Parliamentarian Facing Key Rulings on Reconciliation Bill

      Among the most important decisions concerning the massive budget reconciliation bill pending in the Senate will be made far outside the glare of public attention.  Some time in the next week or so, a handful of Senate staff from each party will meet with Senate Parliamentarian Elizabeth MacDonough for a peculiar ritual known as a “Byrd Bath.”  Almost certainly, no senators will be present.  The result of these few hours of conversation will have a profound effect on the future of U.S. social policy.

     The budget reconciliation procedures Republicans are relying upon to move President Trump’s “One Big Beautiful Bill” provide one of the rare opportunities to circumvent the filibuster, which otherwise requires some bipartisan support for legislation to move.  Half a century ago, the Senate agreed to this deviation from its traditions of forced compromise to allow important fiscal legislation to move relatively unobstructed.  Senators were clear, however, that they did not want budget reconciliation’s reach to spread to allow narrow majorities to impose their will on primarily non-fiscal matters.  The Byrd Rule reflects that sentiment, blocking provisions that disregard Congress’s fiscal planning process, those with no clear fiscal impact, and any other if “it produces changes in outlays or revenues which are merely incidental to the non-budgetary components of the provision”.  Any such provisions may move in a reconciliation bill only if sixty senators – the same number required to end a filibuster – vote to waive the point of order.

     Previously the parliamentarian rejected Republican attempts to defund Planned Parenthood via reconciliation, ruling that anti-abortion fervor was driving the provision and any modest savings were “merely incidental” in its sponsors’ eyes.  Similarly, she prevented Democrats from increasing the minimum wage on reconciliation – an action that would have quite large impacts on taxes and benefit programs – because she judged that those effects were “merely incidental” to sponsors’ desire to transfer money from employers to low-wage workers.  Most controversially, in 2021 she rejected several proposals to give immigrants a path to citizenship – an initiative difficult to accomplish on regular legislation because of its large fiscal cost – because she saw changes in immigration regulation as its sponsors’ key motivation.  I disagree with some of her interpretations of the Congressional Budget Act but have defended the consistency with which she applies those interpretations. 

     The House-passed reconciliation bill is well-stocked with “Byrd bait”.  Some provisions will not take the Parliamentarian long.  The House’s effort to radically rewrite Administrative Law to hobble regulatory agencies obviously is pursuing a regulatory agenda, not a fiscal one.  Similarly, the effort in section 70302 of the House bill (and section 203 of the Senate Judiciary Committee’s proposal) to excuse the Trump Administration’s contempt of court orders does not even purport to have a fiscal purpose.  And section 70300 of the House bill (section 301 from the Senate Judiciary Committee) seeks to block certain settlements of suits against those causing environmental harm, not to change fiscal policy. 

     Others likely will entail a longer discussion.  Section 44111 would reduce federal matching payments for federal Medicaid coverage to states that separately spend their own funds providing comprehensive care to classes of immigrants not eligible for federal coverage.  If those states do not stop spending their own funds on immigrant health care, the bill would sharply reduce the federal matching rate for those states to implement the Affordable Care Act’s Medicaid expansion.  This raises a host of constitutional questions:  among other things, it is very much “a gun to the head” of the kind the Supreme Court held unconstitutional in NFIB v. Sebelius with respect to this same Medicaid expansion. 

     The Byrd Rule, however, does not bar unconstitutional provisions, only ones with primarily non-fiscal motivations.  (It is more than passing strange that it requires only fifty-one votes to override a point of order for violating the Constitution but sixty votes to breach a committee’s 302(a) allocation.) 

     Yet this provision’s fiscal effects, although substantial, also appear “merely incidental” to its non-fiscal effects in much the same way that the minimum wage and the path to citizenship were.  All three provisions would have had large positive or negative effects on the federal fisc, but all three are motivated by something other than federal fiscal policy:  federal regulatory policy (the minimum wage and the path to citizenship) or state fiscal policy (the pending provision on state-funded immigrant health care).  Merely changing someone’s health-care status (from insured to uninsured) is no more a matter of federal fiscal policy than changing their immigration status was in 2021. 

     A flat federal prohibition on states spending their own funds to provide health benefits to certain classes of immigrants would obviously be driven by immigration policy concerns.  That becomes no less true if one reconfigures the provision to obtain some fiscal effects by slashing separate federal payments to states.  

     Congress can, of course, attach conditions to grant programs to ensure efficient and appropriate expenditure of federal dollars, but that is not this provision.  It does not seek to regulate federal Medicaid funds but rather state-only spending.  And states’ spending on immigrant health care likely saves the federal government money by reducing the costs of uncompensated care that must be shifted onto other health care funders (such as Medicare and Medicaid).  It strains credibility to assert that primarily fiscal motives drove this provision’s sponsors to want to pressure states into acting to make their health care systems less efficient so the federal government’s costs can rise. 

     Other provisions of the House reconciliation bill also seem motivated by social policy rather than fiscal concerns.  For example, just as opposition to abortion rather than a desire for savings motivated attempts to defund Planned Parenthood through reconciliation, so too a desire to erode the separation of church and state as much as possible seems to be motivating section 110109 of the House Bill.  That section provides a 100% tax credit specifically for certain kinds of contributions to private schools in lieu of the usual deduction for charitable contributions.  Setting up test cases in the Supreme Court is not primarily fiscal policy. 

     Similarly, section 112008 of the House bill establishes a hellishly complicated “foreign entities of concern” test for the clean energy credits provided under the Inflation Reduction Act – and then eliminates the underlying credits.  Were the legislation preserving the credits, reasonable people could debate whether this new test is driven by fiscal concerns or the desire to make demonstrative statements about foreign policy.  Alternatively, if the legislation applied the “foreign entities of concern” test to tax preferences for the oil and gas industries – preferences that will continue – one might believe that it seeks to achieve meaningful fiscal effects.  As it stands, however, this provision is just one more demonstration of hostility for China, which is not fiscal policy. 

     Republicans’ narrow margins in both House and Senate seem to have discouraged their leadership from quashing obvious “Byrd bait” sought by Members.  The Parliamentarian therefore seems likely to have more work to do this year than on past reconciliation bills, where only a handful of provisions raised problems under the Byrd Rule.  In her thirteen years of service, spanning multiple changes in Senate control, this Parliamentarian has shown that she is up to the task.

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