After each election, lobbyists in Washington, D.C., like myself, work with clients to plan their legislative and regulatory agendas based on the outcomes in November. This year, not only did we have to await the results of two Senate runoff elections in Georgia, but the winners on January 5 realigned power in Washington and with it upended the agendas of businesses across the country.
With Democrats now in control of the White House and both chambers of the U.S. Congress, President Biden has an opportunity to move on many of his priorities promised on the campaign trail. For those of us planning for a Mitch McConnell and Republican-led Senate, our calculations changed overnight as Majority Leader Chuck Schumer takes control with a 50-50 tie broken by Vice President Kamala Harris.
Such a narrow majority for Democrats means they likely lack the votes to pass sweeping Green New Deal legislation, mandate universal health care or eliminate the Senate filibuster. In recent history, when a party controls both the House and Senate but lacks the 60 votes needed in the upper chamber to unilaterally advance legislation, the lawmakers move their priorities through a process known as reconciliation.
The process is not new, but the rules have changed over the years. In most recent history, following the loss of their 60-vote majority, Senate Democrats used reconciliation to pass the Affordable Care Act into law. In 2017, Republicans pushed through the Tax Cuts and Jobs Act also using reconciliation and also without a single vote from the opposition party.
What most Americans do not realize is that the legislative process today little resembles that in their civics textbooks. For most of the past two decades, rarely does a bill become law on its own because Congress attaches individual measures into a larger must-pass legislation, which is usually sent to the White House ahead of an impending deadline. Known as must-pass bills, these vehicles (also known as “Christmas trees”) can swell into the thousands of pages – as we saw with the 5,993-page COVID-relief and government-spending bill in December.
If Democrats move a reconciliation bill, it will dwarf the policy changes in that massive bill passed just months earlier and will only need 50 votes with Vice President Harris breaking the tie. Over the two-year cycle that comprises this 117th Congress, President Biden and Democrats could have multiple opportunities to move a reconciliation bill, but most expect a large measure in the spring focused on coronavirus stimulus and possibly infrastructure and health care.
Over the coming months, Americans will begin to hear more about the reconciliation process. While it may sound arcane, it will impact every American and business. The two main components to reconciliation are that you can pass virtually any budget and spending-related bill or program with only 50 Senate votes, and it must be revenue-neutral over 10 years. It is this second criteria that many believe will lead to tax increases to pay for the stimulus provisions in the bill.
As for businesses, they will potentially receive government support with one hand on the stimulus side of reconciliation, but the government may taketh away with the other hand in the form of increased taxes. Most sources in Washington do not believe most tax provisions would take effect in 2021 so as to not stifle economic growth, but they may come into place in 2022 or shortly thereafter.
One cannot understate the significance of Democrats winning both Georgia Senate seats and taking the majority, albeit a slim one. Biden does not have free reign to legislate, and guardrails exist in the form of moderate Democratic senators unwilling to advance certain bills.
There is no question progressives will seek to press Biden to move on their priorities, and they will have their opportunity in the form of reconciliation. But do not let the root of that word fool you – the parties will not reconcile their differences and compromise. Reconciliation allows one party to govern virtually unilaterally over the other, making this not just any old bill on Capitol Hill.