Budget Reconciliation for Dummies (and Why You Should Care!)

It has been a great year for lovers of high-stakes political drama. The U.S. Senate in particular, where Republicans have a razor-thin majority, has been the stage for enough infighting, deal-making, and grandstanding to keep a political junkie satisfied for years to come. Through all the commotion, one new term is suddenly showing up a great deal, and now seems to be critically important: “reconciliation.” But what is reconciliation, and how might it affect you?

First: a brief review of the American legislative process, for those of us who aren’t civics nerds. In most cases, to become law, a bill must pass both houses of Congress with a simple majority (more than 50% of the vote) and be signed by the President. However, in the Senate, special rules state that any senator may speak as long as they want while a bill is being debated, and he or she cannot be forced to stop talking unless three-fifths of senators vote to force cloture (an end to the debate). This process is called a filibuster, and in practice it means that unless a bill has support from at least 60 out of 100 senators, the opposition can delay the bill indefinitely from coming to a vote, preventing it from becoming law. The filibuster is the kryptonite of slim Senate majorities, and it has a mixed history. In many cases, it has forced different sides to work together and craft compromises; in others, it has prevented anything from getting done where legislation was urgently needed. Love it or hate it, the filibuster is an integral part of Senate procedure and is not going anywhere anytime soon.

That brings us to now. As our government stands in 2017, the Republican Party controls the presidency, has a relatively large majority in the House, and a small majority (52-48) in the Senate. This means that aside from internal party divisions, the filibuster is the main thing preventing Republicans from passing most of their party agenda with no bipartisan compromise required. For their part, Senate Democrats, led by minority leader Chuck Schumer, have made it quite clear that they are prepared to use the filibuster extensively if the Republican Party tries to govern by itself.

This leaves Republican leaders with two options. They can try to craft legislation that could win the support of at least 8 Senate Democrats to gain a 60-40 vote to force cloture and block a filibuster. However, in doing so, they risk losing votes from the more conservative members of their own party. Alternatively, they can turn to an obscure, yet effective, Senate rule called “Budget Reconciliation.”

Budget Reconciliation (hereafter referred to simply as ‘reconciliation’) begins when Congress passes a budget resolution each year. Think of the budget resolution as a rough draft: it does not carry the force of law, but it establishes Congress’ priorities as it begins piecing together the actual budget. However, Congress may choose to include a “reconciliation directive” in the budget resolution. These are basically instructions asking one of the congressional committees to find a way to save X dollars by making some changes in program Y and then report back to Congress. The committee has until the end of the fiscal year to make recommendations for specific changes. Congress may then vote on the recommendations, which become law if they pass both the House and the Senate, as usual. But there is a critical detail in all of this: according to Senate rules, neither the budget resolution nor the final reconciliation vote requires three-fifths vote for cloture. In other words, reconciliation cannot be filibustered.

Knowing this, one might ask, “Why doesn’t the majority party just use reconciliation for everything?” The issue is that there are tight limits on when and how reconciliation can be used. Only one reconciliation directive can be passed with each budget resolution, which essentially means that reconciliation can only be used once per year. So while Senate majorities try to use the process when they can, it is by no means a sustainable method of passing an entire congressional agenda. Reconciliation has existed since 1974 and has been successfully used 20 times, enabling the passage of things like the Bush Tax Cuts for Republicans, and the Health Care and Education Reconciliation Act (a major budgetary addendum to Obamacare, which was not itself passed by reconciliation) for Democrats.

The other main restriction on reconciliation is something called the “Byrd rule,” named for the late West Virginia Senator Robert Byrd. The Byrd rule blocks two kinds of changes from being made via reconciliation. First, it prohibits enacting changes that are not directly related to the original reconciliation directive; for example, if the original directive asked for changes to a veterans’ pensions program, the committee could not come back recommending changes to Medicaid. And second, the Byrd rule only allows for changes that are deficit-neutral. All proposed reconciliation bills are reviewed by the Congressional Budget Office (CBO), and if the CBO review shows that the bill will cost more money than it saves over the next 10 years, it is not eligible to be passed via reconciliation.

So to recap: the reconciliation process allows controversial bills to avoid a filibuster, but it can only be used once a year for specific bills that save money. What does all that mean for you and me today?

Earlier this year, Republicans tried numerous times and eventually failed, to deliver on one of their longtime campaign promises: to repeal and replace Obamacare. Here are a few of the ways in which the months-long debate was shaped by the rules of reconciliation:

  • Republicans had to pass their repeal before September 30th, the end of the fiscal year. They are already planning on using their 2018 reconciliation bill on tax reform, and they may not have majorities in the House and Senate after the 2018 elections, so this may have been their only shot to use reconciliation for Obamacare repeal.
  • The original reconciliation directive requested changes to Medicaid, which meant that Republicans could only propose Medicaid-related changes in new bills, significantly limiting which parts of Obamacare they could alter or remove.
  • Most importantly, the Byrd rule meant that the repeal had to save money. You remember the Democrats’ argument that the variously proposed repeals would leave millions of people without healthcare? This is why. It’s hard to restructure Medicaid in a way that saves billions of dollars and still covers the same amount of people. The Byrd rule essentially backed Republicans into a corner where they could only propose unpopular bills.

In the near future, reconciliation will surely continue to affect our legislative process. The GOP faces the same hurdles on tax reform as it did on healthcare, and it may or may not be more successful this time. But several larger questions still linger: in the long run, will congressional Republicans continue trying to govern as one party, or will they be forced to cut deals with Democrats? And if they can’t cut deals, will they try, as President Trump has repeatedly urged, to abolish the filibuster altogether? Or if they do cut deals, will their own constituents feel betrayed and ditch them for more hardline, uncompromising legislators?

Republicans are in an extremely unenviable position right now. They technically hold all the cards (the presidency and both houses of Congress) and therefore want to avoid the appearance of compromising from a position of strength. However, slim margins and internal divisions are preventing them from getting almost anything done, causing them to appear incapable of governing. For now, Republicans have decided that reconciliation represents their best opportunity to thread the needle, to avoid the appearance of capitulation while still accomplishing something. Is this the correct strategy? We’ll find out at the ballot box on November 6, 2018.





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