Over the past two days I have posted about the President’s new health care reform message, the Senate reconciliation process and how it might affect this fall’s health care debate.
Yesterday’s Byrd rule examples would allow a bill to pass the Senate, but with major parts possibly excised. A smart friend wrote that while Senator Reid may not be able to get the whole car through reconciliation, he could probably get the chassis, wheels, and engine. He could then come back in separate future bills to add things like seats, steering, and brakes.
And two smart friends wrote to tell me they think that clever Senate Democratic staff can draft around some of the Byrd rule problems I raised. They have convinced me that the public option can be drafted so that it is not vulnerable to the Byrd rule test I described yesterday. I still think the “health insurance consumer protections” are vulnerable. I received mixed views on the individual and employer mandates from a few experts.
But I missed the most important point. I was so focused on provisions that would not affect the budget and might therefore have to be removed, that I forgot to think about provisions that would affect the budget.
You will remember from the past two days that the reason Senator Reid might decide to use reconciliation is that he would then need only 51 votes to pass a bill through the Senate. If he cannot build a 60-vote coalition, either with Republicans or among his 60 Democrats, then he may feel his best option is to try a 51-vote strategy. Reconciliation is the only way he can do that.
If any rules place 60-vote requirements on a reconciliation bill, they seriously foul up that strategy. Yesterday I explained why certain non-budgetary provisions would violate the Byrd rule because they don’t affect the budget. If Senator Reid has 51-59 Senators in his coalition, then those provisions will drop out.
I missed that there are two other 60-vote requirements that are triggered by the spending in such a bill.
- There is another prong of the Byrd rule test, which in our case says in effect that if the reconciliation bill increases the budget deficit in any year after 2014, then the spending parts of the bill can be removed unless there are 60 votes to waive the Byrd rule.
- There is a separate Senate point of order against legislation that increases long-term budget deficits. If CBO says that this bill increases the budget deficit by more than $5 B for any of the following periods: 2020-2029, 2030-2039, 2040-2049, or 2050-2059, then the bill dies unless there are 60 votes to waive this point of order.
So imagine that Senator Reid has had clever staff redraft the Senate HELP Committee and Senate Finance Committee language to avoid most of the Byrd rule problems I described yesterday. Assume that he knows from the Senate parliamentarian that, while he will lose some components of the bill if he cannot get 60 votes to defend them, with 51 votes he’ll be able to pass most of the bill.
But then along comes Senator Loper, who is deeply concerned about the fiscal impact that long-term budget deficits will have on her three children. She raises the long-term budget point of order against the reconciliation bill. Assume she has an estimate from CBO which shows that the bill increases budget deficits by more than $5 B in the period 2020-2029. It might look like this key quote from CBO’s analysis of the House Tri-Committee bill, H.R. 3200:
In sum, relative to current law, the proposal would probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year budget window.
If Senator Reid cannot find 60 votes to waive that point of order, the entire bill dies.
Alternately, Senator Loper could raise Byrd rule points of order against the major spending components of the bill. But if she’s just trying to kill the whole thing, the long-term budget deficit point of order is a bigger weapon.
Since we do not yet have a full Senate bill to analyze, we can look at the House Tri-Committee bill for comparison. That bill fails the Byrd rule test: CBO says it would increase deficits in each year from 2015 to 2019. The above quote from CBO suggests CBO would also conclude the bill fails the second test.
Now the House bill’s authors would concede the House bill is incomplete, and that they intend to find bigger offsets. In recent weeks we have seen House Democrats struggle with the political pain of cutting spending or raising taxes. The bigger the gap that has to be closed, the more one has to cut spending or raise taxes, and the harder it is for Democratic leaders to muster the needed votes.
More importantly, income tax increases won’t do it, for reasons I have described before. Income taxes grow about 5% per year. The new proposed spending grow 8-9% per year. This means that, even if you meet Director Orszag’s “10th year test” and match spending and revenues in the 10th year (2019), the two lines will start separating and you’ll get increasing deficits in the long run. It is extremely difficult, and may be impossible, to meet the Senate’s long-term deficit test if the bill uses income tax increases as offsets.
Unless Senator Reid can find ways to make these bills not violate these two tests he will need 60 votes even to pass a reconciliation bill. All of a sudden reconciliation may not allow him to implement a 51-vote strategy.
If Senator Reid wants to use reconciliation to pursue a 51-vote strategy:
- He will have to redraft certain provisions (like the public option) to maximize their chances of surviving Byrd rule challenges. This is relatively easy.
- He will have to assume that certain other provisions will get knocked out of the bill by the Byrd rule. I think the health insurance consumer protections fall into this category.
- He will have to make sure the bill bill does not increase the long-term budget deficit, in any year beyond 2014 or by more than $5 B in any of the four decades beginning in 2020.
This last one is difficult. Extremely difficult. It may be practically impossible.
The President told MSNBC yesterday that in September Democrats might abandon their bipartisan talks with Republicans and choose a partisan route. If they do go partisan, they can either use the reconciliation process or try to get all 60 Senate Democrats to support a single bill. The President and his advisors would be wise not to underestimate the difficulty of the reconciliation path.