• August Recess Special "Back To School" Series
  • August 10, 2015
  • Law Firm: McDonald Hopkins LLC - Cleveland Office
  • Since we are embarking on the August recess— the time when both chambers are out of session— we thought it might be a good time to take the opportunity to explain a little bit more about some of the more complex processes on the Hill. Think of it as a “back to school” primer on how Washington works. This week, we explore how the “reconciliation” process works. There has been a lot of talk of how Hill Republicans might use reconciliation to go after the president’s healthcare law or his immigration executive orders or for comprehensive tax reform, but exactly how does reconciliation work and what are the limitations?

    The budget "reconciliation" process

    The Congressional Budget Act of 1974 lays out a formal framework for developing and enforcing a “budget resolution.” An optional procedure, which Congress has employed from time to time, is known as “reconciliation.”

    Originally, reconciliation was designed as a deficit-reduction tool. However, it was used to enact tax cuts several times during the George W. Bush Administration, thereby increasing projected deficits. Senate rules now prohibit using reconciliation to consider legislation that would increase the deficit; House rules prohibit using it to increase mandatory spending.

    A reconciliation bill is a single piece of legislation that typically includes multiple provisions (generally developed by several committees), all of which affect the federal budget — whether on the mandatory spending side, the tax side, or both. A reconciliation bill, like the budget resolution, cannot be filibustered by the Senate, so it only requires a majority vote (51) to pass, rather than the traditional 60 votes.

    If Congress decides to use the reconciliation process, language known as a "reconciliation directive" must be included in the budget resolution. The reconciliation directive instructs committees to produce legislation by a specific date that meets certain spending or tax targets. The Budget Committee then packages all of these bills together into one bill that goes to the floor for an up-or-down vote, with limited opportunity for amendment. After the House and Senate resolve the differences between their competing bills, a final conference report is considered on the floor of each house and then goes to the president for his signature or veto.

    There are limitations to using reconciliation. In particular, the so-called "Byrd rule" provides a point of order against any provision of a reconciliation bill that is “extraneous” to the purpose of altering entitlement or tax law. If a point of order is raised under the Byrd rule, the offending provision is automatically stripped from the bill unless at least 60 senators vote to waive the rule. This makes it difficult, for example, to include any policy changes in a reconciliation bill unless they have direct fiscal implications. Changes to Social Security also are not permitted under the Byrd rule, even if they are budgetary.

    In addition, the Byrd rule bars any entitlement increases or tax cuts that cost money beyond the five (or more) years covered by the reconciliation directive, unless other provisions in the bill fully offset these costs.