Budget Reconciliation

Budget reconciliation is a special process that makes specific legislation easier to pass in the U.S. Congress. In the Senate, reconciliation bills aren’t subject to filibuster and therefore need only a simple majority of 51 votes to pass.

The process starts when the House and Senate agree on an annual budget resolution that includes “reconciliation directives” for specified committees. These instruct specified House and Senate committees to prepare and report legislation by a certain date that: 1) increases or decreases spending (outlays) by specified amounts over a specified time; 2) increases or decreases revenues by specified amounts over a specified time; or 3) modifies the public debt limit. In most cases, a single budget resolution can generate only two reconciliation bills: a tax-and-spending bill or a spending-only bill and, if desired, a separate debt limit bill.

To ensure that reconciliation bills remain focused on budget measures, the Senate adopted the “Byrd rule”, which treats as extraneous any provision that doesn’t change the level of spending or revenues, or where the change in spending or revenues is “merely incidental” to the provision’s non-budgetary effects. The Byrd Rule is enforced only by points of order raised by members and decided on by the Senate Parliamentarian. In 2021, the Parliamentarian rejected efforts to pass a minimum wage increase and provide a path to legalization for certain categories of unauthorized immigrants in reconciliation bills.

As of mid-2021, Congress has passed reconciliation bills 22 times since the procedure was first employed in 1980. It has been used on several occasions to pass major tax cuts, including the Republicans’ tax cut of 2017, as well as the major welfare overhaul bill in 1996 and parts of the Affordable Care Act in 2010.In March 2021, the Democrats used reconciliation to pass a $1.9 trillion Covid relief package, the American Rescue Plan Act (ARPA). Since no fiscal year 2021 budget resolution was adopted in calendar year 2020, Democrats had an opportunity to generate a second reconciliation bill, labeled the Build Back Better Act, in 2021.