REPUBLICANS, RECONCILIATION, AND TAX CUTS

The news is now filled with discussions of the House and Senate Republican majorities’ attempts to pass tax cuts and “tax reform”. There is a reason that they are dealing with those things now. Republicans badly need any kind of win. They also know, for reasons having to do with “reconciliation” that, for Republicans, that win is perhaps now or never. This is an attempt to explain reconciliation (You will be the only one on your block to understand it), and to explain why for Republicans the use of reconciliation is so necessary. This should make it easier to understand what is being said in the news about these tax cuts.

This is going to be a bit difficult, so let us plunge in: Our subject is the current effort by the Republican majority in the House and in the Senate to pass tax cuts and ultimately tax reform. We begin back in 1968 with Richard Nixon. Nixon had been Vice-President under Dwight Eisenhower for eight years. He was still Vice-President when he lost to John Kennedy in 1960. So, when he came back to run in again in 1968, he had already had eight years close to the presidency. From his previous experience with Eisenhower’s problems with budgeting, Nixon came into office determined to reform the budgeting process.

In our system, the president is the only one elected by all the voters. Yet up till Nixon’s reforms, the government’s annual budgets had been written by a nonpolitical agency, The Bureau of the Budget. The president would have a few days after the BOB finished with its budget to make some quick changes and then that budget would be sent over to the House of Representatives and to the Senate and they would create the final version. Nixon thought that the President of All the People had far too little input. Nixon also, as a Republican, was worried that the great departments he was supposed to administer, after many years of Democratic control, would resist a Republican president far away over in the White House. He wanted more control there too. So, in 1969, the Bureau of the Budget became the Office of Management and Budget (the OMB), with the Director and all the top people to be appointed by each incoming President. With the new system, the President would set budget limits for each department before the budget process began and the OMB’s budget writers would see that those limits were honored. The new OMB would also send people into the departments to be sure that the president’s directives were being followed.

It should be no surprise that people in the House and the Senate thought of this as a presidential power grab. They felt the need to get back in control of the process (Constitutionally, they were responsible for spending). So, in the Budget Act of 1974, they recast their part of the process by creating new Budget Committees in both the House and the Senate. Those budget committees (made up of members of the regular committees in both houses), would have to pass a combined budget resolution by April 15 of each year setting the Congress’s budget cap for each department (so that the President with his budget caps would not have the final say). Then if the departments created programs that would cost more than their assigned cap, there would have to be a final reconciliation resolution, passed by September 15, and the standing committees (Committee on Agriculture, the Armed Services Committee, and others), would have to make adjustments to bring their spending into line. The final budget bills (one for each department) would then have to be passed so that the departments could begin to spend the money on Oct 1, the beginning of the new fiscal year.

One more thing: the writers of the1974 Budget Act were concerned about how those adjustments effecting the departments’ spending could work when there were overruns (they would have only two weeks till October 1st). So, they allowed for a special reconciliation bill that would contain the necessary adjustments for all the departments so that the Congress’s original caps would not be violated. To help make that happen they decided that those reconciliation bills could not be filibustered in the Senate (they couldn’t be talked to death), and that they could pass in the Senate with no more than a simple majority (51 votes instead of the usual 60).

What has happened since is that Congress has figured out how to substitute a whole new bill for the one that was supposed to be used to reconcile departments’ budgets with Congressional caps. The new bill now just has to be related to revenue and deficits. So next week, if the Republicans can make their tax bill the substitute, they can get it through the Senate with 51 votes instead of 60. Then they will not need any Democratic votes at all (The Republicans have a forty four member plurality in the House but in the Senate it is much closer, with only 52 Republicans to 48 Democrats.). They need 51. They have 52. It’s a long shot but the only shot they have. If it were not for this reconciliation substitution their tax cuts would have no chance at all. Right now, the Republican majority is trying to pass the budget resolution that should have been passed back on April 15 (they are a bit behind). The Republican majority needs that combined budget resolution passed because it will provide them the instructions that will allow them to substitute their tax bill. They need the tax cuts to set the stage for tax reform and to keep the money from those wealthy donors flowing!

H.J. Rishel

10/21/2017

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