Monday, December 05, 2016

How Reconciliation Works: What it Can and Cannot Do

Guest Blogger

David Super

     After President Reagan demonstrated the enormous, underappreciated power of reconciliation to pass unpopular legislation, the Senate imposed stricter constraints on what reconciliation bills could contain.  These limits are likely to prove crucial in coming legislative battles.  This post, the second of three, explores in depth the rules governing reconciliation.  The first post offered an overview of congressional procedure; the third considers how congressional Republicans can leverage their procedural advantages to enact much of their program. 

     Most of the limits on reconciliation legislation are enforceable with points of order that require sixty votes to overcome.  In other words, provisions violating these limits that could not muster the sixty votes to defeat a filibuster cannot evade a filibuster by moving through reconciliation.  That being said, senators routinely reach agreements not to raise valid points of order.  For example, when a reconciliation bill’s sponsors might plausibly be able to garner sixty votes to waive a particular point of order, opponents may agree to a modification of the objectionable provision or trade the removal of one problematic provision for their forbearance with respect to another. 

     Limits on reconciliation fall into four main categories.  First, reconciliation legislation is only possible to the extent authorized and directed by congressional budget resolutions.  Under the process envisioned in Congress’s rules, this concurrent resolution opens the annual budget season.  It contains overall ceilings on discretionary appropriations and on direct spending within the jurisdiction of each of Congress’s authorizing committees as well as floors on the revenues provided for in tax legislation.  It also typically includes assumptions about how much will be spent in each of an array of broad categories, or “functions”, of the budget.  The Budget Committees that draft the budget resolution may or may not have particular programmatic changes in mind to reach the targets they set, but these are rarely specified and would not be binding if they were.  The budget resolution also may, but need not, contain “reconciliation instructions” to one or more authorizing committees, as discussed below.

     After the budget resolution is drafted in the committee, it comes to the floor under expedited procedures, limiting the hours of debate, narrowing the scope of permissible amendments, and preventing a filibuster in the Senate.  Upon passing their own versions of the budget resolution, conferees from the House and Senate Budget Committees are expected to meet in conference committee, hammer out a joint version, and return it to their respective chambers for final passage.  Because it does not have the force of law, it is not send to the President for signature.  Instead, it functions as a specialized rulebook for fiscal legislation during that session of Congress, with many of its rules enforced through super-strong points of order that, once raised on the Senate floor, require sixty votes to overcome.  In an idealized world, once a concurrent budget resolution is agreed to by both houses, the appropriations committees begin work on their annual spending bills within the caps the resolution has set and the authorizing committees can go to work recrafting programs in their jurisdiction knowing what spending targets they must meet.

     The budget resolution is important not just as the starting gun in the race to move fiscal legislation but because it largely sets the terms of the resulting debate.  It can give “reconciliation instructions” to committees with jurisdiction over revenues or direct spending.  These instructions are ceilings for the spending (or floors for the revenue) that may be allowed under legislation reported by these committees.  If a committee fails to report out legislation cutting spending down to the level stated in its reconciliation instruction, the chair of the Budget Committee has the opportunity to seek to amend the non-conforming committee’s proposal to achieve the specified targets.  This threat commonly prompts Members in other committees to vote for legislation they oppose (or at least to use the threat of the Budget Committee adding badly-designed cuts to vote in their own committees for legislation that hurts their constituents or contributors).   Similarly, amendments on the Senate floor generally are not in order if they would cause any committee to breach the level of funding specified for it in the budget resolution.  Thus, amendments to shift funds from farm price supports into health care subsidies for low-income people are likely never to reach a vote because, even though they would not increase the total deficit, they would cause spending under the Finance Committee’s jurisdiction to exceed levels permitted in the budget resolution.  Senators can offer an amendment merely to strike a particularly offensive provision, but the likelihood that its savings would then be replaced by an equally obnoxious cut deters some senators from offering such amendments.

     This past year, like most recent years, Congress did not agree upon a concurrent budget resolution.  House and Senate Republican leaders did not see benefit in doing so to justify the amount of arm-twisting of their own Members that would have been required to paper over differences about how deeply to cut spending.  This omission, however, turns out to present them with an unusual opportunity.  Ordinarily, only one budget resolution is passed in each session of Congress, and each budget resolution can authorize no more than one reconciliation bill affecting spending and one reconciliation bill affecting revenues (or a single bill that does both – as well as one debt limit bill).  But because no concurrent budget resolution has passed for the current fiscal year (FFY 2017), congressional Republicans reportedly plan to enact one in early January to allow the gutting of the Affordable Care Act on reconciliation legislation.  Later in the spring, they then will pass another budget resolution, this one for fiscal year 2018, to allow additional rounds of tax and spending reductions.  Thus, we could see two (or more) reconciliation bills moving within a few months of one another this year. 

     Second, the “Byrd Rule” (named for the late Senate Majority Leader and Appropriations Chairman) confines reconciliation legislation to making changes in revenues and in “direct spending programs    (commonly approximated as “entitlements”).  Thus, for example, amendments to civil rights, immigration, or environmental legislation would generally be impermissible on a reconciliation bill. 

     Although the definition of revenues is fairly straightforward, understanding the limitation to direct spending programs requires an appreciation of a fundamental division in the structure of the federal budget that built up over time and was formalized in its present form under the Budget Enforcement Act of 1990.  Federal spending generally is divided between two broad categories:  “discretionary” programs, which depend on annual appropriations, and “direct spending” programs, for which non-appropriations legislation compels spending.  Thus, for example, although the Low-Income Home Energy Assistance Program (LIHEAP) operates under legislation passed by the House and Senate Labor Committees, without funding in annual appropriations bills, it would have no money to help low-income people pay their heating bills.  By contrast, the legislation creating the Supplemental Security Income (SSI) program for low-income people with disabilities or over age 65 operates under legislation (Title XVI of the Social Security Act) defining who is eligible and directing the Commissioner of Social Security to make payments to those eligible people.  If the Commissioner ever failed to do so (for lack of appropriations or otherwise), those whom Title XVI makes eligible could sue for their benefits in the Court of Federal Claims under the terms of Title XVI.  The Commissioner would have no defense, and the resulting judgment would be paid under the Judgment Fund, which has its own permanent, uncapped appropriation.

     Thus, reconciliation can reduce expenditures by amending the terms of statutory entitlements in direct spending legislation such as Title XVI or the National School Lunch Act.  It cannot, however, change discretionary programs either by changing the terms of the legislation that authorizes them or by lowering or eliminating their appropriations.  Because essentially all of the Defense Department’s budget is discretionary, reconciliation legislation cannot cancel weapons systems or rein in our overseas involvements.  On the other hand, discretionary programs that some Republicans have criticized harshly, such as funding for Planned Parenthood, do not face direct threats from reconciliation.  (As discussed below, however, they face extreme vulnerabilities elsewhere.)

     Understanding that almost anything can be dressed up as a direct spending or revenue change, the Byrd Rule also creates a sixty-vote point of order against any provisions in a reconciliation bill whose revenue or spending effects are “merely incidental” to its non-budgetary purposes.  Because Republican Senate Majority Leaders have some history of discharging parliamentarians whose rulings they dislike, the scope of this limitation in practice is difficult to predict.

     Third, reconciliation legislation may not change programs under Title II of the Social Security Act, which governs Old-Age, Survivors’ and Disability Insurance (OASDI).  This rule was included to remove the temptation to finance tax cuts or other spending with increases in the retirement age or cutbacks in benefits to people with disabilities.  The point of order against Social Security cuts is a particularly powerful one, bringing down the whole legislation (rather than just the offending provision).  On the other hand, it does not limit changes in other titles of the act, including those governing Medicare, Medicaid, and SSI.

     And fourth, reconciliation legislation cannot, in aggregate, increase the deficit in years beyond those covered in the budget resolution.  Because budget resolutions typically cover ten years, this can be an obstacle to enacting permanent tax cuts and spending increases.  Accordingly, Democrats designed the Affordable Care Act in 2010 to reduce the deficit both during the first ten years and subsequently.

     One might think that, if the purpose of reconciliation was to overcome obstacles to deficit reduction, its procedures would not be available to enact legislation that would increase the deficit.  That was the original understanding, but congressional Republicans dropped that limitation to pass President Bush’s budget-busting tax cuts in 2001 and 2003.  Democrats reinstated the prohibition on deficit-increasing reconciliation bills when they regained control of Congress in 2007, but Republicans removed those rules again when they took back the Senate in 2015.  Thus, the prohibition on reconciliation legislation that increases long-term deficits is the only remaining restriction on budget-busting.

     This limitation has had an important impact.  It forced congressional Republicans to impose a sunset on President Bush’s tax cuts.  After several extensions, President Obama ultimately was able to trade the termination of a few of the most egregious for making the rest of them permanent.  Had the cuts been permanent in the first place, he would have had no such leverage.  More generally, this rule can put a damper on tax cuts that take the form of allowing the very rich essentially to pre-pay taxes at a steep discount, producing an apparent increase in revenues in the first few years while much more severely reducing revenues in the long term. 

     In my third and final post, I will consider in more detail how these procedures will facilitate enactment of congressional Republicans’ agenda in the coming months and years.

David Super is Professor of Law at Georgetown Law Center. You can reach him by e-mail at David.Super at

Older Posts
Newer Posts