Sunday, August 9, 2009

The Power of Reconciliation in the Health-Care Reform Debate

There is a lot of hushed talk about using the Reconciliation procedure to pass health-care reform in the Congress these days, so Americans need to know something about this obscure parliamentary procedure, and what is at stake.

Reconciliation is an optional, deficit-reducing procedure that was created in the 1974 Congressional Budget Act. The Reconciliation process is a two-stage process. First, Reconciliation directives must be included in the annual Budget Resolution (as they were in the 2010 Budget Resolution passed on April 29). These directives instruct the relevant Congressional committees to develop (in this case, health-care) legislation to meet certain spending or revenue targets. This year, the Reconciliation process can be used starting October 15, when the instructed committees can send their legislative recommendations to their respective Budget Committees, who then package all recommendations into one omnibus Reconciliation bill. Enter Stage 2,when this bill can then be considered on the floor of both chambers of Congress under expedited procedures; of greatest political note is the 20-hour limit on debate on any Reconciliation measure, which effectively strips the minority party of the filibustering option in the Senate. That means the Democrats can pass health-care reform with a simple majority.

But there is an attendant cost to the majority party for using Reconciliation. The Byrd rule, passed in 1985, sets out the rules for what Reconciliation can and cannot be used for. In particular, it specifies that Senators will be allowed to raise a point of order against "extraneous" provisions in a Reconciliation bill which, among other things, "would increase the deficit for a fiscal year beyond those covered by the reconciliation measure." Critically, cloture must be invoked to overcome a point of order. So the filibuster power is back.

Here's the bottom line. Since the Budget Act states that the Reconciliation measure covers the next ten years, the Byrd Rule had the effect of allowing a point of order to be raised against any spending increase (or tax cut) that does not contain a ten-year sunset provision. That's why the Bush tax cuts, passed via the Reconciliation route in 2001, 2003, and 2005, had sunset provisions written into them. If Democrats use Reconciliation, they will get a health-care bill, but it will expire.

Now let's talk politics. There's a debate within the debate that only seasoned politicos know about. Since the actual benefits of Reconciliation are mixed - a health-care bill can be passed with a simple majority in the Senate but it must have a sunset provision - the real power of Reconciliation is not in its actual usage, but in the mere threat of its usage.

The benefits of issuing the threat of going the Reconciliation route are akin to the threat of a presidential veto. The threat of a presidential veto sets the boundaries of permissible legislative action; it lets Congress know what is out-of-the-question and therefore powerfully guides legislative outcomes in the direction of the president's preferences. By letting it be known that they will resort to Reconciliation if they had to, Democrats in Congress are incentivizing Republicans to be part of the making of a bi-partisan bill rather than be shut out of a purely partisan one. In making the threat, Democrats are specifying the costs of Republican non-compliance to the tune of: "if we let you stay in the kitchen, at least you can determine some of the ingredients in the cake. Make us shut you out and you won't have even the slightest say."

Like the presidential veto, the power of Reconciliation is maximal at the level of a threat. For between the time a threat is issued and the time when a bill is passed (via Reconciliation or not), there is a powerful incentive for Republican Senators to come back to the bargaining table because there is the distinct possibility that they could be shut out. Reconciliation is the Democratic antidote to the Republican Party becoming the "Party of 'No'" For if Republicans keep saying "No," then they box themselves into the plea of Nolo Contendere.

That is why different spokespersons for the Democratic Party are keeping the Republicans guessing and making sporadic and cryptic references to the Reconciliation possibility. And Republicans are trying to minimize the power of the threat by characterizing it as a no-go "nuclear option." Unfortunately for Republicans, theirs is an empty threat because there is no Mutually Assured Destruction in this asymmetric power situation, and it is both a legal and political fact that, as the White House says, the Reconciliation option "is out there." It is a win-win situation for Democrats to issue the threat, for if Republicans are unmoved by the threat, Democrats could materialize the threat and get what they wanted having known that an effort at bipartisanship had failed anyway.

What is missed in the debate out there now is that the effect of Reconciliation is already underway, for its power lies in its threat.

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