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The 2020 Election and the Economy: Part III

Executive Summary

In part I of our series on the 2020 election and the U.S. economy, we examined some of the key facts about the election as it currently stands. In part II, we tackled where the candidates stand on some of the major economic policy issues. In this report, the final in our series, we delve into the actual process by which some of these proposals could become law. We examine three policymaking avenues: regular order legislation, budget reconciliation and executive orders/regulatory policy. Each of these policymaking tools comes with its own pros and cons. Regular order legislation is the most powerful tool for rewriting or creating new laws, but it often comes with the highest political hurdles given that this type of legislation can be filibustered in the Senate. Budget reconciliation is a privileged form of legislation that helps policymakers avoid the filibuster, but its special status comes with a series of rules that can make it unwieldy for some types of sweeping policy change. Actions taken by the executive branch, such as executive orders or the appointing of individuals to head key regulatory agencies, often require the least cooperation from Congress, but their power to impact the law is also often more limited, and action taken by one administration can often be reversed by its successor.

Regular Order Legislation: The Simplest Approach

It can be easy to forget that the most straightforward way to change the law at the federal level is simply for Congress to pass a bill through regular order and then have the president sign it into law. One or both chambers of Congress begin by writing and debating legislation in the relevant committees, and over time this legislation can eventually move to the full chambers. From there, one chamber can pass the legislation and then send it to the other, or both chambers can pass their own bills, and then meet in a conference committee to hash out the differences. Regardless, in order for a bill to become a law, the bill must pass both the House and Senate, each with a simple majority, after which it is sent to the president, who can either sign it into law or veto it.

When done this way, many of the challenges associated with budget reconciliation or executive orders dissipate. For example, while the budget impact of the bill as determined by the Congressional Budget Office may matter politically, it is much easier to blow up the deficit in regular order legislation than it is through budget reconciliation, which we will discuss in the next section. And regular order legislation can much more expansively and freely change and create laws across a whole host of policy areas, unlike reconciliation or executive orders.

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Thus, an expansive policy overhaul such as Medicare for All would be best suited to regular order legislation. The challenge is that regular order legislation can, in most circumstances, be filibustered in the Senate. More specifically, it takes 60 U.S. senators to invoke cloture, or end a filibuster (Figure 1). This means that, in practice, a determined minority of senators with at least 41 seats can hold up all sorts of legislation. In partisan times like these, the inability to clear legislation with less than 60 votes is one reason policymakers have struggled to enact new legislation (Figure 2).

In response to the increasing use of the filibuster, legislators have turned to other tools, such as budget reconciliation and executive orders, to achieve their policy priorities. That said, it is important to keep in mind that a simple majority of senators could turn to the “nuclear option” and end the filibuster, as has already been done for cabinet-level nominees as well as Supreme Court nominees. At this point in time, support for this option appears limited in both parties. Should it happen, however, it would open the door to far more wide-reaching policy reform than is likely under the status quo.

Budget Reconciliation: A Key Tool in Modern Policymaking

Budget reconciliation is a term that has grown in importance and relevance in recent years. In short, reconciliation is a fast-track procedure designed to help policymakers make changes to mandatory spending programs and tax policy. Discretionary spending, which includes components of the budget like defense spending, foreign aid and spending on most government agencies such as the Environmental Protection Agency, is determined once a year during the annual appropriations process. Mandatory spending on programs such as Medicare or Medicaid, however, is set by predetermined eligibility requirements, such as age or income. In addition, most aspects of the tax code remain the same from year to year. As a result, mandatory spending and the tax code operate a bit more on autopilot than the discretionary spending side. Reconciliation offers Congress a tool with which it can alter these parts of the budget by reconciling current law with the priorities established in the annual budget resolution.

Reconciliation has gained prominence in these partisan times due to its privileged status; final passage requires a simple majority, and debate time in the Senate is limited, preventing a filibuster by the minority party. Passing legislation through reconciliation is often a much easier hurdle to clear than the de facto 60-vote threshold needed to end a filibuster when considering legislation in the more traditional way. The Tax Cuts and Jobs Act passed at the end of 2017 was done using reconciliation, as were the Bush tax cuts in the early 2000s. A portion of the Affordable Care Act (ACA) was also enacted through reconciliation, and the failed Republican ACA repeal effort in 2017 attempted to use the reconciliation process too.

Because of its special rules, the contents of a reconciliation bill are tightly controlled.1 Several of these restrictions fall under the “Byrd Rule,” which governs what is and is not allowed under reconciliation. A provision of a reconciliation bill violates the Byrd Rule if any of the following apply:

  • It does not produce a change in outlays or revenue.
  • The net budgetary effect of a title reported by the reconciled committee is such that the committee does not achieve its fiscal target (“title” here loosely meaning a broad section of the bill).
  • The committee reports a title containing matter outside its jurisdiction.
  • The budgetary effects of a provision are “merely incidental” to the overall policy objective.
  • The reported title causes an increase in the deficit in any year outside the budget window2.
  • The provision makes changes to the retirement and disability programs in Title II of the Social Security Act.

Broadly speaking, these restrictions are designed to help ensure that Congress utilizes reconciliation for its original budget-related purpose and not simply to take advantage of the special rules governing this t