Budget Clues to Reconciliation

Blog Post
Wednesday, July 28, 2021

Before Congress adjourns for its district work period in August, House and Senate Democrats hope to pass the FY 2022 budget resolution. The annual budget blueprint is essential to the Biden agenda because it initiates “reconciliation” – the special process that sidesteps the filibuster and permits a Senate majority to pass legislation without any minority support.

As legislation goes, a budget resolution is very dry and boring: page after page of numbers, followed by even more pages of obscure budget jargon. But within these pages are clues to the reconciliation bill that will follow. As the FY 2022 budget resolutions winds its way through the two chambers, keep an eye on the following:

Reconciliation instructions. In early July, Democrats announced that the progressive and moderate wings of the party had agreed to a top line spending level of $3.5 trillion for the reconciliation bill. They’ve also promised to pay for most, if not all, of this package. If Democrats hold true to their promise, the sum of the deficit allowances assigned to the reconciled authorizing committees should be significantly less than $3.5 trillion over the 10-year budget window. If, however, the instructions total $3.5 trillion, or close to it, this will provide the first clue that Democrats are not serious about paying for their new programs.

Debt limit instructions. Budget law permits a reconciliation bill to carry language increasing the statutory debt limit by a specified amount, but only if the Senate Finance Committee and House Ways and Means Committee are directed to do so in the budget resolution. In the last decade, however, Congress has changed the way it addresses the debt limit, opting to suspend the debt limit until a specific date (after which the limit automatically adjusts to reflect the level of debt outstanding at that time), rather than specify a numerical increase. The rationale is that a vote to suspend is more benign and carries less political risk for lawmakers at election time. 

But the Senate Parliamentarian has suggested that the rules of reconciliation do not permit suspension of the debt limit in reconciliation, leaving Democrats with a tough choice: negotiate with Republicans to suspend the debt limit outside of reconciliation (during which the minority party is sure to demand what Democrats perceive as potentially unpalatable spending reforms), or use reconciliation to raise the debt limit by trillions, another politically risky endeavor. If Democrats do not include debt limit instructions in the FY 2022 budget resolution, it will be clear they’ve chosen to negotiate with the minority.

Budget process “reforms.” Aside from setting enforceable topline spending and revenue aggregates for the upcoming fiscal year, a budget resolution may also include a number of process reforms such as reserve funds, scoring rules, and new points of order. A majority of these provisions will most likely serve one purpose, however: to smooth passage of the subsequent reconciliation bill. Reserve funds can be thinly disguised loopholes. Scoring rules can help the majority party put their thumb on the scale. A budget resolution can create new points of order and sometimes eliminate old ones that could be problematic for passage of the reconciliation bill.    

Democrats expect to debate their  FY 2022 budget resolution during the first or second week of August. Keep an eye on the elements here for clues about the size and scope of the reconciliation bill that will follow.