Budget Reconciliation

How It Works

Reconciliation was created by the Congressional Budget Act of 1974 as a procedural tool for Congress to align existing laws with the spending and revenue levels in its annual budget resolution. Its key feature is that reconciliation bills cannot be filibustered in the Senate, they pass with a simple 51-vote majority instead of the 60-vote cloture threshold. This makes reconciliation the vehicle of choice for major partisan fiscal legislation when one party controls the White House and both chambers. The Byrd Rule (named for Senator Robert Byrd) restricts reconciliation to provisions that directly change spending, revenue, or the debt limit, anything "extraneous" (like policy changes with only incidental budget effects) can be stripped out by any senator raising a point of order. Reconciliation can be used at most three times per fiscal year (one each for spending, revenue, and debt limit), though in practice a single bill usually combines them. Major recent reconciliation laws include the 2001 and 2003 Bush tax cuts, parts of the Affordable Care Act reconciliation package (2010), the Tax Cuts and Jobs Act (2017), the American Rescue Plan Act (2021), the Infrastructure Investment and Jobs Act components, and the Inflation Reduction Act (2022). Reconciliation bills frequently affect mandatory spending programs (Medicare, Medicaid, SNAP, tax credits) and thus drive multi-trillion-dollar shifts in long-term federal outlays that never show up as discretionary contract awards on USASpending.gov. However, reconciliation can also include substantial program funding that does flow through contracts: the Inflation Reduction Act (2022) directed roughly $80 billion to the IRS over a decade for enforcement and modernization (driving contract opportunities in IT modernization and staffing) and hundreds of billions in clean energy tax credits and grant programs administered by DOE and Treasury. Tracking reconciliation-funded contract flows requires matching program activity codes in agency financial systems to the statutory authorities enacted in reconciliation.

Related Terms

• Appropriation, A law passed by Congress that authorizes federal agencies to spend a specific amount of money for a specific purpose during a defined period.
• Mandatory Spending, Federal spending required by existing law without annual Congressional approval, primarily Social Security, Medicare, Medicaid, and interest on the debt.
• Discretionary Spending, Federal spending that Congress controls through annual appropriations, covering defense, education, transportation, and other agency budgets.