Donald Trump will be America’s 47th president following a resounding win in the 2024 election. The election also gave control of the Senate to Republicans, along with potentially the House of Representatives. This trifecta of control for Republicans provides them the opportunity to use budget reconciliation to make it easier to pass President Trump’s policy priorities. Republicans have been meeting over the summer and fall to discuss what a potential reconciliation package could look like.
What is reconciliation?
The Congressional Budget Act of 1974 was enacted to establish a congressional budget process for the determination of national budget priorities, but also created the process of reconciliation. Reconciliation is a fast-track, budgetary tool used to implement policy changes in spending, revenues and/or federal debt limits into law. The process only requires 51 votes in the Senate, or 50 if the vice president breaks a tie and avoids the threat of a filibuster.
Reconciliation is used to address mandatory or entitlement spending. These include programs such as Medicare, Medicaid, federal civilian and military retirement, SNAP (formerly known as food stamps) and farm programs. However, certain programs, such as Social Security, are prohibited from being addressed through reconciliation. Additionally, reconciliation has not been used to either enact or rescind discretionary spending that is controlled through the appropriations process. It is highly unlikely reconciliation will be used to enact annual appropriations bills. Past reconciliation packages have provided additional funding for existing programs that are traditionally funded through the annual appropriations process. That funding was treated as mandatory because the committees that wrote the provisions were not the appropriations committees. For example, the 2022 Inflation Reduction Act provided $80 billion in mandatory funding to the Internal Revenue Service as directed by the Finance Committee. It is likely future reconciliation packages will provide instructions to rescind previously provided mandatory funding.
What is the reconciliation process?
To start the process, the House and Senate Budget committees must adopt concurrent budget resolutions that include reconciliation instructions. These instructions instruct authorizing committees to report legislation that meets specified targets. These instructions can instruct each committee to increase or decrease spending or revenues to specific amounts. For example, the 2017 Tax Cuts and Jobs Act instructed the Senate Finance Committee and House Ways and Means Committee to increase the deficit by not more than $1.5 trillion over 10 years. Alternatively, the reconciliation instructions can provide floors or ceilings for the targets. The 2017 American Health Care Act directed committees to reduce the deficit by not less than $1 billion over 10 years.
Authorizing committees that receive instructions must then report recommendations that comply with the targets back to the Budget committees by a deadline set in the instructions. The Budget committees combine the recommendations into one reconciliation bill and report the bill to the floor. If the required targets are not met, an amendment can be offered at the Rules Committee to amend the bill to meet the required targets.
The House and Senate then consider the resulting reconciliation bill. In the House, a reconciliation bill is typically considered pursuant to a rule reported by the Rules Committee. In the Senate, reconciliation is a privileged measure and the Budget Act limits debate to 20 hours. Upon passage of the reconciliation bill or conference report by both the House and Senate, it is then sent to the president for his signature.
Senate consideration of reconciliation and the Byrd Rule
As discussed above, reconciliation is a privileged measure in the Senate with expedited procedures where debate is limited to 20 hours and it only requires a simple majority to pass. Any amendments offered after the 20 hours of debate are voted on immediately after being offered, commonly referred to as a vote-a-rama. Amendments must be germane and require a simple majority vote for passage.
The Senate’s Byrd Rule prohibits the inclusion of any extraneous provisions in a reconciliation bill, enforced by points of order. There are six tests to determine if a provision is extraneous:
- If the provision does not produce a change in spending or revenues;
- If the instructed committee does not meet its reconciliation directives;
- If the provision is outside the reporting committee’s jurisdiction;
- If the provision produces budgetary effects that are merely incidental to the non-budgetary components of the provision;
- If the provision increases the deficit outside the budget window; and/or
- If the provision makes changes to Social Security.
Potential extraneous provisions are identified and then presented to the Senate Parliamentarian who then will make an opinion on the provision. The definition of what constitutes an extraneous provision is subject to considerable interpretation by the presiding officer, who relies on the Senate Parliamentarian’s analysis of the provision. If a point of order is sustained, then the violating provision is removed from the bill, but this does not threaten consideration of the entire bill. A point of order under the Byrd Rule can be waived by a 3/5ths vote of the Senate, which will need 60 votes. For example, the American Rescue Plan Act of 2021 contained a provision to increase the minimum wage to $15 an hour. The Senate Parliamentarian issued an opinion that the minimum wage increase is subject to a point of order, which eventually stripped it from the bill.
How many reconciliation bills are allowed?
A maximum of three reconciliation bills are allowed for each fiscal year’s (FY) budget resolution: one to change spending levels, one to change revenue levels and one for the debt limit. If a reconciliation bill carries provisions with more than one of these categories, then that same category cannot be included in another reconciliation bill. This means one budget resolution could include reconciliation instructions that trigger any combination of the three categories. If the reconciliation instructions included provisions to change spending, revenues and the debt limit, then it would be the only reconciliation bill allowed for that FY.
Multiple reconciliation bills could be considered in a calendar year but with different budget resolutions. For example, in calendar year 2017, Republicans used reconciliation twice, once for the American Health Care Act (as part of the FY 2017 budget resolution) and the Tax Cuts and Jobs Act (as part of the FY 2018 budget resolution). Additionally, budget resolutions can be passed after the annual appropriations process is completed for the year. The Consolidated Appropriations Act of 2021 provided government funding in December 2020, but a budget resolution for FY 2021 was then passed in February 2021 and the American Rescue Plan Act was passed through reconciliation in March 2021.
What’s next?
With Republicans controlling the White House, Senate and the House, reconciliation will provide them a key opportunity to pass legislative priorities. In 2025, Republicans could draft two separate budget resolutions (FYs 2024 and 2025) that would provide for two separate reconciliation packages. This would provide Republicans an opportunity to enact policies among many policy areas including health care, immigration, energy and tax priorities along with the debt limit, which expires in early 2025.
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