Budget reconciliation is a budgeting tool used to adjust taxes, spending, and deficits. Its purpose is to conform tax and spending policies with the budget resolution. It is a two-step process. Currently, Congress is working on step 1.
STEP 1 – Pass a budget resolution: The process begins by the House and Senate Budget Committees each passing budget resolutions. A budget resolution creates the reconciliation instructions that task various committees with drafting legislation that conforms to the budget resolution’s goals on revenue, spending, and deficit reduction or increases. Think of the budget resolution as the outline for an essay.
That budget resolution framework must then pass each chamber, and they must match in order to move forward with step 2 - the reconciliation process. The resolutions do not need to be signed by the President.
STEP 2 - Passing reconciliation instructions: The instructed committees submit their legislative recommendations to their respective Budget Committees by the deadline prescribed in the budget resolution.
Reconciliation instructions can require some committees to cut a certain amount in spending, or it can give certain committees a deficit allowance – i.e. up to $1 billion in deficit “spending.” This deficit allowance can be important for tax committees to be able to pass tax cuts, which on paper create a “deficit” (if not offset by cuts in spending elsewhere).
The last step is for both chambers to vote on the final product and, if passed by both, for the president to sign it into law.
The primary advantage to this process is that it bypasses the Senate filibuster, meaning that it can pass with a simple majority of 51 votes instead of needing the usual 60 votes to end debate and send the bill to a final vote before the entire chamber.
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