President-elect Trump has indicated that he will move quickly to achieve an ambitious policy agenda in his second term. He and his transition team have promised to “seal the border” immediately following his inauguration and to extend the tax cuts in the Tax Cuts and Jobs Act within the first hundred days of his administration.

While many of Trump’s policy objectives can be pursued through executive orders, significant components of his economic agenda will require legislative action. Newly re-elected House Speaker Mike Johnson (R-LA) has said there is “no daylight” between Trump’s priorities and those of Congressional Republicans. However, with narrow majorities in both the House and Senate, Republicans do not have the votes to overcome a Senate filibuster. Instead, they have committed to plans to use budget reconciliation—a procedural mechanism that allows certain fiscal initiatives to pass with a simple majority in the Senate—to pursue Trump’s economic agenda.

A Historical Overview

The framers of the U.S. Constitution entrusted Congress—in particular the House of Representatives, as the body closest to the people—with the power of the purse. Article I, Section 8, Clause 1, known as the Spending Clause, grants Congress the authority to allocate funds for the general welfare of the United States. This power is widely regarded as one of Congress’s most significant and far-reaching authorities, serving as the foundation for landmark programs such as Medicare, Medicaid, and other initiatives established under the Social Security Act.

Budget reconciliation, introduced under the Congressional Budget and Impoundment Control Act of 1974, was designed to align federal revenues and expenditures. During the 1970s, Congress faced growing mandatory spending on programs like Medicare and Medicaid alongside escalating conflicts over federal budgeting priorities. Reconciliation was intended to address these challenges by allowing adjustments to spending, revenue, or debt limits to “reconcile” projected revenues and expenditures. First used in 1980, it has since become a vehicle for significant policy shifts, such as tax cuts and reductions in social welfare spending during the Reagan administration.

Over time, the process has evolved into a partisan tool, frequently used to advance major policy goals that lack bipartisan support. Examples include tax cuts under the George W. Bush administration, the Tax Cuts and Jobs Act, the Affordable Care Act, the American Rescue Plan, and the Inflation Reduction Act.

The Reconciliation Process

The reconciliation process enables legislation affecting spending, revenue, or the debt limit to pass with a simple majority in the Senate, bypassing the filibuster. It begins with Congress passing a budget resolution with reconciliation instructions to specific committees. These instructions outline the changes necessary to meet budgetary goals, including specific dollar figure targets. Once the committees submit their proposals, they are combined into a single bill for consideration. Debate is limited, ensuring an expedited process.

The Byrd Rule

Because reconciliation allows legislation to pass with a simple majority in the Senate, it quickly became a favored tool for advancing policy initiatives that might not garner the 60 votes needed to overcome a Senate filibuster. Over time, senators began attaching extraneous provisions to reconciliation bills. Among those criticizing the process was Senator Robert C. Byrd (D-WV), who warned that this practice had “opened a Pandora’s box” for abuse of the reconciliation process and successfully advocated for restrictions.

The Byrd Rule, named in his honor, prohibits provisions unrelated to budgetary goals or that have only incidental effects on the budget. Over the years, the rule has become a cornerstone of the reconciliation process, shaping its use and ensuring it remains focused on fiscal policy.

A provision is deemed extraneous under the Byrd Rule if it meets any of the following criteria:

• No Budgetary Impact: It fails to result in changes to federal spending (outlays) or revenue, or it does not modify the terms or conditions under which these outlays or revenues are determined.
• Noncompliance with Instructions: It increases spending or decreases revenue in a way that violates the committee’s specific reconciliation instructions.
• Jurisdiction Mismatch: It falls outside the jurisdiction of the committee that proposed the provision for inclusion in the reconciliation bill.
• Merely Incidental Budgetary Effects: The budgetary impact of the provision is secondary or incidental to its non-budgetary aspects.
• Deficit Increase Beyond the Budget Window: It would lead to an increase in the deficit in any fiscal year beyond the time frame covered by the reconciliation measure, commonly referred to as the “budget window.”
• Changes to Social Security: It proposes modifications to Social Security, which are explicitly prohibited from being included in reconciliation measures.

Since its adoption, the Byrd Rule has been successfully employed to strike a variety of provisions from reconciliation bills. These have included amendments addressing the commercial use of bovine growth hormone in other countries, abstinence programs, and a proposal to enroll members of Congress in Medicaid. In 2021, Republicans invoked the Byrd rule to remove a proposed increase in the federal minimum wage from the American Rescue Plan. More recently, it was used to exclude several healthcare policy provisions from the Inflation Reduction Act.

The Senate Parliamentarian

Notably, the Byrd Rule is not self-executing; a senator must raise a point of order to challenge whether a section of a bill is extraneous. The non-partisan Senate parliamentarian then determines if the provision in question violates the rule. The current Senate parliamentarian, Elizabeth MacDonough, has served in the role since 2012.

Pros and Cons of Reconciliation

Proponents argue that reconciliation is an efficient way to address pressing fiscal matters without being hindered by Senate gridlock. It has enabled the passage of significant legislation, such as the Affordable Care Act’s expansion of Medicaid and recent pandemic relief measures. However, critics highlight its potential for partisan misuse, as the process increasingly serves as a tool for the majority party to enact sweeping policy changes without bipartisan support. The Byrd Rule’s complexities and the parliamentarian’s role in interpreting it also add procedural hurdles, sometimes undermining the intent of the process.

Looking ahead

Only one reconciliation bill can be passed per fiscal year. Because Congress has not passed a reconciliation bill for FY 2025, Republicans have the option of passing two in the upcoming term. While President-elect Trump has said he would like “one big, beautiful bill,” he has conceded that he “could live” with two in order to achieve his policy goals “as long as we get some passed as quickly as possible.”