Democrats’ Trifecta

Update 503 – Democrats’ Trifecta:
The Healing Power of Reconciliation 

With a Democratic trifecta of now-unified majorities in both chambers of Congress and control of the White House, the new administration has political math on its side in efforts to deliver legislative results and needed COVID relief for weary and sceptical Americans.

Democrats will rely on budget reconciliation as they advance their relief priorities through Congress. The reconciliation process, confusing to some, has been relied on increasingly in the recent past by both Democrats and Republicans. Use of budget reconciliation today to pass COVID relief is the best path forward. 

Below we outline the reconciliation strategy, process, and weigh its benefits and costs in this critical instance. 

Best,

Dana

——————

Budget reconciliation is authorized through the Congressional Budget Act of 1974 to expedite budget bills. While most legislation before the Senate can be stalled with a cloture motion that takes 60 votes to break before a vote on the underlying bill can occur, reconciliation bills pass with a simple majority of those present. With increased political polarization in the Senate, reconciliation has become the primary method for passing big-ticket legislative priorities. 

The Reconciliation Process 

The reconciliation process starts with the House and Senate agreeing on a budget resolution that includes “reconciliation directives.” These directives, sent from budget committees to other committees of jurisdiction, identify the spending and revenue targets under which authors of the bill must work, but do not detail what policies a particular committee should adopt. Once authorizing committees complete their work reaching their sub-topline figures, the Budget Committees assemble them into an omnibus bill to be considered by the full chamber.

While practically any policy can be tacked onto a reconciliation bill in the House, the Senate operates under the “Byrd Rule,” which limits reconciliation to policies that directly change mandatory spending (excluding Social Security), revenue, or the federal debt limit. The Byrd Rule also prevents reconciliation bills from increasing the deficit beyond a ten-year fiscal window. 

If a Senator objects to any policy provision in a reconciliation bill, the Senate Parliamentarian will advise the Presiding Officer whether or not to strike it based on his or her interpretation of the Byrd Rule. Due to the Byrd Rule’s convoluted nature, senators often have to negotiate with the parliamentarian in advance to avoid a point of order that takes 60 votes to overturn.

Reconciliation is increasingly common and has been attempted successfully and unsuccessfully in recent years: 

• Bush Tax Cuts (2001/2003) — successive corporate and individual tax cuts totaling $1.5 trillion that sunset after 10 years.
• Affordable Care Act (2010) — comprehensive health care reform package that cut the uninsured rate by half.
• ACA repeal (2015/2017) — repeated efforts by the House GOP to repeal the ACA; the parliamentarian ruled that abolishing the individual mandate was not reconcilable because it only had an incidental budgetary impact.
• TCJA (2017) — corporate and individual tax cuts totaling $1.7 trillion that are set to sunset after 2025; zeroed-out the individual mandate tax penalties by rewriting the legislation to be a revenue issue.

How Democrats Will Use Reconciliation

Much of President Biden’s American Rescue Plan can be passed through budget reconciliation. On Monday, House Budget Chairman Yarmuth released a budget resolution that would allow for an increase in the short-term deficit by $1.9 trillion. 

Deficit Increases for the 12 Authorizing Committees

Cap ($$ bns.)	Authorizing Committee
$940.72	Ways & Means
357.08	Education & Labor
350.69	Oversight & Reform
188.5	Energy & Commerce
95.62	Transportation & Infrastructure
75.0	Financial Services
50.0	Small Business
17.0	Veterans’ Affairs
16.11	Agriculture
10.0	Foreign Affairs
1.01	Natural Resources
0.75	Science, Space, & Technology

Both chambers are expected to pass reconciliation rules this week, after which House committees must submit their recommendations to the Budget Committees by February 16th. Once committees have delivered their policies, Chair Yarmuth’s committee has a week to assemble an omnibus package. A House vote on a final package will then be expected in the last week of February. The Senate is likely to adopt the House bill as drafted instead of going through the lengthy conference committee process.

Major Stages of the Reconciliation Process

Source: Congressional Research Service

The primary Byrd Rule obstacle for Democrats will be ensuring that the reconciliation bill only affects mandatory spending. With a dozen committee bills and only a two week time frame, Democrats will be tempted to borrow language from the HEROES Act which mostly affected discretionary spending levels — a potential problem for reconciliation. 

Another sticking point is the proposed $15 minimum wage increase. Senate Budget Chairman Sanders maintains that the resulting increase in tax revenue and decrease in public benefits makes a minimum wage hike Byrd-compliant. Other Democrats suggest creating a punitive tax for any business that does not pay its employees at least $15 an hour, a surefire way of getting around the Byrd Rule. 

Multiple Bites of the Apple

The current (Yarmuth) resolution uses Congress’ budget authority for fiscal year 2021, but Democrats could take another shot at reconciliation this calendar year using the FY 2022 budget resolution process. President Biden indicates that he would like to work on an infrastructure investment package once COVID relief is wrapped up. However, some Democratic legislative economic priorities are un-reconcilable and will need to go through regular order.

Opportunity Costs of Reconciliation 

Budget reconciliation entails running through the “vote-a-rama” gauntlet; a chaotic 20-hour period in the Senate where dozens of amendments are voted on in rapid succession without debate. With zero margin for error, Democrats must hold their caucus together through some politically tough votes.

Assuming budget reconciliation is successful, Democrats also must navigate PAYGO rules, which trigger sequestration next January unless Republicans agree to waive the requirement in future legislation. If no waivers are passed, beloved bipartisan programs like Medicare, farm subsidies, and military spending would face draconian cuts. Republicans were able to avert these spending cuts after passing their deficit-funded TCJA by smuggling a PAYGO waiver into a must-pass continuing resolution. Democrats could use the same tactic this year, but it could come down to a game of chicken.

Busting the Filibuster 

Senate Republicans will no doubt use the filibuster to block much of President Biden’s policy agenda. Senate Democrats could, with 50 votes, “nuke” the filibuster — change Senate rules so that bills advance by simple majority. Then-Majority Leader Harry Reid did so in 2013 for non-Supreme Court judicial appointments after facing unprecedented obstructionism from the GOP, and Leader McConnell followed suit in 2017 for Supreme Court nominations. But Senators Manchin and Sinema have promised publicly not to vote to end the filibuster. Former opponents of ending the filibuster (such as President Biden) have hedged on the issue.

President Obama and former Leader Reid have already called for ending the filibuster, as have progressives like Senators Sanders and Warren. Vice President Harris advocated ending the filibuster to pass the Green New Deal during her presidential run. 

Beyond “nuking” the filibuster, Senate Democrats have other options: 

• Preventing use of the filibuster when considering debate on bills while preserving a supermajority requirement for actual passage. 
• Reforming the Byrd Rule to allow more policy to pass through budget reconciliation.
• Requiring Senators wishing to filibuster to be physically present in the chamber to prevent an end to debate, among other changes.

Almost Heaven, West Virginia 🎼

Democrats are on the brink of legislation that constituents everywhere await like manna. West Virginia’s 73 year-old Senator Joe Manchin is a full-throated supporter of the filibuster and an opponent of wishlist items such as a minimum wage increase and direct cash payments may yet vote yes. West Virginia’s Republican Governor Jim Justice, an unlikely ally, drew national attention this week when he called on Congress to “go big” with COVID relief — “don’t count the legs on a cow,” round up and bring it in. As the relief bill takes shape and center stage, Manchin on board is a critical first step.