The 100-member Senate normally requires 60 votes to pass legislation. In an era of deep partisan division, it is difficult to assemble such a “super-majority.” The “Congressional Budget Act of 1974” created a device to by-pass this obstacle.[1] It is called “Reconciliation.” This device requires only 51 votes to pass certain specific kinds of legislation related to the budget. What are the basic rules of “Reconciliation”? First, the required 51 votes can consist of 51 Senators, or of 50 Senators plus the vote of the Vice President. Second, the bills must deal with a) mandatory spending, b) revenue, or c) the federal debt limit. The bills can also deal with more than one of these categories in the same bill. Third, the Senate can pass one bill dealing with each of these categories each year. Fourth, non-budget issues are excluded; changes to Social Security are excluded; and the bill must not increase the federal debt after 10 years.[2]
Two recent bills passed by means of “Reconciliation” are worth noting. The first is the “American Rescue Plan Act of 2021.”[3] The bill proposed spending $1.9 trillion to accelerate recovery from the economic effects of the COVID 19 pandemic and the related recession. The bill raised taxes on some wealthy individuals and on some corporations. The tax increases were projected to raise $60 billion in revenue. That is, it proposed to spend $1.84 trillion not covered by revenue. The bill ticked a lot of Democratic social policy boxes. Republicans criticized it from an economic perspective: it was labeled a ‘stimulus” bill when such “stimulus” was not longer needed. They may have had a point. The Federal Reserve Bank of San Francisco later (2022) calculated that the “American Rescue Plan Act of 2021,” in combination with the earlier “CARES Act” (2020) raised the core inflation rate by 3 percent by the end of 2021.
The second bill is the “Inflation Reduction Act” (2022).[4] Key elements of the bill addressed salient Democratic concerns: lowering prescription drug prices and fostering “green” energy. The bill proposed substantially less spending than did the “American Rescue Plan”: $891 billion. It also proposed to raise much more revenue from taxes on the wealthy: $738 billion. Thus, it spent $1.53 billion more than it took in. The Congressional Budget Office estimated that the “Inflation Reduction Act” would not reduce inflation in 2022 or 2023. The Tax Policy Center[5] estimated that the top 1 percent of taxpayers would see a 0.2 percent increase in their tax rate, and the 80-99th percentile a 0-0.1 percent increase. This is hardly draconian.
Which is exactly the point. “Make the rich pay their fair share of taxes” is a long-running and standard Democratic message. It has broad support among Democratic voters.[6] Why didn’t Democratic politicians include real and big tax increases on the wealthy in bills they passed by reconciliation? Perhaps one politician’s off-guard remark explains why: “you need both a public and a private position.”[7] This not a uniquely Democratic stance. It explains much.
[1] Which means that we have been dealing with a deeply divided Senate—and country—for better than 50 years. It isn’t such a new phenomenon. That doesn’t mean that the issues dividing the country have remained the same or that the voter line-ups have remained the same.
[2] Reconciliation (United States Congress) – Wikipedia
[3] American Rescue Plan Act of 2021 – Wikipedia
[4] Inflation Reduction Act – Wikipedia
[5] Tax Policy Center – Wikipedia
[6] See the excellent analysis in Americans’ top frustrations with the federal tax system | Pew Research Center
[7] Clinton’s Two-faced (Private v. Public) Policy on TPP
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