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Will Congress Revamp Reconciliation to Quickly Pass Biden COVID Relief Plan?

January 26, 2021 by Dan McCue
The U.S. Capitol, Thursday, Dec. 24, 2020, in Washington. (AP Photo/Jacquelyn Martin)

WASHINGTON – It’s the buzzword of everyone wanting to bypass GOP resistance and pass President Joe Biden’s $1.9 trillion COVID-19 relief package, and it could upend decades of precedent when it comes to the federal budget process.

The word is “reconciliation,” and according to the Congressional Research Service, it is a special legislative process created as part of the Budget Act of 1974 to help lawmakers bring revenue and spending levels into conformity with the policies of a congressional budget resolution.

All reconciliation bills are basically a set of instructions that set cost or savings targets for specific committees of jurisdiction. The instructions cover everything including mandatory spending, revenue, and/or debt limit changes.

Typically, reconciliation is a two-stage process in which instructions are included in a budget resolution directing the appropriate committees of jurisdiction to develop legislation to achieve the desired budgetary outcomes.

Then, the resulting legislation is considered (usually as part of an omnibus bill) under expedited procedures in the House and Senate.

“Accordingly, reconciliation may be the most potent budget enforcement tool available to Congress for a large portion of the budget,” wrote the Research Service’s Megan S. Lynch in 2016.

For years, Senators used the reconciliation process to pass a wide range of policies unrelated to the federal budget, while circumventing the filibuster.

However, in the mid-1980s, the Senate adopted the so-called Byrd Rule — named for former Sen. Robert Byrd, D-W.Va. — to stop the practice, and five years later it was codified as a provision of the Omnibus Budget Reconciliation Act of 1990.

That provision, formally amending the 1974 Budget Act, made the Byrd Rule’s prohibition on including extraneous provisions in reconciliation bills permanent. But that’s not to say the lawmakers who passed the amendment didn’t leave themselves a little wiggle room.

Under certain circumstances, it’s still possible for the majority party in the House and Senate to adjust the Byrd Rule’s application without violating the rule itself.

What Would It Take?

Bearing in mind the Biden administration continues to hope for widespread bipartisan support for its COVID-19 relief plan, House and Senate Democrats continue to quietly lay the groundwork for a reconciliation-based plan to move the relief package through Congress.

So what would it take to advance this strategy?

First, the relevant House and Senate committees would have to be authorized to designate the $1.9 trillion federal outlay as mandatory spending, despite the fact the package includes hundreds of billions of dollars in spending that in normal times would be considered discretionary spending.

Once the spending is deemed mandatory, it will, in theory, be subject to reconciliation.

There is talk on Capitol Hill that a resolution granting the committees such authorization could be moved soon — in a matter of days rather than weeks.

Once adopted by committee, the package would then go to the floor, where reconciliation bills can pass with a simple majority vote.

This would enable them to avoid a Republican filibuster. Current filibuster rules require a super-majority of 60 votes to cut off debate in the Senate and bring legislative bills or other measures to a vote.

There had been talk of the 117th Congress eliminating the filibuster, but that talk died Monday after Sens. Joe Manchin, of West Virginia, and Kyrsten Sinema, of Arizona, both moderate Democrats, announced they were against such a move.

Almost all reconciliation bills are privileged in a number of ways. For instance, they place a 20-hour limit on debate in the Senate, include a built-in motion to proceed to the bill, and a strict germaneness test for amendments that occurs after regular debate has ended. 

How Do Reconciliation Instructions Work? 

The budget reconciliation process begins with the adoption of a concurrent budget resolution in both chambers of Congress that includes reconciliation instructions.

 The reconciliation instructions:

  • Identify the authorizing committee(s) tasked with reconciliation;
  • Specify the dollar amount of budgetary changes that must be achieved over designated time frames (usually the first year of the budget); and
  • Name the date by which the committee or committees must report reconciliation legislation. 

Reconciliation instructions may also direct the House Ways and Means Committee and the Senate Finance Committee to report legislation to change the limit on the public debt in accordance.

“While budget resolutions often assume and even suggest that committees include specific policies, these suggestions are not binding or enforceable. The budget resolution sets dollar targets, but the committees decide how these targets are met, substantively limited only by their jurisdiction,” notes the Committee for a Responsible Federal Budget, in a lengthy analysis it has released on the process.

If only one committee has reconciliation instructions, the reconciliation legislation reported by that committee goes directly to the House or Senate floor for consideration.

Often, instructions will span across multiple committees. In this case, each committee reports its bill to the Budget Committee, which in turn combines the individual bills into an omnibus measure to send to the floor for a vote. 

Whether Biden’s COVID relief bill goes to one or more committees is a decision chamber leaders will have to make before pressing the reconciliation button.

How Would Reconciliation Affect the Budget Deficit?

The federal government spent its way to a $3.1 trillion budget deficit in fiscal 2020, and since then Congress has passed an additional $900 billion coronavirus relief package.

Reconciliation bills are allowed to either decrease or increase the deficit over the time period covered by the budget resolution.

It is also possible for a reconciliation bill to contain provisions with costs as well as savings, as long as the net effect complies with the reconciliation instructions.

The Senate has tried to keep reconciliation from increasing the deficit, but the last serious attempt to do so was repealed in 2015.

Budget hawks argue that even without those restraints, reconciliation legislation cannot add more to the deficit than is allowed in the instructions under the budget resolution.

They note, however, that there is no limit on how costly these instructions can be.

Reconciliation legislation is also subject to a number of budget points of order.

For example, to avoid a 60-vote point of order, they must comply with the spending and revenue levels in the budget and abide by the Senate “pay as you go” (PAYGO) rule, which prevents legislation from adding to deficits.

“However, these rules can be changed – or exceptions added – in the budget resolution itself,” the Committee for a Responsible Federal Budget has said.

“As with any other bill, deficit increases under reconciliation are subject to the statutory PAYGO law, which does not allow net increases in the deficit over the course of a year or the following five-year and 10-year periods,” the committee continued. “An exclusion from the Senate PAYGO rule and statutory PAYGO as part of the reconciliation bill would be subject to a 60-vote point of order. 

“Finally … provisions in a reconciliation bill that increase the deficit beyond the period covered by the budget resolution are subject to a 60-vote point of order under the Byrd Rule unless the costs are offset by savings from other provisions in the same title of the bill,” the group said.

A Second Look at the Byrd Rule

The Byrd Rule provides a “surgical“ point of order that strikes any provisions in violation without blocking the entire bill.

But like all Senate rules, it is not self-enforcing. Senators must take the initiative to enforce it, says R Street, a non-profit public policy research organization, that recently released a long “explainer” on the reconciliation process.

They do so by raising points of order against provisions in reconciliation bills on the basis that they are extraneous according to one, or more, of the Byrd Rule’s six tests:

1. The provision does not produce a change in outlays or revenues;

2. The net effect of the provisions reported by the committee writing the title containing the provision is that the committee fails to achieve its reconciliation instructions;

3. It is not in the jurisdiction of the committee with jurisdiction over said title or provision;

4. It produces changes in outlays or revenues which are merely incidental to the non-budgetary components of the provision;

5. It increases net outlays or decreases revenues during a fiscal year after the fiscal years covered by such reconciliation bill…and such increases or decreases are greater than outlay reductions or revenue increases resulting from other provisions in such title in such year;

6. It recommends changes to the Social Security program (old age and disability).

Lawmakers have reportedly already consulted with the Senate parliamentarian to address potential Byrd rule challenges. The status of those conversations is unknown to anyone but the participants.

The Senate’s presiding officer is charged with evaluating disputed provisions in reconciliation bill debates to determine whether they comply with the Byrd Rule and are therefore eligible to be included in the reconciliation bill. 

Yet as noted, the rule does not always provide clear guidance on how the presiding officer should apply it. It is appropriate for senators to determine how to apply the Byrd Rule in specific situations in which those rules are silent. 

Given this, senators and their presiding officer are under no obligation to follow the parliamentarian’s procedural advice in determining whether the budgetary impact of a disputed provision in a reconciliation bill is “merely incidental” to its underlying policy impact. 

Any advice provided by the parliamentarian is necessarily limited by the same shortage of precedents that also complicates the presiding officer’s ability to discern the meaning of “merely incidental” by referring to past practice. 

Other Restrictions on Reconciliation

The Senate parliamentarian has ruled in the past that a budget resolution can only provide for one reconciliation bill each for revenues, spending, and debt limit.

If a reconciliation bill has both spending and revenue provisions, no other reconciliation bill affecting spending or revenues is allowed.

Reconciliation bills cannot change the budget process either, such as by establishing or modifying discretionary spending limits, because the changes themselves must directly affect spending or revenues without relying on subsequent congressional action.

The Senate parliamentarian has also ruled that a reconciliation bill cannot create or amend any type of fast-track procedure for legislation limiting debate time in the Senate.

Additionally, the Committee for a Responsible Federal Budget notes, reconciliation legislation seems unlikely to be able to be used for specified changes to discretionary spending. This includes the authorization of new appropriations, the passage of appropriations bills themselves, or special one-time appropriations such as those included in recent COVID relief bills. In many cases, lawmakers could avoid this prohibition by classifying and structuring discretionary spending as mandatory spending.

How Reconciliation Could Be Used for COVID Relief

According to the Committee for a Responsible Federal Budget, reconciliation can be used to enact further economic relief or stimulus in response to COVID-19 pandemic but with some limitations.

“Due to the Byrd rule, a COVID relief package could not add to the deficit beyond the budget resolution window, could not change Social Security, and could not include policies that are non-budgetary in nature. In addition, COVID relief enacted through reconciliation would likely preclude the use of discretionary spending,” the organization says.

It goes on to point out that many COVID relief policies under discussion would easily meet these criteria.

For example, a temporary expansion and extension of unemployment benefits, one-time rebate checks, an increase in Paycheck Protection Program funding, or tax credit expansions could all be enacted under reconciliation.

Other COVID relief policies could likely be enacted under reconciliation with some adjustments.

For example, the committee says, lawmakers could still issue aid to states and dedicate resources toward the COVID response itself, but likely not through the discretionary appropriations used in recent COVID relief bills. Instead of new discretionary appropriations, reconciliation would have to rely on mandatory allocations or mandatory formula-based funding.

But the Committee for a Responsible Federal Budget says a final category of COVID relief would have a more difficult time making it through reconciliation.

“Based on current rules and precedent, it is unlikely that policymakers could raise the minimum wage or mandate that businesses offer paid sick leave through reconciliation. Changes to various rules and requirements for existing programs such as the Paycheck Protection Program might also be difficult to pass,” it says.

Even in these cases, however, the committee says policymakers may be able to identify workarounds or persuade (or possibly even overrule) the parliamentarian to rule such policies as warranted.

The Committee went on to say many elements of President Biden’s agenda beyond COVD-19 relief could also be enacted through reconciliation.

“In particular,” it says, “nearly all of his proposed tax increases – other than changes to the Social Security payroll tax or some tax compliance measures – would qualify. 

“Many spending increases, especially expansions to existing programs, would also qualify. However, these increases could not be enacted on a permanent basis unless fully offset over the long-run by the same committee proposing the spending,” the committee says.

“Changes to discretionary spending would be more challenging to enact through reconciliation, though in many cases could be done by adjusting how the spending is structured,” the committee continues. “A major infrastructure package, for example, would likely need to be composed of mandatory spending and tax provisions rather than new discretionary appropriations.”

Permanent increases in infrastructure spending would be particularly challenging since the transportation committees have jurisdiction over only a relatively limited set of potential offsets, and the financing is typically under the jurisdiction of the tax-writing committees.

“Even one-time or temporary spending increases could present some challenges, since infrastructure spending tends to take several years to be fully spent and thus could increase deficits beyond the budget window even if allocated in the near term,” the committee says. 

It goes on to recommend that for COVID relief, policymakers should consider the size of the economic output gap they are seeking to fill, as well as the potential effects of any package on output, employment, poverty, household income, business stability, public health, and long-term growth. 

An output gap indicates the difference between the actual output of an economy and the maximum potential output of an economy expressed as a percentage of gross domestic product.

“Other spending, and especially permanent spending, should be fully offset in light of today’s high and rising debt levels,” the committee says. “Ideally, they would go further and use reconciliation as an opportunity to put in place revenue increases and cost reductions to slow the growth of debt over the long term.”


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