All I Want for Christmas is…Reconciliation Reform

Today marks the third anniversary of the signing of the Tax Cuts and Jobs Act of 2017 into law.  Enactment of this legislation was a major policy victory for President Trump during his first year in office and for congressional Republicans. It was also the sixth time in seventeen years that the majority party in Congress—the party in control of both chambers—used the budget reconciliation process to engage in fiscal mismanagement.  

Created by the Congressional Budget and Impoundment Control Act of 1974 (CBA), budget reconciliation is an optional component of the annual budget process. It is a tool Congress can use to bring spending and revenue levels in line with those established in the annual budget resolution.  

A budget resolution sets fiscal priorities and goals for an upcoming fiscal year, but does not carry the force of law. Accordingly, separate legislation is needed to implement the spending and revenue levels it establishes. This is where the reconciliation process comes into play.  

Reconciliation begins when Congress adopts a budget resolution that includes reconciliation directives. These instruct one or several committees in either the House or Senate to report any legislation that makes budgetary changes by a certain amount over a particular period of time. They also determine the date by which this legislation must be reported. If reported, the legislation is then considered on the House and Senate floors under expedited procedural rules.  

The reconciliation process can be a useful tool for fiscal responsibility. Indeed, it has been used eighteen times since 1979 to pass legislation that reduced budget deficits. For example, the Omnibus Reconciliation Act of 1993 reduced the deficit by $888 billion over a five-year period (in real 2017 dollars). Congress also used it once to pair and then pass two pieces of legislation that, when combined, reduced the deficit by $92 billion through reductions in spending and revenue levels.  

In more recent years, however, Congress has used the reconciliation process 6 of the last 9 times to pass legislation that substantially increased budget deficits—most notably through the passage of several major tax bills (the Taxpayer Refund and Relief Act of 1999; the Marriage Tax Relief Reconciliation Act of 2000; the Economic Growth and Tax Reconciliation Act of 2001; the Jobs and Growth Tax Relief Reconciliation Act of 2003; the Tax Increase Prevention and Reconciliation Act of 2005; the Tax Cuts and Jobs Act of 2017). The Economic Growth and Tax Reconciliation Act of 2001, for example, increased the deficit by $1.85 trillion over a ten-year period. 

On each of these occasions, the majority party in Congress designed their budget-busting legislation merely to serve political goals and thus, for the most part, passed it without much support from the minority party. The Tax Cuts and Jobs Act of 2017 is a great example, as the $1.8 trillion legislation (as last estimated by the CBO) benefits red states more than blue states and passed without a single Democrat’s favorable vote. 

Certainly, expenditures of taxpayer money—especially of such size and impact—should not function as political favors in exchange for party loyalty. Accordingly, the following changes should be made to prevent the majority party in Congress from using the reconciliation process to engage in fiscal mismanagement for partisan ends.   

First, section 310(a) of the CBA, which outlines the reconciliation process, is currently silent on the issue of whether it can be used to increase or decrease deficits. This leaves that decision to Congress and the president. It should therefore be amended to specify that reconciliation can be used only for deficit reductions. 

Second, section 310(e) subsection (2) of the CBA could be amended to remove filibuster protection from any reconciliation bill that increases the deficit. Barring a scenario in which the majority party in Congress holds 60 or more seats in the Senate, this would force the majority to compromise with the minority party. 

Third, that same section could also be amended to provide filibuster protection for a reconciliation bill only if that bill is supported by at least one-third of the minority party in the Senate. This reform, in particular, could promote bipartisan lawmaking in the realm of economic policy, as reconciliation could be used to pass legislation only if a substantial majority or a cross-partisan coalition that comprises a simple majority in the Senate is in support.  

However, if curbing this behavior outright is unattainable, there are other reforms that would at least limit its impact. For example, Section 313(b), which outlines extraneous matter related to the “Byrd Rule,” currently allows budget-busting legislation to remain in effect long after the party that passed it loses control of Congress, as is the current case with the Tax Cuts and Jobs Act of 2017. But, this rule could be amended to place a two-year cap on any reconciliation legislation that causes an increase. This would limit the impact of any such legislation only to the time period when the passing party is in control of Congress.  

For the most part, these days, the reconciliation process serves only as a tool for the majority party in Congress to achieve their own, self-interested ends—on the collective taxpayer dime. Thankfully, there are a multitude of avenues that could, if not curb, at least constrain this behavior. As post-pandemic economic recovery looms and expenditures continue to increase, reformers in Congress should seriously consider these options sooner rather than later.