Highlights
Introduction
With a Republican governing trifecta looking increasingly likely, policy observers should get ready to hear one word a lot in the coming days: “reconciliation.” Reconciliation is a Congressional procedure that was first invoked in 1980 to reduce deficits. Since that time, it is increasingly a parliamentary silver bullet that allows a unified government to enact budget-related legislation with a simple majority. This process allows lawmakers to avoid the 60-vote threshold that must normally be hurdled to overcome a filibuster in the Senate. The catch is that reconciliation comes with several strings attached that limit its utility to lawmakers. More recently, one of those limitations loosened. In 2017 and 2021, Congress invoked this process twice in the same calendar year. If this recent practice continues, that means that a Republican-controlled Congress can reasonably deploy this process three times before the November 2026 midterm elections.
Reconciliation
Reconciliation is among the most powerful procedural tools available to policymakers because bills passed through the reconciliation process are considered under special rules that can overcome a filibuster in the Senate. These rules limit the time allotted for debate, the scope of amendments, and the number of votes needed for passage. In the House, simple majorities can attach similar conditions to most legislative matters, so the unique parliamentary characteristics of reconciliation legislation are largely intended to override the filibuster in the Senate.
The reconciliation process is a feature of the Congressional Budget Act of 1974, which sets forth the timeline and procedures for how Congress should consider tax and spending legislation. Importantly, this acts as a limitation on the types of policy changes that can be enacted through this process. In general, reconciliation can only be used to change tax and spending laws. Arcane Congressional rules, such as the Byrd rule, work to limit the scope of legislation that can be considered under reconciliation
The Congressional budget process assumes that Congress, irrespective of its composition, formulates, debates and eventually agrees to a budget resolution that sets spending limits for the upcoming fiscal year (which begins October 1). Congress has long since departed from this tradition. Debating budget resolutions, particularly in the Senate, consumes valuable floor time and can expose members to difficult votes. Spending limits can be established through negotiation outside of the budget process, sparing members the hassle and futility of a budget resolution debate.
Today, the budget resolution is still important as the necessary first step in the budget reconciliation process. To begin this process, both Chambers must pass an identical budget resolution that includes reconciliation instructions to Congressional Committees. These instructions must include four key elements: 1) the committee to which the instruction is directed; 2) the deadline by which the relevant committee or committees must comply; 3) the specified dollar amount change to either revenues, outlays, the deficit, or the public debt; and 4) the time period over which those budgetary changes must be achieved.
Once a resolution with these instructions is agreed to by Congress, instructed Committees develop and report legislation that meet the budget targets set forth in the reconciliation instruction. For example, as part of the enactment of the Tax Cuts and Jobs Act (TCJA) in 2017, Congress first adopted a budget resolution (H. Con. Res. 71) that, among other directives, instructed the Senate Finance Committee to “report changes in laws within its jurisdiction that increase the deficit by not more than $1,500,000,000 for the period of fiscal years 201 8 through 2027.” Essentially this was the Finance Committee’s allowance to develop tax legislation that cost no more than $1.5 trillion. Along with a similarly instructed Ways and Means Committee in the House, the Finance Committee developed the TCJA, which ultimately passed the House and Senate through the reconciliation process. This process was used twice under the current administration: first to enact the American Rescue Plan of 2021, and then to enact the Inflation Reduction Act of 2022.
How Many Bites at How Many Apples?
In the modern Congress, two clear themes for reconciliation measures emerge – they are partisan, and they tend to be relatively complex fiscal measures. When circumstances afford (specifically unified government), reconciliation offers an administration and Congress the opportunity to deliver partisan victories – such as tax reform for Republicans and climate policy for Democrats. If given the opportunity, one could imagine Congress relying exclusively on this process. However, significant limitations attach to the reconciliation process. In addition to the limitation to budget-related legislation, there is also a limit on how many reconciliation bills Congress may consider for a given budget resolution.
Congress may only consider one bill for each of the fiscal changes provided for in the reconciliation instructions. Thus, a budget resolution provides Congress with only one “bite at the apple” each for making changes to revenues, spending, and the debt limit through reconciliation, for a maximum of three reconciliation bills.
Consider the instruction to the Senate Finance Committee to report legislation that increased the deficit no more than $1.5 trillion over the budget window. Because the TCJA included changes to both revenue and spending, the legislation precluded any further reconciliation legislation that would make any tax or spending change. Because the budget resolution did not include an instruction to increase the debt limit, the third form of reconciliation instruction, all avenues for reconciliation legislation under that budget resolution were exhausted. Thus, the maximum number of reconciliation bills that may spin off from a budget resolution is three, but it is increasingly common for congress to only enact a single measure that changes both taxes and spending while forgoing changes to the debt limit.
It is typically the case that when Congress considers a budget resolution, it only does so once in a calendar year. Budget resolutions nominally set spending levels for the upcoming fiscal year: they are generally prospective. However, during the Trump administration and the Biden administrations, Congress considered two budget resolutions in the same calendar year, which gave those Congresses two opportunities to enact reconciliation in the same calendar year.
When a new administration and Congress takes office, the fiscal year is already several months along. Under the formal budget process, Congress would have already agreed to a budget resolution for that fiscal year and enacted appropriations for the same. However, it is far more common that Congress will not have passed a budget resolution or full year appropriations when the new Congress and president are sworn in. Such was the case in calendar years 2017 and 2021. Congress had not enacted an FY2017 or FY 2021 budget resolution for those respective years. Thus, policymakers reasoned, they could take up a budget resolution even though the fiscal years were months along. In January of 2017, Congress agreed to a budget resolution for FY2017, S. Con. Res. 3, which allowed the Congress to consider the Affordable Care Act repeal bill, the American Health Care Act, under reconciliation procedures. In October of 2017 (with FY2018 begun), Congress agreed to a budget resolution for FY2018, H.Con.Res.71. This budget resolution allowed Congress to consider and enact the Tax Cuts and Jobs Act under reconciliation procedures.
Congressional Democrats pursued a similar approach during the Biden administration. In February of 2021, Congress adopted an FY 2021 budget resolution, S.Con.Res. 5, solely as a vehicle for reconciliation. The result was the American Rescue Plan Act, which was passed using expedited procedures and became law in March of 2021. In August of 2021, just six months later, Congress adopted a second budget resolution, S.Con.Res 14, this time covering FY2022. Again, the primary purpose for this legislation was facilitating a future reconciliation bill, which became the Inflation Reduction Act. The House passed this measure in November of 2021, while the Senate did not pass it until the following year.
The upshot of this recent practice is that Congress can consider two pieces of reconciliation legislation in the same calendar year, provided they are considered pursuant to different budget resolutions. In a two-year period, specifically the period before the midterms of any incoming Congress and administration, Congress can consider three budget resolutions and invoke reconciliation procedures. As budget resolutions can give rise to up to three reconciliation measures, this means a new Congress can get three opportunities each to change taxes, spending, and the debt limit – for a total of 9 bills – before the midterms. It is worth noting that there is also an obscure process – budget revisions under section 304 of the Budget Act – that may allow yet more opportunities for Congress to invoke reconciliation in a given year. However, this approach has not been tested and may be limited in its application. In practice, a maximum of three comprehensive tax and spending bills is likely the most Congress could practicably undertake before the midterms.
Conclusion
Budget reconciliation is a powerful legislative tool that can be used to overcome the filibuster in the Senate. Increasingly, this tool is used to secure legislative victories for largely partisan policy goals. With a unified Congress, the Trump administration, as was the case previously, has the opportunity to use reconciliation to enact budget-related policy with simple majorities. Under recent practice, the next Congress will have one more opportunity to invoke this tool – and up to three such opportunities before the midterms.