What is budget reconciliation anyway?


If you had asked me in 2005 to define budget reconciliation, I might have assumed that you were talking to me about reconciling my personal budget.

The truth is, fiscal reconciliation is all about “reconciling” the federal budget.

Sit Gen Z (and maybe a few Millennials): the rest of us remember the days you’d sit down with your checkbook, monthly receipts (yes, paper receipts), bank statement, your budget and a calculator. You would compare your checkbook balance to your monthly receipts, record your expenses, calculate your remaining balance and compare it to your budget. Then over the next month, you would have a reconciled statement, which would tell you how much money you had left and if you needed to cut back on spending or if your savings account had just grown.

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Over the past few days, there has been a lot of talk about budget reconciliation as Democrats took control of the White House and both houses of Congress. Because I participated – firsthand – in the 2005 budget reconciliation, I felt the time was right to offer a brief introduction, especially for a generation who may never have come together to reconcile – in paper and pencil – your own budget.

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For history buffs, Reconciliation was created by the Congressional Budget Act of 1974 and allows Congress to review – quite quickly – tax law, spending law, and debt resolution law. There have been over twenty budget reconciliations enacted since 1980. (The Congressional Non-Partisan Research Service (CRS) has prepared a long history of reconciliation for anyone looking for a little read ahead of the inauguration.)

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If Congress decides to use reconciliation legislation to process expenses, it can only be used to process mandatory expenses. Mandatory expenses are also referred to as “eligible” expenses, or funds used for programs that are required – or permitted – by law. Some more well-known examples of eligibility programs include Medicare, Medicaid, Social Security benefits, parts of the Pell Grant program, and SNAP (or food stamps). The other part of the federal budget is “discretionary” spending, which Congress controls through the annual appropriation process. Reconciliation is not used to process discretionary spending.

For the fools of Senate procedure: in the Senate, reconciliation bills are not systematically obstructed and the scope of amendments that can be proposed to the bill is limited, giving the controlling party (in this case, Democrats) a chance to advance their political agenda.

This brings us to the last gossip in Washington – how to start the process of reconciliation in Congress.

Now, suppose the House and Senate – both under Democratic leadership – want to proceed with reconciliation. In this case, they must come to an agreement on a budget resolution that includes “reconciliation instructions” or directions to congressional committees that have mandatory spending programs in their jurisdiction. By a specific date, congressional committees that have received “instructions” must deliver their proposal to House and Senate leadership.

To meet their deadline, congressional committees must convene their members to talk (or debate) about mandatory spending programs that they will modify to meet “instructions” set out by congressional (in this case, Democratic) leadership. Committees are instructed to increase or decrease mandatory spending by a certain amount over a certain period, increase or decrease revenue by a certain amount over a certain period, or increase or decrease debt public of a certain amount. It is up to each committee that has mandatory spending in its jurisdiction to decide what changes to make to these programs to meet their “direction.” Once each committee has voted on the changes it will undertake to achieve its goals, it will refer its recommendations to the appropriate budget committee in its chamber.

At this point, budget committees consolidate all of the committee’s recommendations into one major bill, which will then be considered by the full House and the full Senate. Often, House and Senate committees can differ in what legislation they amended to achieve their prescribed objectives. The House and Senate will then appoint a “conference committee” made up of representatives and senators chosen to negotiate differences in the approaches of the chambers. The “conference committee” will work on a resolution on a single bill which can then be voted on by each chamber.

After each chamber votes on the final bill – and if passed, it will be forwarded to the president for signature.

And There you go! The reconciliation is over!

In my experience in 2005, fiscal reconciliation was used by Republican leaders to enact deficit reduction legislation. However, reconciliation has also been used to decree tax cuts to increase Republicans’ deficits. That is, until 2007, when Democrats took control of both houses and banned the use of reconciliation for this purpose. And then the rules changed again in 2011, and then again in 2017. For anyone interested in earning anecdotes on Congressional Budget Reconciliation: The House Budget Committee has a great historical tale.

Bottom line: President-elect Biden and the new leaders of the democratically controlled House and Senate have all spoken of using reconciliation as a way to meet the pressing fiscal needs of the pandemic and the resulting economic downturn. Keep in mind that the only programs that will be affected by reconciliation will be these “rights,” which are few in number, but which make up a significant portion of the federal budget and affect every American in one way or another. Therefore, as we will all be affected by this accelerated legislative process, I recommend that the term “reconciliation” become your common term for 2021.

Pencils down.



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