Reconciliation Reveals Cracks in the Budget Process
It took days of round-the-clock committee markups, a marathon Rules Committee meeting, and dead-of-night negotiations, but House Republicans manhandled their “One Big Beautiful Bill Act” across the floor and on to the Senate barely an hour after sunrise on May 22, achieving a major milestone toward enactment. This has been an excruciating process for congressional leaders counting on budget reconciliation—a known fast-track method of avoiding the Senate’s filibuster—as a slick workaround for a closely divided chamber, and it won’t get any easier. Clearly, reconciliation is no panacea for a hopelessly broken budget system, and continued misapplication won’t improve matters.
It would be easy to point fingers at the significant differences in priorities (and even tactics) between the chambers early on in the reconciliation process—or at blue-state holdouts demanding a handout—as the main source of frustration. Those factors, along with the substance of the legislation, certainly are challenging, but that would still be the case even if issues of Pentagon spending or taxation were brought up under regular order.
Reconciliation on Paper
When budget reconciliation burst onto the scene in 1974 as part of the Congressional Budget and Impoundment Control Act, it was a major fix to what had become a similarly broken budget. The 109th Congress Senate Committee on the Budget’s Committee on the Budget: 1974-2006 chronicles the reform process, describing the run-up to 1974 as a time of “undesirable budget outcomes, such as persistent and growing deficits, excessive spending and a growing portion of outlays considered to be ‘relatively uncontrollable’” as well as “delays in the annual appropriations process, leading to funding gaps and excessive reliance on continuing appropriations acts.”
Just over 50 years later, that context—unremitting deficits, out-of-control mandatory spending, and a relentless cavalcade of continuing resolutions—sounds all too familiar. But reconciliation, as originally conceived, was quite different from today’s partisan cudgel. The Congressional Budget Act of 1974 called for two budgets each fiscal year.
- Nonbinding budget (May): Created a basic framework for authorizations, outlays, revenue, and debt in order to initiate the appropriations process (to be completed soon after Labor Day).
- Budget resolution (by Sept. 15): Either affirmed or revised the earlier numbers based on the now-enacted fiscal year’s appropriations and other financial decisions. If changes were needed to bring finances in line with enacted legislation, then reconciliation instructions to other committees could be made at this time.
The Act assumed that all financial matters for the fiscal year would be finalized by Sept. 25—well ahead of the Oct. 1 fiscal year start date—and that, barring extraordinary circumstances, no other legislation related to debt, deficits or surpluses, revenues, and discretionary or mandatory spending would be taken up until the budget process restarted the following spring.
With only 10 days between the second budget’s due date and the end of the fiscal year, this fast-track reconciliation procedure was clearly intended as a matter of expediency rather than a legislative cheat code. It was understood that major financial issues would already be adjudicated in the months leading up to the 10-day reconciliation sprint.
Reconciliation is just what it says on the label: a mechanism to keep the actions of differing committees in agreement with the topline numbers in the underlying budget. The Senate Budget Committee write-up calls it a “last minute procedure.” Reconciliation was a reality check—verification that the laws in place comport with one another and with the stated plan. It got top billing in the floor consideration queue by virtue of its importance and the October deadline just ahead.
Reconciliation in Practice
The first use of reconciliation in 1980 looked much like the reconciliation of today in that it was initiated by the first budget and instructed committees to achieve deficit reductions through reduced outlays and increased revenues. The budget resolution also covered fiscal years 1981-1983—not just one year as originally planned. By 1985, the law had changed to require five-year budget windows; today, it’s not uncommon to see budgets that outline budget levels for 10 years. In fact, the FY25 budget resolution is in the 10-year camp, setting levels through 2034.
It is proper for budgets to look beyond the immediate fiscal year. After all, budgets set a collective vision for where we want to go as a country, and changes can take time. However, stretching the time horizon for a budget also creates opportunities for loopholes, such as frontloading the “good stuff” (e.g., tax cuts or new subsidies) and postponing potentially painful cuts to sometime in the future when there’s no guarantee they’ll be enacted. The Committee for a Responsible Federal Budget calls these “timing gimmicks,” and the current reconciliation package is rife with them, setting up a $4.8 trillion fiscal cliff in 2028. As Sen. Mike Lee (R-Utah) explained on the Senate floor in 2011, a promise to cut future anticipated spending is “one that isn’t binding on Congress if those spending cuts are stretched out over the course of 10 or 15 years or more.”
By the second time reconciliation was implemented in 1981, the Reagan administration had spotted its potential as a workaround for the Senate’s deliberative process. The Omnibus Budget Reconciliation Act included a diverse array of policy priorities like “lawnmower standards and a maximum speed limit” along with changes to education, agriculture, housing, transportation, veterans, health, and defense issues. Notably, tax cut legislation was enacted the same year—under regular order.
The 1985 “Byrd rule” attempted to reduce extraneous topics in reconciliation by reorienting the process toward its original purpose: deficit reduction. But the Byrd rule also made it difficult to address some of the major drivers of U.S. debt (e.g., Social Security and disability insurance) and to avoid some of the aforementioned fiscal cliffs. Because the Byrd rule prohibits increasing the deficit outside the 10-year budget window, some provisions are therefore temporary, setting up future policy battles and unnecessary economic uncertainty.
None of these obstacles has made reconciliation a less desirable vehicle for fast-tracking complicated and/or far-reaching policy prescriptions. Both Democratic and Republican administrations have twisted and trimmed the legislative text to comply with a set of rules never intended for this purpose. The resulting overreliance on reconciliation has led to drafting errors and economic uncertainty, and it continues to exacerbate the bitter partisan divide both on and off Capitol Hill.
Conclusion
Although reconciliation and the 1974 budget reforms attempted to rein in the country’s growing deficit and debt, they have largely failed in those efforts. Our current fiscal outlook is worse than ever, and a recent credit rating downgrade reflects significant doubts for near-term improvement. Reconciliation has proven itself a poor tool for budgetary restraint almost from its inception, illustrating once more the urgent need for significant process reform. This dismal news should reinvigorate efforts to form the bipartisan debt commission championed by House Budget Committee Chair Jodey Arrington (R-Texas) in the prior Congress and to enact a more effective process with less opportunity for misuse.