Five Facts on Budget Reconciliation

There has been considerable coverage of efforts by President Biden and congressional Democrats to enact Biden’s “Build Back Better” agenda through the budget reconciliation process, but little about what reconciliation actually is. Here are five facts on budget reconciliation.

  1. The budget reconciliation process was created by the Congressional Budget Act of 1974.

Reconciliation grew out of rising concerns about deficits and increasing presidential control of the budget process, which is constitutionally the prerogative of Congress. Charles Schultze, a former director of the Bureau of the Budget (the predecessor to today’s Office of Management and Budget), proposed the creation of a “final budget reconciliation bill,” a new type of legislation that would make sure that spending bills passed by each committee fell within overall spending targets adopted by Congress.

  1. Reconciliation was first used in 1980 and has been successfully used a total of 22 times.

The new budgetary power was not used until 1980, when President Carter signed a reconciliation bill that cut the overall federal budget by about $8 billion. President Reagan was the first to make regular use of reconciliation. In all, reconciliation was successfully used seven times during Reagan’s presidency — nearly one-third of all uses of the procedure.

  1. The scope of reconciliation was limited in 1985 under the “Byrd rule” that remains in force today.

President Reagan had hoped to use reconciliation even more broadly. During his first term, Congress passed reconciliation bills containing provisions that did not directly relate to the budget. Sen. Robert Byrd (D-WV), then the minority leader, led passage of an amendment to strike “extraneous” amendments from reconciliation bills. In 1990, Congress permanently adopted the “Byrd Rule.” The rule bars “measures with no budgetary effect” from being considered through reconciliation, which is commonly understood to mean measures that don’t directly impact taxing or spending. The Senate parliamentarian has the authority to determine whether a proposal meets this test.

  1. Until 1997, no successful reconciliation bill increased the federal debt.

The first 13 reconciliation bills to be signed into law all reduced the deficit through spending cuts or tax increases. The first significant reconciliation bill to increase the debt was the $1.35 trillion tax cut ($2.1 trillion in today’s dollars) enacted by President George W. Bush in 2001.

  1. The American Rescue Plan, signed into law in March, was the biggest-ever spending bill passed through reconciliation.

President Biden’s $1.9 trillion American Rescue Plan passed the Senate 50-49 along party lines in March. President Trump’s Tax Cuts and Jobs Act, which passed the Senate 51-49 in 2017, has been estimated as likely to grow the national debt by $1.9 trillion-$2.2 trillion.


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