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Thought Leadership

Budget Reconciliation


Budget reconciliation is a procedure created in 1974 for making changes in federal policy to meet fiscal guidelines set by the U.S. Congress. The process includes a limit of 20 hours of debate. It should be noted that reconciliation bills cannot be blocked by filibuster (the right of an individual to extend the debate) in the Senate and need only a simple majority to pass. The process is hence attractive enough to whichever party that controls the Senate. However, reconciliation comes with strict rules that bar its use for provisions that do not have a significant fiscal impact.

Budget Reconciliation 2011

For bills to ‘even out’ federal spending and revenues often proved difficult to pass. Reconciliation was created to streamline the process which particularly involved cuts in programs to reduce deficit.

The policy could be related to health care, education, etc. Under certain rules, provisions in which the fiscal results are “merely incidental” to the true intent of the legislation can be struck out. For a complex measure such as comprehensive health care reform, this could leave many provisions subject to challenge by the Republicans and give a strong hand in the final shape of the bill to the Senate parliamentarian who must rule on each point of dispute.

Reconciliation and the Filibuster

Budget reconciliation takes the filibuster off the table, levels the playing field on the Senate floor so that every senator’s vote is equal and a simple majority can adopt legislation. Under the Senate’s original rules, any senator enjoyed a right to “unlimited debate” (filibuster) which thereby gave them - not to mention the minority party as a whole - enormous power to stop a bill. Currently, 60 senators can vote to close debate since the Senate has adopted certain rules to limit the right to filibuster effectively closing off a debate. 

The Politics of Reconciliation

While reconciliation is extremely controversial, it is permitted under the rules. The current Senate majority leader Mr. Harry Reid dismissed complaints by Republicans.  As per him, history suggested that the vast majority of those reconciliation efforts have been made by Republicans. He said that the Republicans should not lament since they had used the procedure before. Senator Judd Gregg of New Hampshire famously defended the process when Republicans were using it in 2005. Still, passing a reconciliation measure proved difficult for the Democrats since Republicans criticized passing a major legislation using an unsavory tactic.

The Health Care legislation 'Endgame'

In the case of the health care legislation, since the House Democrats were opposed to various provisions they had the ability to accept only a Senate-passed bill. Therefore, the White House and Congressional Democrats used reconciliation to make changes to the health care bill including the alterations proposed by the President.

The budget reconciliation measure that was approved first by the Senate and then by the House, included changes in the levels of subsidies that would help moderate-income Americans afford private insurance. It would also help increase the Medicare payroll tax that would take effect in 2013 and help pay for the legislation.

The Republicans were accusing the Democrats and Mr. Obama of trying to rush the bill through Congress. However, the President and his allies stated that a majority and supermajority had been gained in the House and the Senate respectively. Therefore, technically reconciliation could be used only to pass a small package of fixes to the original bills.

The House passed the Senate’s bill and at the same time they removed some provisions that had drawn criticism such as a special deal on Medicaid for Nebraska. They also adjusted other provisions that were unpopular with House Democrats for example the excise tax the Senate had imposed on high-cost insurance plans.

In the Senate the Republicans succeeded in forcing Democrats to make minor changes in the language of the reconciliation bill. This also included an overhaul of the federal student loan program. This meant the bill was needed to go back to the House for final passage, which it approved in a brisk session on the evening of March 25.