Congress is considering using budget reconciliation – one of the budget’s most powerful tools – to help pass President Biden’s agenda. As a former chairman of the Senate Budget Committee, I am uniquely familiar with budget reconciliation. I have seen it used wisely, and I have seen it used recklessly, and I urge the Senate to reinstate the rule we put in place in 2007: the “Conrad Rule,” which prevents any reconciliation bill from increasing the deficit.
We first adopted the Conrad Rule because of reconciliation’s rampant misuse. At the core of reconciliation is its intention to align Congress’s tax and spending policies with its stated budgetary goals. Congress passes a budget with targets for outlays and revenues, and a reconciliation bill can be used to bring the law in line with those goals. In the past, this generally meant that we used reconciliation to decrease the budget deficit; however, in 2001 and 2003, Republicans used reconciliation to pass the Bush tax cuts, which greatly increased the deficit.
When Democrats took the Senate majority in 2007, we decided to end that practice by putting in place the Conrad Rule.
The Conrad Rule was successful during my tenure as Budget Committee chairman. In 2010, we used reconciliation to fix issues with the Affordable Care Act, but the rule ensured that we didn’t increase the deficit to do so. In fact, the Affordable Care Act helped to lower health care costs and improve the Medicare trust fund.
Unfortunately, when Republicans took over the Senate in 2015, the Conrad Rule was put out to pasture. Since then, reconciliation has been used twice to add $2 trillion each to the debt — in 2017, when Republicans passed the Tax Cuts and Jobs Act, and this year, when Democrats passed the American Rescue Plan.
Given the pandemic and economic crisis, it was right to borrow for COVID-19 relief. But now it’s time to stop relying on our children to pay our bills, and to return to a world where we actually budget.
Reinstating the Conrad Rule makes sense for several reasons.
First, the country is in a precarious fiscal situation. When we originally instituted the Conrad Rule in 2007, the deficit totaled $161 billion, or 1.1 percent of the economy, and debt totaled 35 percent of GDP. Today, the deficit has swelled to $3 trillion – and will remain about $1 trillion per year even once the economy recovers – while debt is larger than the economy and headed to a new record as a share of the economy. This country is on an unsustainable fiscal path, and the least we can do is not make it worse.
Second, paying for new investments like those in the American Jobs Plan and American Families Plan is better for the economy than deficit-financing them. The Congressional Budget Office and Penn Wharton Budget Model both have estimated that paying for new investments over time will do more to boost wages and income than borrowing for investments.
Third, paying for new policies improves their sustainability, both by ensuring new spending is affordable and avoiding the need for politicians to rely on sunsets and other budget tricks to comply with reconciliation rules that already prevent bills from adding to the debt over the long term (i.e. the Byrd Rule).
Lastly, most of the pay-fors are good policies in their own right. We should all support commonsense, good government ideas like enforcing existing tax law and closing the tax gap, making the wealthy pay their fair share and lowering the costs of health care. But without a requirement to offset new spending, special interests will tear these policies apart.
As my former colleagues in the Senate consider their agenda, I urge them to reinstate the Conrad Rule and, better yet, codify it into law, and end the political gamesmanship of this tool that is meant for fiscal responsibility. The best outcome would be a well-crafted major bill that invests in our country and the next generation without asking them to pay for it.
Kent Conrad served as a U.S. senator from North Dakota, 1992-2013. During that time, he served as chairman of the Senate Budget Committee from 2001 to 2003, and again from 2007 to 2013. He is a board member of the Committee for a Responsible Federal Budget.