be tricky. On Thursday, July 28, Senate Majority Whip Dick Durbin (D-IL) announced he had contracted COVID. Several other Senators, including Manchin, are just getting over the virus. In addition, Senator Patrick Leahy (D-VT) has been absent due to hip surgery. It is expected that he will be present for any must-have votes next week. However, just one absence for any reason could derail the entire process.


The legislative text is currently being reviewed by the Senate parliamentarian for potential budget violations. In a reconciliation package, all new spending must be offset with accompanying revenue and no extraneous provisions are allowed. The package laid out by Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin includes $369 billion in new climate spending approximately $300 billion in deficit reduction through various changes to the tax code, allow Medicare to negotiate the cost of some prescription drugs, and provide subsidies for the Affordable Care Act. The parliamentarian must complete a full review, also known as a Byrd Bath after the former Senator Robert Byrd (D-WV), before the package can move forward. This process could take several days.


Arizona Senator Kyrsten Sinema (D-AZ) has been one of two Democratic holdouts during the year long reconciliation negotiation. She made clear earlier in the process that she would not support tax increases in a reconciliation package. The proposed package from Senators Manchin and Schumer includes significant tax increases. Senator Sinema has yet to announce her position on the package and her staff indicated she would not reveal a position until the parliamentarian had completed the Byrd Bath review.


Should the package get through the Senate, it will then head to the U.S. House for approval. The House will need to return from its August recess to consider the package, likely into the week of August 8th. The Democratic majority currently has a margin of just 4 votes. This margin is set to shrink by one to 3 following a special election for an open House seat in Minnesota on August 9th in which the GOP is favored. Just as Senate Democrats struggled with internal conflicts over the package, House Democrats did too. Many Progressive Democrats are likely unhappy that the package is limited in scope compared to what they had originally pursued. Some northeastern Democrats are surely unhappy that the package does not include State and Local Tax relief for high income states. If and when this package reaches the House floor, Speaker Nancy Pelosi (D-CA) will need to mollify any internal concerns to get it through the chamber.


BGR Group is a bipartisan firm that works for you in Washington, in state capitals, and around the world.