Budget Reconciliation Explained

Congressional Democrats and the Biden administration will likely use a powerful procedural tool called budget reconciliation to pass some of their top priorities. But what is budget reconciliation?

Reconciliation allows bills in the Senate to pass with just a simple majority, bypassing the usual 60-vote threshold and the filibuster. In the current session of Congress, Democrats hold a slim majority in the Senate, 50-50, with Vice President Kamala Harris serving as the tie-breaking vote between the evenly divided parties. With 51 votes in the Senate, Democrats can use budget reconciliation to pass legislation without Republican support.

Congress sets total spending, the surplus or deficit, revenues and the public debt in its annual budget resolution, which can include reconciliation instructions. These instructions direct congressional committees to recommend changes to the law to achieve the revisions set out by the budget resolution. Congress then incorporates the committees’ policies into a reconciliation bill.

While undoubtedly a useful tool to pass spending and revenue bills without full cooperation between parties, budget reconciliation cannot be used to pass every type of policy. The Byrd rule, proposed by former Senator Robert Byrd, D-WV, and adopted by Congress in 1985, codifies the constraints and restrictions of the budget reconciliation process. The Senate parliamentarian enforces these constraints and usually makes the final decision on which provisions can be included in a reconciliation bill.

The Byrd rule requires that legislation passed through reconciliation must have a budgetary impact and change federal spending or revenue. For example, reconciliation could be used to raise or lower taxes but not to pass voting rights legislation. Congress most recently used reconciliation to enact the American Rescue Plan Act, a $1.9 trillion COVID-19 relief package that included an expansion of the child tax credit, direct economic impact payments

Is your Representative a cosponsor of the Fair COLA for Seniors Act, H.R. 4315? This bill would provide more accurate cost-of-living adjustments (COLAs) for federal retirees by changing how COLAs are calculated. The proposed formula would better account for the inflation of goods and services like medicine, health care, housing and other essential living expenses seniors most often purchase. Urge your Representative to cosponsor this bill by visiting NARFE’s Legislative Action Center at www.narfe.org.