Likely the most significant legislation Congress will consider this year is a budget reconciliation bill. For weeks, congressional Republicans and President Trump have been laying the groundwork to agree on a process for advancing Trump’s agenda via the special legislative process of reconciliation, with the original aim to have a budget resolution on the floor this month and a bill on the President’s desk by May.
The major sticking points thus far have related to just how ambitious the reconciliation bill for this fiscal year should be. While Senate Republican leadership and the House Freedom Caucus would prefer to tackle President Trump’s agenda with two reconciliation bills—a first to deliver quick wins on border, defense, and energy spending, and the second on tax cuts—House Republican leadership and House Ways & Means Chair Jason Smith (R-MO) would prefer “one big, beautiful” reconciliation bill, arguing that it is the best way to ensure as much of the Republican agenda is enacted as possible, including the extension of the 2017 Trump tax cuts. There has also been some disagreement among congressional Republicans about how aggressive to be with deficit-reduction targets. The razor-thin House majority as well as the differences between House and Senate leadership’s preferred strategies have made these discussions all the more challenging.
After weeks of intense effort in the House, the Senate emerged this week as the “first mover.” Senate Budget Chair Lindsey Graham (R-SC) released the text of the Senate’s Fiscal Year 2025 Budget Resolution and scheduled markups for the resolution next week on February 12 and 13. House Republicans, meanwhile, continue to work toward a deal within their Conference that would allow them to proceed with a single bill inclusive of a tax title and robust offsets.
While media attention has focused on if, when, and how congressional Republicans will attempt to tackle “big ticket” budget items (e.g., extending the Trump tax cuts, spending on border security, increasing the debt limit) via reconciliation this year, clients should remain vigilant and attuned to the details of reconciliation, including potential opportunities and risks. Because this will be Congress’ primary focus for the foreseeable future, clients should assess whether reconciliation could be a vehicle for their policy priorities and whether their favored programs will be on the chopping block as congressional Republicans seek offsets for any increased spending or tax cuts (“pay-fors”).
With the Senate set to formally begin the reconciliation process next week, this blog post provides an overview of the reconciliation process as well as the Senate FY25 Budget Resolution.
A. Budget Reconciliation Process Overview
Budget reconciliation is a special legislative process that allows Congress to quickly advance legislation with a fiscal impact. It is intended to allow Congress to bring federal spending, revenue, and debt in line with Congress’ budget goals for the upcoming fiscal year. The reconciliation process is optional, and Congress may only use it once per fiscal year.
Reconciliation is an appealing process to expedite the consideration of (often controversial) legislation because it allows both the House and Senate to pass legislation with a simple majority vote, as opposed to the 60 votes typically required in the Senate to overcome a filibuster and thus pass legislation.
Over the last few decades, reconciliation has become a common tool to advance a partisan agenda when there is unified control of the presidency, House, and Senate but the governing party lacks the 60-vote Senate majority needed to overcome a filibuster. This is the case again this Congress, as there is unified Republican control of the presidency, House, and Senate but Republicans hold 53 Senate seats.
Since the reconciliation process was established in 1974 by the Congressional Budget Act, it has been used 23 times to enact legislation. Recent reconciliation bills include the Tax Cuts and Jobs Act (2017) during the first Trump Administration and the American Rescue Plan Act (2021) and the Inflation Reduction Act (2022) during the Biden Administration.
The reconciliation process begins with the adoption of a budget resolution, or “blueprint” for reconciliation with topline numbers for spending and offsets. The budget resolution provides individual committees with reconciliation instructions, which direct their ability to recommend provisions for the bill consistent with the resolution.
In addition to the potential political roadblocks discussed above, Republicans will also face procedural limitations to what they can accomplish through reconciliation. Reconciliation bills are subject to the Senate’s Byrd Rule, which restricts “extraneous” matter in reconciliation legislation. A provision is considered “extraneous” if it:
- Does not produce a change in outlays or revenues (i.e., does not “score” in the cost estimate by the Congressional Budget Office);
- Increases outlays or decreases revenues out of line with the relevant committee’s reconciliation instructions;
- Is outside the jurisdiction of the committee reporting it;
- Produces a budgetary effect that is “merely incidental” to the policy objective (or non-budgetary components) of the provision;
- Increases the deficit in any year outside the budget window (usually ten years); or
- Makes changes to Social Security.
The most frequently invoked challenges are that a provision does not produce outlays or revenues or has a budgetary effect that is merely incidental to the policy objective.
Importantly, the Byrd Rule is not self-enforcing. A senator must raise a point of order to invoke the Byrd Rule. Then there is debate on the point of order and the presiding officer rules on the point of order, following the guidance of the Senate Parliamentarian. The ruling of the presiding officer and thus the Parliamentarian can be overturned with 60 votes—the same threshold as ending a filibuster.
For example, this means that Republicans could use reconciliation to increase immigration law enforcement and border security funding but not make sweeping changes to immigration law with only incidental revenue impact. The Byrd Rule serves as a deterrent to attempting to make substantive policy without a significant budgetary impact through reconciliation and provides the Senate Parliamentarian with a huge amount of power—effectively the ability to exclude provisions from the bill unless overruled by a Senate supermajority.
See our colleague’s blog and this Congressional Research Service report for more background and history on the Byrd Rule.
B. Senate Blueprint for Reconciliation
On Friday, February 7, Senate Budget Chair Lindsey Graham (R-SC) released the text of the Senate’s Fiscal Year 2025 Budget Resolution, which he characterized as “the blueprint that unlocks the pathway for a fully paid for reconciliation bill to secure the border, bolster our military, increase American energy independence and begin the process of fiscal sanity.” The bottom line of this proposal is that it is consistent with the Senate’s preferred two-bill strategy, with tax excluded this round.
The resolution included the deficit increase and reduction targets listed in the tables below. These numbers not only confirm the intent to exclude tax this round but also give insights into which committees will be seeking offsets. These are placeholder numbers pending the committee’s deliberations. The negative numbers represent deficit reduction targets of an amount “not less than” the number given. The positive numbers represent deficit increases “not exceeding” the number given.
In a press release accompanying the resolution, Graham identified the following priorities for a first reconciliation bill:
- Border security, including funding for:
- The wall and upgrading technology for ground and aerial support
- Increasing detention beds
- Increasing the number of ICE officers, Border Patrol agents, and assistant U.S. attorneys
- State and local law enforcement
- National defense, including funding for:
- U.S. military readiness “and the ability to defend U.S. interests globally”
- “Growing the U.S. Navy and strengthening its industrial base”
- Integrated air and missile defense
- Nuclear defense
- Energy independence, including:
- On and offshore lease sales
- Ending the methane emissions fee
- Identifying spending reductions to offset and “fully pay[] for the investments in our border security, national security and domestic energy production up front”
Graham scheduled markups for the resolution on February 12 and 13. You can find a copy of the resolution text here, the budget tables here, and a fact sheet on the Senate proposal here.