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Why Democrats Can’t Use Reconciliation for Tax Cuts like the GOP Did

- December 6, 2010

My colleagues like to ask me questions about obscure and not-so-obscure congressional budget procedures. This week, folks are wondering whether reconciliation could have been used by Democrats to pass a bill extending the Bush tax cuts for only the middle class. Avid Monkey Cage readers will remember the role reconciliation (aka the “sidecar fix”) played earlier this year when Democrats used reconciliation to prevent Republicans from filibustering health care reform (after Democrats lost their 60th Senate seat). Indeed, reconciliation can be a very helpful thing for less-than-supermajorities intent on major policy change. Just ask Senate Republicans who managed to avoid a filibuster of the Bush tax cuts in 2001 and 2003 by packaging the tax cuts into reconciliation bills to avoid the need for 60 votes.

As Senate Democrats failed to get 60 votes this past weekend to cut off debate on an amendment to extend tax cuts for the middle class, many Democrats are now asking: Where’s reconciliation when you need it? Why aren’t Democrats using reconciliation to push through their majority’s favored position on extending middle class tax cuts and letting upper income taxpayers’ rate cuts lapse?

Although there has been some agitation in the liberal blogosphere for just such a tactic, there are several reasons why this strategy is off the table. I don’t claim to offer an exhaustive list of explanations, but I’ve tried here to highlight the most pressing reasons why reconciliation is foreclosed at this point in the waning days of the 111th Congress.

1. No more room at the inn. Reconciliation is only available to be used when the congressional budget resolution expressly includes reconciliation “instructions.” The fiscal year 2010 budget resolution did include such instructions, allowing Congress to use reconciliation protection to package savings from health care and college loan programs. Reconciliation thus cannot be used again as a vehicle for passing an additional bill this Congress (though there seems to be some debate about whether the original reconciliation instructions might still permit tax cuts to be squeezed into a second reconciliation bill).

2. No budget, no reconciliation. Democrats opted against passing a congressional budget resolution for fiscal year 2011 (the fiscal year that began Oct. 1). Failure to act on a budget resolution (in part because Blue Dogs and some other Democrats were apparently loath to cast votes for it) foreclosed the creation of a new reconciliation bill for the extension of middle class tax cuts.

3. You can’t step into the same river twice. Democrats’ dissatisfaction with GOP use of reconciliation for tax cuts led House and Senate Democrats in 2007 (reaffirmed in 2009) to change House rules and Budget Act provisions to prevent future majorities from using reconciliation to shield tax cuts from a filibuster. Absent 60 votes, majorities must offset provisions that increase the deficit. The changes also made it more difficult for future majorities to comply with the Budget Act by making tax cuts expire at the end of the budget window. In other words, the trick of ending all the Bush tax cuts in December 2010 to make the bill appear revenue neutral within the ten-year budget window that ends this month can no longer be played. This of course is problematic for anyone seeking to use reconciliation to pass only middle class tax cuts. Those cuts would have to be paid for.

Will the new Republican House majority want to be bound by these rules created by Democrats? Unlikely. Next time House Republicans pass a budget resolution, I would not be surprised to see them eliminate the restrictions on the use of reconciliation for tax cuts. And I would not be surprised to see the current House rule lapse when the GOP re-organizes the chamber in January. But can Senate Republicans so easily alter the Budget Act when the chamber will be (nominally) controlled by Democrats? Interesting times ahead.