The following provides an overview of the budget reconciliation process as well as congressional Republicans’ plans to enact President-elect Trump’s tax and immigration agenda, either through a single reconciliation package or in two separate bills.
Budget Reconciliation Process Overview
Definition and Purpose: Reconciliation is a specialized legislative process designed to streamline passage of budget-related measures in the Senate. Unlike regular legislation, reconciliation bills bypass the Senate’s 60-vote filibuster threshold and require only a simple majority to pass, making them a vital tool for enacting fiscal priorities quickly, especially in a divided Congress. However, this process is strictly limited to provisions that have direct fiscal impacts, such as changes to spending, revenues, or deficits.
Past Reconciliation Bills: Recent examples of successful reconciliation bills include the 2017 Tax Cuts and Jobs Act, the pandemic-era 2021 American Rescue Plan, and the climate-focused 2022 Inflation Reduction Act.
Launching Reconciliation: The Budget Committee first issues reconciliation instructions to the relevant authorizing committees who then draft their portions of the ultimate bill. These instructions reflect the majority’s priorities and are based on a set of assumptions to reach certain spending goals over a 10-year window. The authorizing committees aim to satisfy these assumptions with their proposed language (defunding a program, reducing spending, etc.) which the Budget Committee compiles into a single resolution for final passage in Chambers to begin the reconciliation process.
Constraints on Reconciliation
Time Limits: Reconciliation can only be used once per fiscal year to address mandatory spending, revenues, and debt limits, and its provisions cannot have fiscal effects extending beyond a 10-year window. Floor debate reconciliation bills is capped at 20 hours, limiting opportunities for extended debate or obstruction. Following the debate, the Senate enters a “vote-a-rama,” a session where senators can propose numerous amendments in rapid succession. While often viewed as a procedural tool, these amendments frequently serve political messaging purposes, allowing members to signal their positions on contentious issues.
The Byrd Rule: The Byrd Rule excludes non-germane provisions from the reconciliation bill that are not budgetary in nature, affect Social Security, or would increase the deficit or decrease revenue. The Senate Parliamentarian enforces the Byrd Rule in a pre-floor review process colloquially known as the “Byrd bath” to determine whether each provision meets the rule’s criteria. Noncompliant provisions are typically struck or amended before the reconciliation bill reaches the Senate floor. This review process ensures that reconciliation remains tool for budgetary legislation rather than broader policy changes.
Political Cohesion: While reconciliation enables the majority party to advance its priorities without bipartisan support, its effectiveness depends on a cohesive party strategy. For example, the ARP and IRA faced significant hurdles in the Senate, including prolonged vote-a-ramas and extensive negotiations with moderate Democrats such as Senator Joe Manchin (WV) (retired). These challenges underscore the importance of securing intra-party consensus in advancing reconciliation legislation. Today, House Republicans’ slim majority and their disagreements with Senate Republicans over whether to pursue a combined or split reconciliation strategy could complicate Republicans’ plans.
President-elect Trump & Congressional Republicans’ Reconciliation Plans
Timing & Strategy: Republicans have yet to come to an agreement on whether they will use fiscal years 25 or 26 to pursue reconciliation, and whether reconciliation would be pursued in a single or multi-pronged bill that splits up immigration/defense and tax measures. Major discretionary policy changes are not expected to be included in reconciliation. Nevertheless, Republicans bear the political brunt of enacting any tax changes before the TCJA expires at the end of the year given their majorities to avoid blowback for an increase in taxes should the law lapse.
Proposed Tax Changes: While details of a reconciliation tax package have yet to be released, the House’s close margins make it likely that Republicans will reach an agreement on SALT deduction changes to be included in the bill. In general, taxes are largely expected to be addressed this year before the 2017 TCJA expires to avoid an estimated $4 trillion deficit boom.