Other CRFB Papers

Report: Analysis of the 2015 Social Security Trustees' Report

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Today, the Social Security and Medicare Trustees released their annual reports on the financial health of the programs. Although these projections show some improvements relative to last year, they nonetheless show both programs continue to face large shortfalls that will grow over time. With regards to Social Security, the Trustees show that:

  • The Social Security Disability Insurance (DI) trust fund is on the brink of depletion, and is projected to be exhausted in late 2016 – just over a year from today. Absent legislation, beneficiaries in that program would face an immediate 19 percent across-the-board benefit cut.
  • On a combined basis, or assuming reallocation or interfund borrowing, the Old Age, Survivors, and Disability Insurance (OASDI) trust funds are projected to be exhausted in 2034. At that point, all beneficiaries would face an immediate 21 percent across-the-board benefit cut, which would grow to more than 27 percent by 2090.
  • Over 75 years, Social Security’s actuarial imbalance totals 2.68 percent of taxable payroll, or about 0.96 percent of GDP.
  • The gap between Social Security spending and revenues is projected to grow from 1.3 percent of payroll (0.46 percent of GDP) this year to 3.5 percent of payroll (1.26 percent of GDP) by 2040 and 4.7 percent of payroll (1.62 percent of GDP) by 2090.
  • Overall, this year’s report represents an improvement over last year’s, which showed a combined trust fund exhaustion date of 2033 (one year sooner) and a 75-year actuarial imbalance of 2.88 percent of payroll (0.20 percentage points higher).

Although the projections have slightly improved, Social Security’s long-term outlook is fundamentally unchanged. The SSDI trust fund will be depleted next year, and the combined trust funds by the time today’s 48-year-olds reach the normal retirement age – or when today’s newest retirees turn 81.

Policymakers must act quickly to put Social Security on a path toward solvency. As time goes on, it will be more difficult to secure the Social Security programs for current and future generations with thoughtful changes instead of abrupt benefit cuts or tax increases.

Read the full report below, or at this link (pdf).

Avoiding Budget Gimmicks Chartbook: 2015

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For additional budget process resources including specific options for reform, visit our Better Budget Process Initiative home page.

 

A previous version of this chartbook is available at Chartbook: Avoiding Budget Gimmicks and explanations of the previous charts are included on the blog Everything You Need to Know About Budget Gimmicks, in 8 Charts.

Four Gimmicks to Watch Out For

As Congress begins the appropriations process, maneuvers through this year’s Fiscal Speed Bumps, and looks to pay for the costs of new legislation, they may be tempted to rely on budgetary slights-of-hand in order to avoid hard choices. With debt already at record-high levels, these budget gimmicks will both worsen the fiscal situation and undermine Congress’ credibility.

Here are four gimmicks to watch out for. See illustrations of these and other gimmicks in our chartbook:

  1. Pension Smoothing: Some policies would save money in the near-term by shifting revenues from the future, taking advantage of the ten-year Congressional budget window. One specific policy called “pension smoothing” would reduce employer pension contribution requirements (increasing taxable profit) initially and increase them (reducing taxable profit) later. The policy would raise revenue in the first decade but lose that same revenue afterwards, and thus should not be used as a pay-for.
  2. OCO Defense Slush Fund: Non-war defense spending is capped under current law and limited by “sequestration.” But the caps can be circumvented by designating some non-war defense spending as “Overseas Contingency Operations” (OCO) funds, which are exempt from spending limits. The current budget resolution allows appropriators to spend $96 billion on OCO, even though the Pentagon only requested $58 billion, using the account as a slush fund. Any significant divergence from the Pentagon request would represent a gimmick meant to inflate defense spending.
  3. Phony CHIMPs: Just as policymakers may use the OCO designation to exceed defense spending caps, they may use savings from CHIMPs – or Changes in Mandatory Programs – to thwart the non-defense caps. CHIMPs allow policymakers to offset discretionary spending over current limits with mandatory spending cuts. While the principle is sensible, in reality most of the mandatory cuts either reduce spending that would have never occurred or count one-year spending delays as if they are spending cuts. The use of this gimmick has increased since 2011 and should ultimately be discontinued.
  4. Double Counting Tax Reform Revenue: The same money cannot be used twice, but complicated budget conventions sometimes allow policymakers to claim it can. For example, they may use the same revenue to simultaneously pay for rate reduction and finance spending from the Highway Trust Fund. Revenue raised should only be used for one purpose or the other.

 

For additional budget process resources including specific options for reform, visit our Better Budget Process Initiative home page.

 

Op-Ed: Paving the Way for Sustainable HIghway Financing

RealClearPolicy | May 21, 2015

Congress faces yet another deadline, and yet again is set to stall. This time, there literally could be a bumpy road ahead.

The current legislation authorizing highway and mass-transit spending is scheduled to expire at the end of the month. Not long after that, the Highway Trust Fund (HTF) will run out of reserves, which will cause road-improvement projects across the country to grind to a halt. Legislative action is required to avoid delaying critical infrastructure projects and the jobs they produce.

A two-month extension of highway funding has already been passed by the House and is likely to be enacted soon. Lawmakers should use the extra time to end the cycle of temporary fixes and produce a long-term solution that is free of gimmicks and is fiscally responsible.

Another short-term extension is in keeping with Washington's recent track record in dealing with similar circumstances. Time after time, deadlines have been nearly missed or even outright disregarded when it comes to important budget and fiscal matters. Lawmakers have often kicked the can down the road with short-term patches, only to be forced to address the same issue again and again. Steering haphazardly over these "fiscal speed bumps" has imperiled the nation's finances and caused voters to question the ability of Congress to function.

In the relatively few instances when an issue was actually resolved, it was done in a way that worsened the already unsustainable long-term national debt outlook. This was the case with the recent "doc fix" that permanently replaced the Sustainable Growth Rate (SGR) formula for Medicare payments to physicians. By our calculations, the "fix" will add over $500 billion to the long-term debt.

Now, Congress faces a highway-funding shortfall of about $175 billion over the next decade. That's the equivalent of a 14-cent-per-gallon gas-tax increase, or more than a 35 percent cut in future spending.

After multiple temporary patches, lawmakers want to kick the can yet again, this time in the hopes that tax reform can be enacted later this year and can provide revenue for the Highway Trust Fund.

With our infrastructure spending underfunded and our tax code badly in need of reform, marrying tax and highway policy offers a rare two-for. But passing tax reform is also very hard — which is why it hasn't happened in almost 30 years — and counting on its passage to fund current highway projects puts those and future projects at risk.

Legislators must come up with a plan that charts a course for stable highway funding while avoiding potholes and wrong turns without driving up the debt.

My colleagues at the Committee for a Responsible Federal Budget and I have written a new paper, "The Road to Sustainable Highway Spending," that lays out such a plan — one that would encourage the passage of tax reform to fund highway spending, but not count on it to keep the program solvent.

The proposal has three components:

  1. Get the trust fund up to speed by paying off $25 billion of "legacy costs" from past highway commitments by reducing unnecessary farm subsidies and extending certain spending cuts from the Ryan-Murray budget deal.
  2. Bridge the financing gap by ensuring that revenue and spending remain closely in line through a default policy that schedules a 9-cent gas-tax increase one year in the future and limits annual highway spending to revenue collection and interest income.
  3. Create a fast lane to tax and transportation reform that uses a special process to give Congress the opportunity to utilize tax reform to find alternative revenue to replace some or all of the scheduled gas-tax increase, pay for higher infrastructure spending, or both.

The plan described above gives Congress both the power and the responsibility to decide how we should finance our infrastructure spending and how large the federal investment should be. But it ensures that every dollar of highway spending is fully paid for, and puts an end to the process of temporary gimmick-ridden patches that pave over the real problem.

We face a rocky road for highway funding because policymakers refuse to work together and make the decisions necessary to move forward. There are lots of options available; Congress must build on those ideas. In "The Road to Sustainable Highway Spending," we illustrate one potential route.

We can't afford any more "my way or the highway" attitude from lawmakers. We need collaboration and leadership. It's time to get to work.

Marc Goldwein is the Senior Vice President and Senior Policy Director of the Committee for a Responsible Federal Budget.

The Road to Sustainable Highway Spending

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The current legislation authorizing highway and mass transit spending is scheduled to expire at the end of May, and only a few months later the Highway Trust Fund will run out of reserves. Extending the life of the trust fund through the end of the year will require $11 billion, and extending it for a decade will require nearly $175 billion.

For over 50 years, federal highway spending had been financed with dedicated revenue, mainly from the gas tax. Since 2008, however, dedicated revenues have fallen short of spending, and policymakers have covered the difference with about $65 billion of general revenue transfers – often without truly paying for the cost. Those transfers are projected to run out before the end of the year, disrupting infrastructure spending across the county.

To maintain important infrastructure investments and avoid adding an additional $175 billion to the debt, Congress must identify responsible solutions to close the shortfall in the Highway Trust Fund. Fortunately, Congress has many options at its disposal to do so (see Appendix for more).

One solution that has recently gained popularity would rely on revenue generated from business tax reform to close some of the $175 billion gap. While this would be a sensible solution, tax reform will not pass before the current highway bill expires, and there is a risk it will not pass at all this year.

CRFB’s plan, The Road to Sustainable Highway Spending, would encourage the passage of tax reform while also ensuring the Highway Trust Fund remains adequately funded regardless of tax reform’s fate. The plan would:

  1. Get the Trust Fund Up to Speed ($25 billion) by paying the “legacy costs” of pre-2015 obligations with savings elsewhere in the budget.
  2. Bridge the Financing Gap ($150 billion) with a default policy to raise the gas tax by 9 cents after a year and limit annual spending to income.
  3. Create a Fast Lane to Tax Reform to help Congress identify alternative financing before the gas tax increase and spending limits take effect.

The Road to Sustainable Highway Spending would ensure the Highway Trust Fund remains solvent while giving policymakers flexibility to decide the level of highway spending and how it would be paid for. Our plan represents just one of many possible solutions. Importantly, any solution must responsibly address the gap between spending and revenue without resorting to gimmicks or deficit-financed transfers.

The full paper can be read below, or downloaded here. A 1-page summary is available here.

Updated Appropriations 101

What are appropriations?

Appropriations are annual decisions made by Congress about how the federal government spends some of its money. In general, the appropriations process addresses the discretionary portion of the budget – spending ranging from national defense to food safety to education to federal employee salaries, but excludes mandatory spending, such as Medicare and Social Security, which is spent automatically according to formulas.

How does Congress determine the total level of appropriations?

Under current law, after the President submits the Administration’s budget proposal to Congress, the House and Senate Budget Committees are each directed to report a budget resolution, which if passed by their respective houses, would then be reconciled in a budget conference (see Q&A: Everything You Need to Know About a Budget Conference). The resulting budget resolution, which is a concurrent resolution and therefore not signed by the President, includes what is known as a 302(a) allocation that sets a total amount of money for the Appropriations Committees to spend. For example, the conferenced budget between the House and Senate set the 302(a) limit for FY 2016 at $1.017 trillion.

In addition, discretionary spending is currently subject to statutory spending caps. The Budget Control Act of 2011 set discretionary caps through 2021, which were modified for 2013, 2014, and 2015 by the American Taxpayer Relief Act of 2012 and Bipartisan Budget Act of 2013. Beyond 2015, the statutory caps set by the Budget Control Act are reduced by about $90 billion annually through an enforcement mechanism known as “sequestration” (see Understanding the Sequester) implemented after the failure of the Joint Select Committee on Deficit Reduction to produce legislation to reduce the debt.

How does Congress allocate appropriations?

Once they receive 302(a) allocations, the House and Senate Appropriations Committees set 302(b) allocations to divide total appropriations among 12 subcommittees, each dealing with a different part of the budget. Those subcommittees must then decide how to distribute funds within their 302(b) allocations. These 302(b) allocations are voted on by the respective Appropriations Committees but are not subject to review or vote by the full House or Senate. The table below lists the FY 2015 regular (non-war, non-disaster) appropriations, along with the House FY 2016 302(b) allocations for each of the subcommittees.


Source: House Appropriations Committee, Senate Appropriations Committee, CBO.

Each subcommittee must propose a bill that ultimately must pass both chambers of Congress and be signed by the President to take effect. Although the budget process calls for 12 individual bills, many of them are often combined into what is known as an omnibus appropriations bill and sometimes a few are combined into what has been termed a minibus appropriations bill.

How are appropriations levels enforced?

If any appropriations bill or amendment in either house exceeds the 302(b) allocation for that bill, causes total spending to exceed the 302(a) allocation, or causes total spending to exceed statutory spending caps, then any Member of Congress can raise a budget “point of order” against consideration of the bill. The point of order can be waived by a simple majority in the House as part of the rule for floor consideration of the bill and overridden by a 60-vote majority in the Senate. If, despite these points of order, Congress enacts legislation increasing spending beyond the defense or non-defense caps, then the President must issue a sequestration order to reduce discretionary spending across-the-board in the category in which the caps were exceeded, effective 15 days after Congress adjourns for the year. Importantly, certain types of discretionary spending – including for overseas contingency operations and for designated emergencies – do not count against the statutory caps.

What happens if funds are needed outside of the appropriations process?

Congress can pass a supplemental appropriations bill in situations that require additional funding immediately, rather than waiting until the following year’s appropriations process. Supplementals are often used for emergencies such as natural disasters or military actions. Occasionally, Congress has used supplemental appropriations to stimulate the economy or to provide more money for routine government functions after determining that the amount originally appropriated was insufficient. Supplemental appropriations bills are subject to the same internal and statutory spending limits as regular appropriations. They require the same offsets to ensure they do not exceed spending limits, unless designated as emergency spending.

What role does the President play in the appropriations process?

Although the President has no power to set appropriations, he influences both the size and composition of appropriations by sending requests to Congress. Specifically, each year the President’s Office of Management and Budget (OMB) submits a detailed budget proposal to Congress based on requests from agencies. The appendix to the President’s budget submission contains much of the technical information and legislative language used by the Appropriations Committees. In addition, the President must sign or veto each of the 12 appropriations bills, giving him additional influence over what the bills look like.

What is the timeline for appropriations?

The 1974 Budget Act calls for the President to submit his budget request by the first Monday in February and for Congress to agree to a concurrent budget resolution by April 15th. The House may begin consideration of appropriations bills on May 15th even if a budget resolution has not been adopted, and is supposed to complete action on appropriations bills by June 30th. However, none of these deadlines are enforceable and they are regularly missed. The practical deadline for passage of appropriations is October 1st, when the next fiscal year begins and the previous appropriation bills expire. For a full timeline of the budget process, click here.

What happens if appropriations bills do not pass by October 1st?

If the appropriations bills are not enacted before the fiscal year begins on October 1st, federal funding will lapse, resulting in a government shutdown. To avoid a shutdown, Congress may pass a continuing resolution (CR), which allows for continued funding, providing additional time for completion of the appropriations process. If Congress has passed some, but not all, of the 12 appropriations bills, a partial government shutdown can occur.

What is a continuing resolution?

A continuing resolution, often referred to as a CR, is a temporary bill that continues funding for all programs based on a fixed formula, usually at or at least based on the prior year funding levels. Congress can pass a CR for all or just some of the appropriations bills. CRs can increase or decrease funding and can include “anomalies,” which adjust spending in certain accounts to avoid technical or administrative problems caused by continuing funding at current levels, or for other reasons.

What happens during a government shutdown?

A shutdown represents a lapse in available funding, and during a shutdown the government stops most non-essential activities related to the discretionary budget. To learn more, see Q&A: Everything You Should Know About Government Shutdowns.

Do agencies have any discretion in how they use funds from appropriators?

Executive branch agencies must spend funds provided by Congress in the manner directed by Congress in the text of the appropriations bills. Appropriations bills often contain accompanying report language with additional directions, which are not legally binding but are generally followed by agencies. And in some instances, Congress will provide for very narrow authority or can use funding limitation clauses to tell agencies what they cannot spend the money on. That said, Congress often provides broad authority, which gives agencies more control in allocating spending.  Agencies also have some authority to reprogram funds between accounts after notifying (and in some cases getting approval from) the Appropriations Committees.

What is the difference between appropriations and authorizations?

Authorization bills create, extend, or make changes to the law and specific programs and specify the amount of money that appropriators may spend on a specific program (some authorizations are open ended). Appropriations bills then provide the discretionary funding available to agencies and programs that have already been authorized. For example, an authorization measure may create a food inspection program and set a funding limit for the next five years. However, that program is not funded by Congress until an appropriations measure is signed into law. The authorization bill designs the rules and sets out the details for the program, while the appropriations bill provides the actual resources to execute the program. In the case of mandatory spending, an authorization bill both authorizes and appropriates the funding for a specific program, without requiring a subsequent appropriations law.

Where are the House and Senate in the current appropriations process?

The Senate and House have set a 302(a) allocation level of $1.017 trillion for regular appropriations pursuant to the budget conference agreement. The House has passed the agreement and the Senate is expected to do so in the near future. The House Appropriations Committee has issued the 302(b) subcommittee allocations (see table above), while the Senate has yet to do so. Currently, the House is passing individual appropriations bills through committee and has already begun floor consideration, while the Senate is holding subcommittee hearings. To follow the progress of individual appropriations bills throughout the process, see our Appropriations Watch: FY 2016.

Q&A: Everything You Need to Know About a Budget Conference

This year, Congress made it a priority to pass a concurrent budget resolution. Both the House of Representatives and Senate passed their own budget plans at the end of March, and now they must work through the differences in the two budgets through a budget conference committee. This week, both chambers began the process and appointed conferees to serve on the committee.  Below, we explain how this budget conference will work, and what it intends to accomplish.

What is a budget conference?

A budget conference is a process by which the House and Senate iron out the differences in the budget resolutions they each passed separately to arrive at a unified “concurrent budget resolution” that each chamber will then adopt. The leaders of each party and budget committee in both houses choose members to participate in the conference committee.

Over what time period will the conference negotiate?

According to the Budget Act of 1974, which created the current budget process, a budget conference is supposed to be completed and the resolution passed by both chambers by April 15th. Obviously, Congress has not met this deadline – and indeed it is routinely missed. However, Senate Budget Committee Chairman Mike Enzi (R-WY) and House Budget Committee Chairman Tom Price (R-GA) have already been negotiating ahead of a formal conference, and formal negotiations will begin shortly now that conferees have been named. A formal meeting of the conference committee will occur on April 20th, after which a timeline for completion may become clearer.

Who is in the budget conference?

The budget conference committee will consist of 30 lawmakers – 22 from the Senate and 8 from the House of Representatives. Of the Senate members, 12 are Republicans and 10 are Democrats (including two independents caucusing with Democrats). Of the House members, 5 are Republicans and 3 are Democrats. The conference committee is chaired by Representative Tom Price (R-GA) and Senator Mike Enzi (R-WY), and includes Representatives Diane Black (R-TN), Mario Diaz-Balart (R-FL), John Moolenaar (R-MI), Gwen Moore (D-WI), Todd Rokita (R-IN), Chris Van Hollen (D-MD), and John Yarmuth (D-KY) and Senators Kelly Ayotte (R-NH), Tammy Baldwin (D-WI), Bob Corker (R-TN), Mike Crapo (R-ID), Tim Kaine (D-VA), Angus King (I-ME), Lindsey Graham (R-SC), Chuck Grassley (R-IA), Ron Johnson (R-WI), Jeff Merkley (D-OR), David Perdue (R-GA), Rob Portman (R-OH), Bernie Sanders (I-VT), Jeff Sessions (R-AL), Debbie Stabenow (D-MI), Pat Toomey (R-PA), Mark Warner (D-VA), Sheldon Whitehouse (D-RI), Roger Wicker (R-MS), and Ron Wyden (D-OR).

How many people have to agree to the recommendations?

In order for the conference committee to offer recommendations, the proposal must be agreed upon by a majority of each chamber’s representatives to the conference. From a practical standpoint, that probably means all Republican members of the conference committee will need to support the package.  Once agreed upon, the budget resolution is sent to the House and Senate for a vote, where a simple majority will be required for passage.

What is a concurrent budget resolution?

A budget resolution is a blueprint outlining intended revenue levels and spending by category for the coming fiscal year as well as future years. It does so by setting the top-line spending and revenue numbers along with various processes to achieve those numbers, but it does not specify exactly how the funds should be spent nor mandate any specific policy changes.

A concurrent budget resolution is a budget resolution agreed to by both chambers of Congress. Importantly, while both the House and Senate must vote in support of this resolution, it is not signed by the President and thus not legally binding.

While a budget resolution does not, by itself, carry the force of law, it can establish rules in both chambers of Congress in ways that make future laws easier to enact. A budget resolution can be an important component of any ultimate budget agreement for at least four reasons. First, budget resolutions set the top-line spending levels and establish safeguards preventing those levels from being exceeded. Second, budget resolutions can establish rules governing debate over legislation that impacts the budget. Third, budget resolutions can include a process known as reconciliation that requires the various committees to achieve a certain amount of deficit reduction and removes legislative hurdles (such as the filibuster in the Senate) for legislation that meets the given targets and other criteria. And finally, concurrent budget resolutions can represent an important political agreement between the chambers on future fiscal policy.

What cannot be decided in a budget resolution?

While a budget resolution sets spending limits for committees of jurisdiction and may include instructions for savings that must be achieved, it does not determine the allocation of funds within that limit or dictate how any assumed savings can be achieved. With regards to annual appropriated funds, the budget resolution can set top-line numbers but not determine where money is allocated within agencies. With regard to mandatory spending and revenue, the resolution can set targets but cannot specify what policies would achieve these targets.

In addition to not being able to set specific policies, a budget resolution cannot set even top-line numbers when it comes to Social Security or the Postal Service, both of which are considered “off-budget.”

Finally, and perhaps most importantly, budget resolutions cannot change actual tax or spending policy nor otherwise change the law.

What happens after the budget conference?

If the conference committee is able to reach an agreement on spending levels, revenue levels, and any reforms or instructions, the final resolution would receive expedited, or “fast track,” consideration in Congress. It can pass with only a majority of votes in the Senate as opposed to the 60-vote margin typically needed to overcome a filibuster. After the resolution has been approved by both chambers, the respective appropriations committees may work on funding bills to fit within the spending caps laid out in the budget resolution. In addition, if the budget resolution includes reconciliation instructions, the instructed committees must report legislation that complies with the instructions by the date specified in the budget resolution.

When was the last time we had a budget conference?

The last time a budget conference met was in the fall of 2013, after the agreement ending the government shutdown initiated a conference between the House and Senate budgets. The House budget under Chairman Paul Ryan (R-WI) was substantially different than the Senate budget by Chairman Patty Murray (D-WA). While the conference committee met publicly only once and did not conference a budget resolution, it did result in negotiations between the two chairs. The resulting Bipartisan Budget Act, also referred to as Ryan-Murray, successfully set spending levels for fiscal years 2014 and 2015.

When was the last time we had a conferenced concurrent budget resolution?

The last budget conference that resulted in a concurrent budget resolution passing both chambers took place in April 2009 (the budget resolution for Fiscal Year 2010). At that time, Democrats held majorities in both the House and Senate, so the resolutions were relatively similar. Among other things, the resolution provided reconciliation instructions for what would become the Health Care and Education Reconciliation Act, which was part of the Affordable Care Act.

Where are the two sides starting from as we enter the new budget conference?

The budgets passed by the House and Senate are similar in many ways, but there are differences that must be worked out. Some of these differences relate to the proposed spending levels. For example, starting in FY 2017 the House spends much less on non-defense discretionary spending than the Senate and also spends much more on defense discretionary spending. Meanwhile, the House saves less from the Medicare program than the Senate. All told, the House includes $5.5 trillion of deficit reduction compared to the Senate’s $4.9 trillion, and the House reaches balance in 2024, one year earlier than the Senate’s 2025. See “Debt and Deficits Under the FY 2016 Budgets” for more information.

Arguably much more important than the top-line numerical differences, however, are a number substantive differences between each budget. For example, the Senate budget includes a Deficit-Neutral Reserve Fund for sequester relief whereas the House budget uses Overseas Contingency Operations funding—a type of emergency spending—to provide defense sequester relief. In addition, the House budget provides reconciliation instructions—a fast track process for savings bills—for every committee with mandatory spending oversight whereas the Senate only gives these instructions to the Finance and Health, Education, Labor, and Pensions (HELP) committees. As a final example, both resolutions contain a variety of different budget process reforms that will also have to be agreed upon.

What is budget reconciliation?

Budget reconciliation is a process of expedited consideration for changes to mandatory spending programs or federal revenue. The budget resolution can provide reconciliation instructions to committees to achieve a certain level of savings. Lawmakers can pass a reconciliation bill with only a simple majority in the Senate without the threat of a filibuster. A special rule, known as the “Byrd Rule,” places limits on what can be considered in the reconciliation process. It prohibits provisions that are not related to mandatory spending or revenues, increase deficits beyond the timeframe covered by the resolution, or have no budgetary effect, among other limitations.

In total, 20 bills have been passed into law through reconciliation, including the 1990 Omnibus Budget Reconciliation Act, the Balanced Budget Act of 1997, the 2001 and 2003 tax cuts, and portions of the Affordable Care Act. Some of these efforts, such as the 1990 and 1993 Omnibus Budget Reconciliation Acts, have produced significant deficit reduction (each saved nearly $500 billion over five years) while others, such as the 2001 and 2003 tax cuts, have increased deficits. See a full comparison here.

How does the budget conference relate to the debt limit?

The budget resolution passed in the Senate included a provision prohibiting the Senate from considering any proposal from the conference committee that provides for an increase in the statutory debt limit. If this provision is kept in conference it would prevent a debt ceiling increase being approved through the reconciliation process under the 51-vote threshold. This means that the debt limit will have to be dealt with on a separate track. However, an agreement on a plan to reduce deficits as part of the budget conference may facilitate action on separate legislation increasing the debt limit.

What should policymakers do now?

The budget conference is a perfect place to instruct the relevant committees to find long-lasting solutions to our long-term fiscal challenges and to diminish the frequency and intensity of the showdowns the country has become accustomed to in the last few years. Both the House and Senate budget resolutions this spring called for putting debt on a downward path as a share of the economy, and the same should be expected from the conference committee recommendations and any subsequent action.

A conferenced concurrent resolution on the budget should allow authorizing committees to develop reconciliation legislation to meet the prescribed instructions for deficit reduction. Under the statutory time frame, the House may begin to consider Fiscal Year 2016 appropriations legislation on May 15th with a soft deadline of June 10th to pass all twelve appropriations bills through committee and complete all action in the House by the end of June. The Senate would, in theory, work on appropriations legislation on a similar time frame and the House and Senate would conference each bill. A hard deadline and major Fiscal Speed Bump exists on October 1st when the federal government’s discretionary funding runs out. All appropriations bills will need to be passed identically by both chambers and signed by the President to keep the government open and avoid a shutdown similar to the one in October of 2013.

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