2) What can the Senate pass with budget reconciliation?

A lot of things — so long as they affect federal spending and revenue. It’s called budget reconciliation, after all. Reconciliation was established as part of the Congressional Budget Act of 1974, driven by lawmakers concerned about the growing federal deficit.

The process begins with a congressional resolution instructing committees in the House and the Senate to draw up legislation. The budget resolution sets the first parameter for what can pass via budget reconciliation: The final bill must reduce or increase the federal deficit by no less or no more than the amount specified in the resolution.

For example: The budget resolution passed by Senate Republicans in 2017 to set up reconciliation for their tax plan stipulated that the bill could increase by the deficit by $1.5 trillion over 10 years — but no more. That became the target as Republicans decided which taxes to cut and which to raise.

The provisions that are included in the reconciliation bill must then somehow change federal spending or federal revenue. Raising and lowering taxes, expanding subsidies for health insurance, and spending money on new infrastructure projects are some of the obvious, much-discussed ideas that could be included in a reconciliation bill.


3) What can’t pass with budget reconciliation?

Reconciliation was used at first in the 1980s to approve Reagan-era spending cuts, but quickly senators started to use reconciliation for policies unrelated to its original purpose. One reconciliation bill was used to reduce the number of board members on the Federal Communications Commission.

In the eyes of Senate institutionalists like Robert Byrd of West Virginia, these were abuses of the reconciliation process. So Byrd proposed and the Senate codified constraints on what can be passed through budget reconciliation, to make sure the process was actually used for matters affecting the federal budget. Those constraints are now colloquially called the Byrd Rule.

Under the rule, reconciliation bills can’t change Social Security. They can’t be projected to increase the federal deficit after 10 years. They must affect federal spending or revenue — and their effect on spending or revenue must be “more than incidental” to their policy impact.

In other words, the primary purpose of the provisions in a reconciliation bill must be to affect the federal deficit; those budgetary effects can’t simply be a byproduct of trying to achieve some other policy aim. To borrow an example that came up a lot during the recent health care debates, changing insurance regulations might not comply with the Byrd Rule. While those changes would surely affect federal spending (the government spends money subsidizing health insurance, so changes to its cost would alter federal outlays), their main policy purpose would be to affect what kind of health coverage people receive.

$tevie wrote:
I am not going to read it in its entirety right now, but I do thank you for posting this. I've bookmarked it for later.

Reading things like this always end with me thinking that the Senate is such a royal pain in the arse.