The Filibuster, the Fiscal Cliff, and the Costs of Congressional Procedure
Although overlooked in most news coverage, Congressional procedures play an important role in policy outcomes. Indeed, the fiscal cliff might not have even been an issue if not for the filibuster, which has pushed Congress to employ existing legislative procedures in ways that go beyond their intended purposes and resulted in sub optimal outcomes, such as the fiscal cliff.
The largest portion of the $600 billion fiscal cliff resulted from the expiration of the Bush tax cuts on Jan. 1st, 2013. But why were the tax cuts scheduled to expire?
The simple answer is that in 2001, Republicans weren’t sure if they had enough votes in the Senate to stop the Democrats from filibustering President Bush’s proposed tax cuts (see page 2 of this report), so Republicans in Congress used a filibuster-proof procedure called reconciliation to get the tax cuts through.
But this procedure—which was originally created in the 1974 Budget Act to give Congressional leaders greater control over the budget process and help reduce the deficit—requires that any policy passed through reconciliation be deficit-neutral over a specified time period, usually ten years.
If a policy in the reconciliation bill is not deemed deficit-neutral by the Congressional Budget Office (CBO), any member of the Senate can strike that policy from the reconciliation bill unless 60 senators vote otherwise. This particular aspect of the reconciliation process is called the Byrd Rule.
Since the Bush tax cuts would have decreased revenues but not spending, Republicans had to figure out a way to make the tax cuts deficit-neutral over the subsequent ten year period. To do this, they made it so that after nine years the tax cuts would expire. Thus, in the tenth year, tax rates would return to their previous levels, boosting revenues so that over the ten year period the tax cuts would be deficit-neutral.
The tax cuts were originally set to expire after 2010 but, given the weakness of the economy at the time, President Obama agreed to extend the cuts for another two years, which is why income taxes were set to automatically increase beginning on Jan. 1, 2013.
How does this relate to the filibuster debate? Well, those opposed to the filibuster often attack it for being anti-majoritarian. A strong counterargument to this critique, and one that I am sympathetic to, is that the filibuster does not lead to complete obstruction on issues that are critical to the majority party because they have the tools, like reconciliation, to overcome the filibuster.
However, using reconciliation is not costless.
As we saw with the fiscal cliff, Congress’s use of reconciliation contributed to a scenario where doing nothing could have had devastating economic effects. Given the 112th Congress’s reputation as one of the least productive or functional Congresses in history, people had reason to fear the worst, creating uncertainty that might have had negative economic effects (although see here) even though the cliff was averted.
Furthermore, crafting major fiscal policies that arbitrarily expire creates the perfect environment in our polarized Congress for partisan showdowns. Since much of Congressional disapproval stems from perceptions about the political process (see here and here), it’s likely that these showdowns further diminish [http:/] the public’s trust in our political institutions.
Another example is the Affordable Care Act, which was also passed via reconciliation. To meet the deficit-neutrality requirement, Democrats included cuts to Medicare reimbursement rates in the reconciliation bill and delayed major expenditures from the new healthcare program for a few years (see table 2 on page 18 of this report. Although some of these delays were logistical—the insurance exchanges, for example, would take some time to set up—it’s likely that Democrats would not have set up the policy the way that they did if not for the constraints placed on them by using reconciliation.
All of this suggests that using reconciliation to overcome the filibuster is not costless, and we should recognize its drawbacks as we contemplate filibuster reform.