CRS Updates Budget Reconciliation Report

The FY2006 budget resolution (H.Con.Res. 95), which was agreed to by the House and Senate on April 28, 2005, included reconciliation instructions for: (1) an omnibus bill to reduce mandatory outlays by about $35 billion over a five-year period, covering FY2006-FY2010; (2) a bill to reduce revenues by $70 billion over the same period; and (3) a bill to increase the limit on the public debt by $781 billion.

Congressional action on the resultant reconciliation legislation, while ultimately successful, was marked by controversy and delay. Initial floor consideration of the first reconciliation measure, the omnibus spending bill, occurred in November 2005. Congressional action on reconciliation legislation carried over into the following session, concluding in May 2006.

The omnibus spending reconciliation bill, the Deficit Reduction Act of 2005 (S. 1932), was signed into law by President George W. Bush on February 8, 2006, as P.L. 109-171 (120 Stat. 4-184). The Congressional Budget Office (CBO) estimated net mandatory outlay savings under the measure of $38.810 billion over five years (assuming that apparent drafting errors in two sections are corrected, CBO noted, the five-year savings would increase by $713 million, to $39.523 billion).

The revenue reconciliation bill, the Tax Increase Prevention and Reconciliation Act of 2005 (H.R. 4297), was signed into law on May 17, 2006, as P.L. 109-222 (120 Stat. 345-373). The Joint Committee on Taxation estimated the five-year revenue reduction at $69.960 billion.

Finally, the House and Senate passed a measure (H.J.Res. 47), outside of the budget reconciliation process, increasing the debt limit by $781 billion. The measure was signed into law on March 20, 2006, as P.L. 109-182 (120 Stat. 289). Consequently, no actions were taken under the reconciliation process with respect to debt-limit legislation.

As of May 2006, congressional action on the reconciliation legislation called for in the FY2006 budget resolution has been completed. Action still may be taken during the 2006 session on attendant matters, including legislation correcting the two apparent drafting errors in the Deficit Reduction Act of 2005. In addition, several lawsuits have been filed contesting the validity of the Deficit Reduction Act of 2005 because of an apparent clerical error that occurred during House and Senate consideration of the measure.

This report will be updated as developments warrant.

                            Contents

Spending Reconciliation

The Senate passed S. 1932 (the Deficit Reduction Omnibus Reconciliation Act of 2005) on November 3, by a vote of 52-47. The Congressional Budget Office (CBO) estimated net mandatory outlay savings of $34.644 billion over five years (FY2006-FY2010).

The House passed H.R. 4241 (the Deficit Reduction Act of 2005) on November 18, by a vote of 217-215. CBO estimated net mandatory outlay savings of $49.889 billion over five years.

The conference report (H.Rept. 109-362) on S. 1932, which was renamed the Deficit Reduction Act of 2005, was reported on December 19. CBO estimated net mandatory outlay savings under the measure of $38.810 billion over five years (assuming that apparent drafting errors in two sections are corrected, CBO noted, the five-year savings would increase by $713 million, to $39.523 billion).

On December 19, the House agreed to the conference report by a vote of 212-206. On December 21, the Senate removed extraneous matter from the legislation pursuant to a point of order raised under the "Byrd rule," and then, by a vote of 51-50 (with Vice President Cheney breaking a tie vote), returned the amended measure to the House for further action. On February 1, the House concurred in the Senate amendment, by a vote of 216-214, clearing the measure for the President.

President Bush signed the measure into law on February 8 as P.L. 109-171 (120 Stat. 4-184). Due to an apparent clerical error during final action on the measure, the Senate, later that day, agreed to S.Con.Res. 80 by unanimous consent; the concurrent resolution deemed the version of S. 1932 presented to the President to be a true enrollment. On February 16, the House tabled a privileged resolution, H.Res. 687, by a vote of 219-187; the resolution would have directed the House Committee on Standards of Official Conduct to investigate the circumstances surrounding the apparent clerical error.

Revenue Reconciliation

The Senate passed S. 2020 (the Tax Relief Act of 2005) on November 18, by a vote of 64-33. The Joint Committee on Taxation (JCT) estimated net revenue reductions of $57.756 billion over five years (FY2006-FY2010). In order to facilitate a conference with the House, the Senate later passed H.R. 4297 with an amendment. According to the JCT, H.R. 4297, as passed by the Senate, would reduce revenues by $69.415 billion over FY2006-FY2010, reflecting about $12 billion in further revenue reduction compared to the levels in S. 2020, as passed earlier by the Senate.

The House passed H.R. 4297 (the Tax Relief Extension Reconciliation Act of 2005) on December 8, by a vote of 234-197. JCT estimated net revenue reductions of $56.082 billion over five years.

The conference report (H.Rept. 109-455) on H.R. 4297, which was renamed the Tax Increase Prevention and Reconciliation Act of 2005, was filed on May 9. The JCT estimated that the conference agreement would reduce revenues by $69.960 billion over the five-year period, FY2006-FY2010.

The House agreed to the conference report on May 10, by a vote of 244-185, and the Senate agreed to it the following day, by a vote of 54-44.

President Bush signed the measure into law on May 17 as P.L. 109-222 (120 Stat. 345-373). A second package of revenue changes, which may include some matters dropped from the initial House and Senate revenue reconciliation bills in conference, is expected to be considered later this session, outside of the reconciliation process.

Debt-Limit Reconciliation

On March 20, 2006, President Bush signed H.J.Res. 47, a measure increasing the statutory debt limit by $781 billion to $8.965 trillion, into law as P.L. 109-182 (120 Stat. 289). The measure was deemed to have passed the House on April 28, 2005, pursuant to the "Gephardt rule" (House Rule XXVII), as part of final action on the FY2006 budget resolution. The Senate passed the measure without amendment on March 16, 2006, by a vote of 52-48.

The enactment of P.L. 109-182 obviated the need for any action on debtlimit legislation under the reconciliation process.

In developing a budget resolution, the House and Senate Budget Committees use various sources of budgetary information and analysis, including baseline budget projections of revenue, spending, and the deficit or surplus prepared by the Congressional Budget Office (CBO). A budget resolution typically reflects many different assumptions regarding legislative action expected to occur during a session that would cause revenue and spending levels to be changed from baseline amounts. Most revenue and mandatory spending,⁴ however, occurs automatically each year under permanent law. Therefore, if the committees with jurisdiction over the revenue and mandatory spending programs do not report legislation to carry out the budget resolution policies by amending existing law, revenue and mandatory spending for these programs likely will continue without change. There are some notable exceptions to the permanency of revenue and mandatory spending laws, such as many of the tax cuts proposed by President George W. Bush and enacted in 2001 and 2003.

Discretionary spending, on the other hand, is provided annually in regular, supplemental, and continuing appropriations acts. The House and Senate, therefore, are assured an opportunity each year to consider discretionary spending within the context of budget resolution policies. The enforcement of budget resolution policies regarding discretionary spending relies, for the most part, on the ability to raise points of order against individual appropriations acts that violate the suballocations of discretionary spending made pursuant to Section 302(b) of the 1974 act.

The budget reconciliation process is an optional procedure that operates as an adjunct to the budget resolution process.⁵ The chief purpose of the reconciliation process is to enhance Congress's ability to change current law in order to bring revenue, spending, and debt-limit levels into conformity with the policies of the budget resolution. Under the reconciliation process, the House and Senate may compel their committees to develop legislation changing existing law. Accordingly, reconciliation can be a potent budget enforcement tool for a large portion of the budget.

Reconciliation is a two-stage process. First, reconciliation instructions are included in the budget resolution, directing the appropriate committees to develop legislation achieving the desired budgetary outcomes. If the budget resolution instructs more than one committee in a chamber, then the instructed committees submit their legislative recommendations to their respective Budget Committees by the deadline prescribed in the budget resolution; the Budget Committees incorporate them into an omnibus budget reconciliation bill without making any substantive revisions.

The second step involves consideration of the resultant reconciliation legislation by the House and Senate under expedited procedures. Among other things, debate in the Senate on any reconciliation measure is limited to 20 hours (and 10 hours on a conference report) and amendments must be germane and not include extraneous matter. The House Rules Committee typically recommends a special rule for the consideration of a reconciliation measure in the House that places restrictions on debate time and the offering of amendments.

In cases where only one committee has been instructed, the process allows that committee to report its reconciliation legislation directly to its parent chamber, thus bypassing the Budget Committee. In some years, budget resolutions included reconciliation instructions that afforded the House and Senate the option of considering two or more different reconciliation bills. Once the reconciliation legislation called for in the budget resolution has been approved or vetoed by the President, the process is concluded; Congress cannot develop another reconciliation bill in the wake of a veto without first adopting another budget resolution containing reconciliation instructions.

As an optional procedure, reconciliation has not been used in every year that the congressional budget process has been in effect. Beginning with the first use of reconciliation by both the House and Senate in 1980, however, reconciliation has been used in most years. Congress has sent the President 19 reconciliation acts over the years; 16 were signed into law and three were vetoed (and the vetoes not overriden). Table 1 provides a list of the 10 reconciliation acts presented to the President from 1990 (for FY1991 and subsequent years) to the present. Seven of the acts were signed into law and three were vetoed by President Bill Clinton.

The inclusion of reconciliation instructions in a budget resolution has not always resulted in House or Senate consideration of a reconciliation measure under the instructions. In 1996, the FY1997 budget resolution (H.Con.Res. 178) provided for three separate reconciliation measures dealing with: (1) "Welfare and Medicaid Reform and Tax Relief"; (2) "Medicare Preservation"; and (3) "Tax and Miscellaneous Direct Spending Reforms." A reconciliation measure reforming the welfare system was enacted in 1996 (P.L. 104-193), but the House and Senate did not act on the other two reconciliation measures provided for under the budget resolution.

Further, not every reconciliation measure considered by one chamber has been considered by the other chamber, or been regarded as a reconciliation measure when considered by the other chamber. In 2000, for example, the House considered and passed several reconciliation measures, but they were not considered by the Senate.⁶

Initial actions under reconciliation focused on deficit-reduction efforts. Consequently, the procedures were employed to achieve spending reductions and revenue increases on a net basis. In the latter part of the 1990s, particularly when large surpluses emerged in the federal budget for the first time in decades, the focus of reconciliation action was shifted to reducing revenues, which continued into the 2000s. In the FY2006 budget resolution, reconciliation directives entail reductions in both revenues and spending.

       Table 1. Reconciliation Resolutions and Resultant

In all three years, as shown in Figure 1, the reconciliation acts relied on net mandatory savings, amounting over five years to an estimated $75 billion in the 1990 act, $77 billion in the 1993 act, and $107 billion in the 1997 acts. With regard to revenues, however, the 1990 and 1993 acts reflected estimated net increases over five years of $158 billion and $241 billion, respectively, while the 1997 acts reflected an estimated net reduction of $80 billion over five years.

Five-year net savings in discretionary spending attributable to statutory limits, established in the 1990 act and extended in the 1993 and 1997 legislation, ranged from an estimated $69 billion (in the 1993 act), to $89 billion (in the 1997 acts), to $190 billion (in the 1990 act). Although estimates of savings in discretionary spending were included in the CBO assessments of the budgetary impact of the reconciliation measures, the discretionary savings actually occurred as the annual appropriations acts were enacted over the five-year period. Debt service savings accounted for the remaining deficit reduction.

 

Figure 1. Budgetary Components of Selected Reconciliation Acts

 

 

Note: The savings in discretionary spending shown here, which were attributable to statutory limits established in the 1990 act and extended in the 1993 and 1997 legislation, were included in the CBO assessments of the budgetary impact of the reconciliation measures, but the discretionary savings actually occurred as the annual appropriations acts were enacted over the five-year period.

Many factors influence the development of a budget resolution, particularly the President's annual budget submission toward the start of the session. Development of the budget resolution, as well as the President's budget, involves the consideration of estimates of future spending, revenues, and the resultant deficit (or surplus) based on current law. These estimates are referred to as baseline budget projections, as prepared by the Congressional Budget Office (CBO), and current services estimates, as prepared by the Office of Management and Budget (OMB). The impact of congressional and presidential budgetary policies often is assessed by comparing revenue, spending, or deficit or surplus levels under such policies to the CBO and OMB baseline estimates.

This section provides background on budget policies for FY2006-FY2010, as formulated in 2005, with respect to budget components targeted by the reconciliation process -- the deficit, mandatory outlays, revenues, and the public debt limit. For each component, information is provided on baseline budget projections, the President's budget submission, and the congressional budget resolution.

Baseline Budget Projections

On January 25, 2005, CBO issued its annual report providing baseline budget projections, The Budget and Economic Outlook: Fiscal Years 2006 to 2015. The baseline budget projections were updated on March 8 in conjunction with the development of the FY2006 budget resolution; the updated March baseline is used in this report, unless otherwise indicated.⁷ Current services estimates were prepared by OMB and submitted in February as part of the President's FY2006 budget.⁸

The Deficit. During the period encompassing the five fiscal years most recently completed before the current session began, FY2000-FY2004, the federal government incurred both surpluses and deficits, as shown in Table 2.

        Table 2. Total Deficit or Surplus: FY2000-FY2004

Both the CBO baseline budget projections and the OMB current services estimates indicated a sustained but declining deficit path in the coming years. As shown in Table 3, CBO projected that the FY2005 deficit would decline from the prior year to $365 billion.

       Table 3. CBO and OMB Baseline Deficit Projections:

CBO noted that the statutory rules governing the preparation of baseline projections likely resulted in an understatement of spending for military operations in Iraq and Afghanistan by tens of billions of dollars, thereby understating the deficit for FY2006, and possibly later years as well.

The OMB current services estimates included higher deficit levels than CBO for each year, but followed the same trend of gradual decline reflected in the CBO projections.⁹ OMB estimated a decrease in the deficit for FY2005 from the prior year's level, to $390 billion. Further, OMB projected the deficit to decline from $361 billion for FY2006 to $207 billion for FY2010. Over five years, the cumulative projected deficit amounted to $1.351 trillion.

Mandatory Outlays. Under the CBO baseline budget projections, mandatory outlays were projected to grow by $339 billion over the five-year period, from $1.385 trillion for FY2006 to $1.724 trillion for FY2010. In comparison, outlays for net interest were projected to grow by $93 billion, from $211 billion for FY2006 to $304 billion for FY2010, and discretionary outlays were projected to grow by $65 billion, from $915 billion for FY2006 to $980 billion for FY2010. As a percentage of GDP, mandatory outlays were projected to increase by FY2010 to 10.9% (an increase of 0.2% from FY2006). Outlays for net interest were projected to increase to 1.9% (an increase of 0.3%) and discretionary outlays were projected to decrease to 6.2% (a decrease of 0.9%).

The OMB projections for mandatory outlays showed an increase over the fiveyear period of $336 billion, nearly the same as the CBO projection. The OMB projections, however, showed higher levels of mandatory outlays for each fiscal year, rising to $1.752 trillion for FY2010.

Revenues. According to CBO, total revenues were projected to rise by $594 billion over the five-year period, from $2.213 trillion for FY2006 to $2.807 trillion for FY2010. As a percentage of GDP, revenues were projected to increase by FY2010 to 17.8% (an increase of 0.6% from FY2006).

OMB projected a greater increase in revenues, $663 billion, over the five-year period (rising to $2.841 trillion for FY2010).

Public Debt Limit. Finally, CBO projected the increases that would be needed in the public debt subject to statutory limit, which currently stands at $8.184 trillion. Although the revised debt-limit levels were not identified in the baseline projections published in March, the projections published in January indicated that the debt-limit level would amount to $8.529 trillion for FY2006, rising steadily to $10.847 trillion for FY2010.

The last four increases in the public debt limit, which occurred between 1997 and 2004, are shown in Table 4. The amount of increase ranged between $450 billion and $800 billion.

        Table 4. Public Debt-Limit Increases: 1997-2004

Initial Budget Submission (February). President George W. Bush submitted his budget particularly for FY2006 to Congress on February 7, 2005. The President's budget focused on deficit reduction, noting his goal of reducing the $521 billion deficit originally projected for FY2004 (amounting to 4.5% of GDP) in half by FY2009.¹⁰ Under the President's proposals, as shown in Table 5, the deficit would be reduced over a five-year period, from $390 billion for FY2006 (3.0% of GDP) to $207 billion for FY2010 (1.3% of GDP), a level below the 40-year historical average of 1.7% of GDP.

Compared to the OMB current services estimates, the President's proposals would increase the deficit in three years (by $29 billion for FY2006, $9 billion for FY2007, and $4 billion for FY2009) while leaving it unchanged in the other two years. In the net, the President's proposals would increase the deficit by $42 billion over the five-year period, compared to the current services baseline.

            Table 5. President Bush's FY2006 Budget:

Second, mandatory outlays would be reduced over the five-year period by $62 billion, reflecting programmatic reforms amounting to $55 billion and user fee proposals amounting to $7 billion.¹² Taking into account outlay increases of $23 billion associated with certain tax proposals (e.g., health tax credits), the net reduction in mandatory outlays would amount to $39 billion over five years. The net reduction would eliminate more than 10% of the $330-plus billion growth in mandatory outlays projected by OMB and CBO in the baseline during FY2006-FY2010.

Third, revenues would be reduced in the net by $106 billion during the five-year period.¹³ Half of the revenue decreases during this period, $53 billion, would be attributed to making permanent certain tax cuts enacted in the revenue reconciliation acts of 2001 and 2003, which dealt with the dividends and capital gains tax rate structures, expensing for small business, and other matters.

President Bush's February budget submission did not reflect additional discretionary spending for operations in Iraq and Afghanistan for FY2006, nor did it reflect his proposals regarding changes in the Social Security program involving the establishment of individual accounts.

Mid-Session Review (July). On July 13, 2005, President Bush submitted to Congress the required Mid-Session Review (MSR) of his FY2006 budget.¹⁴ The MSR revealed some significant changes in the budget since the initial February submission, as shown in Table 6. The annual deficit levels dropped by between $37 billion and $89 billion, and the cumulative five-year deficit dropped by $326 billion (from $1.393 trillion to $1.067 trillion).

                    Table 6. President Bush's FY2006 Budget:

The FY2006 Budget Resolution

Consideration of the FY2006 budget resolution began in the House and Senate in March and came to a conclusion at the end of April. Following a brief legislative history of the budget resolution, this section provides a summary of overall budget resolution policies.

Legislative History. The House Budget Committee reported H.Con.Res. 95 on March 11, 2005 (H.Rept. 109-17), and the Senate Budget Committee reported S.Con.Res. 18 on the same day, but without a written report.¹⁵

The House considered H.Con.Res. 95 on March 16 and 17 under the terms of a special rule, H.Res. 154, which had been reported by the House Rules Committee (H.Rept. 109-19, March 15, 2005). Four amendments made in order under the special rule were offered and defeated: (1) an amendment in the nature of a substitute, offered by Representative Jeb Hensarling on behalf of the Republican Study Committee, by a vote of 102-320; (2) an amendment offered by Representative David Obey, ranking minority member of the House Appropriations Committee, by a vote of 180-242; (3) an amendment in the nature of a substitute, offered by Representative Melvin Watt on behalf of the Congressional Black Caucus, by a vote of 134-292; and (4) an amendment in the nature of a substitute, offered by Representative John Spratt, ranking minority member of the House Budget Committee, by a vote of 165-264.

After action on the amendments was completed, the House passed H.Con.Res. 95 by a vote of 218-214.

The Senate began consideration of S.Con.Res. 18 by unanimous consent on March 14. Consideration of the measure continued on March 15 and 16, culminating with its passage, as amended, on March 17, by a vote of 51-49. The Senate considered about 70 amendments, agreeing to dozens of them.

The House and Senate convened a conference on their competing versions of the budget resolution, with H.Con.Res. 95 serving as the conference vehicle. The conferees met on April 27 and the conference report was filed the next day.¹⁶ The House agreed to the conference report on April 28, by a vote of 214-211, and the Senate agreed to it the same day, by a vote of 52-47.

Overall Budget Resolution Policies. In terms of overall budget resolution policies, the House and Senate began the conference from positions of fundamental agreement. The budget resolutions reported by the House and Senate Budget Committees hewed fairly closely to the general contours of the President's budget proposals. Both resolutions employed a five-year time frame covering FY2006-FY2010, with revisions included for the then current fiscal year, FY2005, as well. The three main pillars of budget policy, as reflected in the reported budget resolutions, involved significant restraint on the growth of discretionary spending, a more modest curtailment of the growth of mandatory spending, and further reductions in revenues, although at a more modest level compared to the actions taken in 2001 and 2003.

While the House agreed to the budget resolution reported by the House Budget Committee without change, the Senate revised the version reported by its Budget Committee. Although dozens of amendments were adopted in the Senate, many of them involved precatory language (i.e., sense-of-the-Senate statements) or procedural matters rather than changes in spending or revenue levels. Some significant changes were made in budget levels, including to reconciliation instructions (as discussed below), but the basic outline of budget policy recommended by the Senate Budget Committee remained intact.

The positions of the House, the Senate, and the final conference agreement regarding several key components of the budget plan are presented in Table 7. With regard to the cumulative deficit over the five-year period, the differences between the House ($1.359 trillion) and the Senate ($1.450 trillion) were relatively modest; the conference agreement essentially split the difference ($1.400 trillion). House-Senate differences regarding total mandatory outlays and total revenues for the five-year period were even more narrow. Again, the conference agreement essentially split the difference ($9.401 trillion) with respect to total mandatory outlays over five years. In the case of total revenues, the House-Senate difference was negligible ($23 billion), and the conference agreement ($12.440 trillion) was within $1 billion of the House position.

           Table 7. Selected Components of the FY2006 Budget

Initial House Action

The House Budget Committee reported the FY2006 budget resolution, H.Con.Res. 95, on March 11, 2005. As reported, the budget resolution contained two sets of reconciliation instructions to House committees in Section 201 (see Table 8).

              Table 8. Initial Reconciliation Instructions: House

The House Budget Committee contemplated a schedule in which the revenue reconciliation bill would be considered first, before the August recess, and the spending reconciliation bill would be considered second, after the August recess. The submission deadline for the spending reconciliation recommendations was September 16, 2005; the reporting deadline for the revenue reconciliation measure was June 24.

Each of the four amendments made in order during initial House consideration of the budget resolution would have modified or eliminated the reconciliation instructions for FY2006-FY2010 recommended by the House Budget Committee. The Hensarling amendment would have increased the savings in mandatory outlays to more than $125 billion and the revenue reductions to about $106 billion; the Obey amendment would have added revenue increases of nearly $26 billion, intended to be targeted at wealthy taxpayers; and the Watt and Spratt amendments would have eliminated the reconciliation instructions completely. As indicated earlier, all of the amendments were defeated; subsequently, the House agreed to the budget resolution without having made any changes in the reconciliation instructions as reported by the Budget Committee.

Initial Senate Action

The Senate Budget Committee reported its version of the FY2006 budget resolution, S.Con.Res. 18, on March 11, 2005.¹⁷ The reconciliation instructions included in the budget resolution as reported by the Senate Budget Committee differed in several respects from the instructions in the budget resolution agreed to by the House (see Table 9).

              Table 9. Initial Reconciliation Instructions: Senate

Finally, the Senate Budget Committee proposed to reverse the timing of legislative action compared to the House's recommendation, imposing an earlier submission date for spending reconciliation recommendations (June 6, instead of September 16 in the House) and a later reporting date for revenue reconciliation legislation (September 7, instead of June 24 in the House). The reporting date for the reconciliation measure pertaining to the public debt limit was September 16.

The Senate, unlike the House, agreed to amendments that changed the reconciliation instructions recommended by the Budget Committee. On March 17, the Senate adopted three amendments that revised both the spending and revenue reconciliation instructions. First, the Senate adopted Bingaman (for Smith) Amendment #204, by a vote of 52-48. The amendment struck the spending reconciliation instructions to the Finance Committee in Section 201(a)(6) and added to the budget resolution a provision establishing a reserve fund of $1.5 million for the creation of a 23-member Bipartisan Medicaid Commission. It had been widely assumed that the Finance Committee would consider reductions in Medicaid spending in order to meets its instruction of $15.036 billion in savings over five years; consequently, the amendment was seen as a means of protecting the Medicaid program from spending cuts.

The second amendment that the Senate adopted on March 17 was Bunning Amendment #241, by a vote of 55-45. The amendment, which increased the revenue reduction under reconciliation by $4.8 billion for FY2006 and $63.9 billion for FY2006-FY2010, was characterized by Senator Bunning as accommodating the repeal of a 1993 increase in the taxation of Social Security benefits.

Finally, the Senate adopted on March 17 Kennedy Amendment #177, as modified, by a vote of 51-49. The amendment decreased the instruction to reduce revenues by $723 million for FY2006 and $5.474 billion for FY2006-FY2010, thereby offsetting spending increases for education programs.

The Senate also considered and rejected several other amendments that would have modified the reconciliation instructions. In particular, the Senate rejected Cantwell Amendment #168, by a vote of 49-51. The amendment, which would have struck the instruction in Section 201(a)(4) to the Energy and Natural Resources Committee to reduce outlays by $2.658 billion over five years, was characterized by Senator Cantwell as precluding the opening of the Arctic National Wildlife Refuge (ANWR) to oil exploration.

In the net, the amendments that the Senate adopted decreased the total outlay reduction over five years by $15.036 billion, from the reported level of $32.042 billion to $17.006 billion, and increased the total revenue reduction over five years by $58.426 billion, from the reported level of $70.154 billion to $128.580 billion. By scaling back the outlay reductions and boosting the revenue reductions required by the reconciliation instructions, the Senate dramatically changed the net effect of reconciliation on the total deficit estimate over the five-year period. While the reconciliation instructions in the budget resolution as reported by the Senate Budget Committee would have increased the deficit in the net by about $38 billion over five years, the instructions in the resolution as passed by the Senate would have increased the deficit in the net by about an additional $73 billion over that period, or about $111 billion in total.

Action on the Conference Report

The conferees reported their agreement on H.Con.Res. 95 on April 28, 2005. In addition to the separate spending and revenue reconciliation measures that each chamber had proposed, the conferees agreed to a third reconciliation measure, on the public debt limit, as had been proposed by the Senate.

In the case of the spending and revenue reconciliation measures, the conferees found a middle ground between the positions of the two chambers (see Table 10), which was close to the levels reported by the Senate Budget Committee.

            Table 10. Reconciliation Instructions for FY2006-FY2010:

Table 11 presents more detailed information on the reconciliation instructions included in the conference agreement.

            Table 11. Reconciliation Instructions in the Conference

On October 6, 2005, Speaker of the House J. Dennis Hastert issued a press release on a plan developed by House Republican leaders.²⁰ In commenting on the plan, Speaker Hastert noted:

•  

  Hurricanes Katrina and Rita have dealt a severe blow to our nation, both in terms of human and economic losses. We can and will recover, but it will require some serious belt-tightening throughout the federal government. House Republican leadership, Committee Chairmen and key members of the conference have worked together to come up with a proposal we believe can accomplish this task. In order to maintain our commitment to deficit reduction, we are proposing to move a mid-session Budget Amendment for the first time in almost 30 years (1977). The Amendment will increase the total amount of savings which can help pay for these unexpected costs.

  The "Hastert Plan" has four elements, according to the Speaker's press release:

• an increase of $15 billion or more in the mandatory savings required to be achieved through the budget reconciliation process, from about $35 billion for FY2006-FY2010 to at least $50 billion for that period, as well as the "dollar-for- dollar" offset of any new mandatory spending for disaster relief included in reconciliation legislation;

• continued restraint on discretionary spending, including an additional across-the-board cut in discretionary spending for FY2006;

• packages of additional rescissions to further help offset reconstruction costs; and

• the permanent elimination, through "deauthorization," of programs already "zeroed out" in the current appropriations process.²¹

According to an assessment made by the Senate Budget Committee on January 18, 2006, the five-year costs stemming from these measures, covering FY2006-FY2010, are estimated at $98.921 billion. Most of the relief costs -- $62.3 billion -- are attributable to two emergency supplemental appropriations acts, P.L. 109-61 and P.L. 109-62. The Senate Budget Committee's assessment does not reflect several measures still pending in the House or Senate or expected to be considered at a later time. These measures could increase the costs for hurricane-related relief by tens of billions of dollars.

In the meantime, seven of the eight House committees were informed by the Republican leadership that they should work toward achieving, in the aggregate, an additional $15 billion in five-year savings through their reconciliation recommendations. Although the increased savings amounts for each committee were not announced officially, media reports indicated that the House Ways and Means and Education and Workforce Committees were expected to achieve most of the increased savings, roughly an additional $7 billion and $5 billion, respectively.²⁴

By informal agreement, the schedule of reconciliation actions in the House was delayed to accommodate these developments.

In the Senate, the Republican leadership announced its support for enacting offsets, but did not specify a comprehensive plan to do so or indicate any intent to consider a revised budget resolution. On September 12, Senate Majority Leader Bill Frist and Senate Budget Committee Chairman Judd Gregg issued a joint statement indicating that, in order to allow "the Congress and the committees to address the immediate concerns related to the recent hurricane and not be encumbered by budget reconciliation requirements in the near term," the Senate Budget Committee would not meet to markup the spending reconciliation bill until October 26.²⁵

On September 27, Senate Majority Leader Frist, Budget Committee Chairman Gregg, and other members of the Republican leadership, wrote to the chairmen of the committees subject to reconciliation instructions, asking them to recommend spending reductions "above and beyond" those already called for under the instructions as part of the offset efforts. In addition, the leadership also sent letters to the chairmen of non-reconciled committees, encouraging them to find savings within their committee's jurisdiction as well.²⁶ Specific amounts of additional savings for the committees were not identified in the correspondence.

As discussed in the next section, the spending reconciliation bills reported by the House and Senate Budget Committees proposed net savings substantially greater than were required, but the savings were scaled back somewhat during further legislative action. According to CBO, the net savings over five years attributed to the conference agreement on the spending reconciliation bill amount to $39.523 billion (assuming the correction of two apparent drafting errors), which is nearly $5 billion more than required under the reconciliation instructions in the FY2006 budget resolution.

Additional savings were achieved in appropriations legislation enacted late in 2005, including a government-wide, one-percent across-the-board spending cut in the Defense Appropriations Act for FY2006 (Division B, Section 3801 of P.L. 109-148, enacted into law on December 30, 2005).

Spending Reconciliation Legislation

Initial Senate Action. The Senate Budget Committee met on October 26, 2005, and ordered the omnibus spending reconciliation bill, S. 1932 (the Deficit Reduction Omnibus Reconciliation Act of 2005), reported by a party-line vote of 12-10. The bill was reported the following day, without a written report.²⁷

According to the Senate Budget Committee, the submissions from the instructed committees exceeded the outlay savings required by the instructions in the aggregate by $4.649 billion for FY2006 and $4.456 billion for FY2006-FY2010. The FY2006 outlay savings totaled $6.168 billion, compared to instructions totaling $1.519 billion; the FY2006-FY2010 outlay savings totaled $39.114 billion, compared to instructions totaling $34.658 billion. All eight of the instructed committees met or exceeded their instructions for FY2006 and exceeded their instructions for FY2006-FY2010. A summary of CBO's scoring of the savings in S. 1932, as reported by committee (and as passed), is presented in Table 12.

The Senate began consideration of S. 1932 on October 31. After four days of consideration, the Senate passed the bill on November 3, by a vote of 52-47. During Senate consideration of the bill, 20 amendments were adopted, 9 were rejected, and 4 were withdrawn; additionally, 9 amendments fell under points of order.

Ten of the 20 amendments that were adopted had a significant budgetary impact, including three with an outlay impact in FY2006- FY2010 of about $1 billion or more: (1) Enzi Amendment #2352, which increased education spending by $2.555 billion; (2) Bingaman Amendment #2365, which reduced Medicaid spending by $1.194 billion; and (3) Feinstein Amendment #2411, which increased Medicaid spending by $950 million.²⁸ In the net, the amendments adopted by the Senate reduced the savings from the reported level by $746 million in FY2006 (to $5.422 billion) and by $4.470 billion in FY2006-FY2010 (to $34.644 billion).

As shown in Table 12, the outlay savings in the bill as passed by the Senate exceeded the instructed level for FY2006 by $3.963 billion and virtually matched the instructed level for FY2006- FY2010 (falling below by $14 million).²⁹

Initial House Action. The House Budget Committee met on November 3 to consider the spending reconciliation bill and ordered it reported by a party-line vote of 21-17. The bill, H.R. 4241, the Deficit Reduction Act of 2005, was reported on November 7 (H.Rept. 109-276). During the committee markup of the measure (which, under the rules of the reconciliation process, does not allow substantive amendments), the committee rejected six motions offered by Democratic Members to direct the chairman to request of the House Rules Committee that certain amendments be made in order during consideration of the Deficit Reduction Act of 2005, and that the special rule for consideration of the bill not allow its consideration until after the House has considered the revenue reconciliation bill.

 Table 12. CBO Scoring of Spending Reconciliation

Notes: Details may not add to totals due to rounding. The reconciliation instructions to the Health, Education, Labor, and Pensions Committee for FY2006 and FY2006-FY2020 also encompassed FY2005. The estimated savings for Title I (Committee on Agriculture, Nutrition, and Forestry), as passed by the Senate, reflect enactment of H.R. 2744, the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2006 (which became P.L. 109-97 on Nov. 10, 2005).

According to scoring by CBO, the reconciliation submissions of each of the eight instructed committees, as shown in Table 13, met or exceeded (substantially exceeded, in some instances) its instructions for FY2006-FY2010. The submissions of two committees in particular, Education and Workforce and Ways and Means, exceeded the required five-year savings by $7.771 billion and $7.048 billion, respectively. The combined savings from all eight committees, amounting to $53.918 billion over five years, exceeded the total instructed levels by $19.260 billion, more than achieving the leadership's request for an additional $15 billion in outlay savings.

 Table 13. CBO Scoring of Spending Reconciliation

On November 17, the House Rules Committee met and reported a second special rule for the consideration of the spending reconciliation bill. The special rule, H.Res. 560 (H.Rept. 109-303), provided (under a self-executing feature) for the adoption of amendments modifying the language regarding food stamp eligibility and striking provisions dealing with ANWR and OCS leasing, as in the first rule, and modifying the Medicaid language, and barred the consideration of any further amendments. Later that day, the House considered and passed H.Res. 560 by voice vote, after agreeing to an amendment offered by Representative Adam Putnam. The Putnam amendment provided for the incorporation of further amendments into the bill under a self-executing feature of the special rule.

Later on November 17, the House considered H.R. 4241 under the closed rule, passing the bill early on November 18, by a vote of 217-215. Beyond the amendments incorporated automatically pursuant to H.Res. 560, no amendments were considered. According to CBO, the modifications made pursuant to H.Res. 560 reduced the overall outlay savings in the bill to $49.889 billion over five years (see Table 13).³⁰

In order to prepare for conference action, the House then immediately passed the Senate companion bill, S. 1932, without objection, after amending it to substitute the House-passed language in H.R. 4241.

Action on the Conference Report. On December 14, the Senate disagreed to the House amendment to S. 1932 and requested a conference. Seven different motions to instruct conferees were offered and agreed to that day: DeWine (71-20), Kohl (75-16), Harkin (66-26), Baucus (75-16), Carper (64-27), Kennedy (83-8), and Reed (63-28). Senate conferees were appointed the next day.

On December 16, the House agreed to the request for a conference and appointed conferees. A motion to instruct conferees, offered by Representative John Spratt, ranking minority member of the House Budget Committee, was agreed to by a vote of 246-175.

The conference report (H.Rept. 109-362) on S. 1932, which was renamed the Deficit Reduction Act of 2005, was reported on December 19 (during the legislative day of December 18).³¹Appendix A provides a contents listing of S. 1932 as set forth in the conference report. The Congressional Budget Office estimated net mandatory outlay savings under the measure of $38.810 billion over FY2006-FY2010 (assuming that apparent drafting errors in two sections are corrected, CBO noted, the five-year savings would increase by $713 million, to $39.523 billion).³²

On December 19, the House agreed to the conference report by a vote of 212-206. The Senate considered a motion to proceed to the consideration of the conference report on December 19. Senate consideration of the conference report occurred on December 19-21. On December 21, the Senate removed extraneous matter from the legislation pursuant to a point of order raised under the "Byrd rule," and then, by a vote of 51-50 (with Vice President Cheney breaking a tie vote), returned the amended measure to the House for further action.

The extraneous matter was removed from S. 1932 pursuant to a point of order raised by Senator Kent Conrad, the ranking minority member of the Senate Budget Committee.³³ The point of order sought to strike four provisions from the measure:

• Section 5001(b)(3), requiring the Secretary of Health and Human Services to submit to Congress by August 1, 2007, a report on the plan for the hospital value based purchasing program under Medicare;

• Section 5001(b)(4), requiring the Medicare Payment Advisory Commission to submit to Congress by June 1, 2007, a report that includes detailed recommendations on a structure of value based payment adjustments for hospital services under Medicare;

• a portion of Section 6043 (proposing a new subsection (e)(4) to the proposed new Section 1916A of the Social Security Act), relating to the negligent standard for hospitals and physicians who treat Medicaid patients; and

• Section 7404, regarding eligibility for foster care maintenance payments and adoption assistance.

In order to complete final action on S. 1932, the House and Senate had to resolve the remaining differences with respect to Section 5001(b)(3) and (b)(4) and the applicable portion of Section 6043. On December 21, Speaker J. Dennis Hastert sought unsuccessfully to have the House concur in the Senate changes by unanimous consent.³⁴ At that time, the decision was made to carry over House action into early 2006, toward the beginning of the second session.

On February 1, the House considered H.Res. 653, a resolution reported by the House Rules Committee (H.Rept. 109-366; January 31, 2006), which provided for the concurrence by the House in the Senate amendment to the House amendment to S. 1932.³⁵ By agreeing to the resolution, by a vote of 216-214, the House cleared the measure for the President.

Prior to agreeing to H.Res. 653, the House overcame a point of order raised by Representative Jim McDermott, by a vote of 226-201. The point of order, raised pursuant to Section 426(a) of the Congressional Budget Act of 1974, pertained to the inclusion in S. 1932 of an unfunded mandate involving the child support enforcement program.

Approval by the President and Subsequent Challenges. President Bush signed the measure into law on February 8, as P.L. 109-171 (120 Stat. 4-184), and issued a signing statement indicating how specified provisions in the law would be regarded by the executive branch:

Due to concerns regarding the apparent clerical error, the Senate on February 8 passed by unanimous consent S.Con.Res. 80, a measure stating:

The next day, February 14, House Democratic Leader Nancy Pelosi and other members of the House Democratic leadership sent a letter to Speaker Hastert requesting that the legislation be reconsidered. On February 16, House Democratic Leader Pelosi offered a privileged resolution, H.Res. 687, directing the House Committee on Standards of Official Conduct to conduct an investigation into the matter; the House tabled the resolution by a vote of 219-187.⁴¹

Media reports indicate that the House and Senate may consider legislation making the two "technical corrections" identified by the Congressional Budget Office (discussed below), but that any further actions are uncertain.⁴²

Several challenges to the Deficit Reduction Act of 2005 have been raised in court. A lawsuit was filed in U.S. District Court (Mobile, Alabama) in February seeking to strike down the law on the ground that it was not passed in identical form in both chambers.⁴³ In March, a second lawsuit was filed in U.S. District Court (Washington, DC) by the public interest group, Public Citizen, on the same ground.⁴⁴ On April 27, Representative John Conyers, the ranking member of the House Judiciary Committee, indicated that he and other ranking members of House Committees with jurisdiction over agencies affected by the Deficit Reduction Act of 2005 also were filing a lawsuit.⁴⁵

Brief Summary of the Conference Agreement. The conference agreement on the spending reconciliation measure consists of ten titles, as shown in Table 14.

The changes proposed in the legislation would affect a wide array of federal programs, including federal assistance to agriculture (Title I); housing programs and the deposit insurance system for banks and credit unions (Title II); the Federal Communication Commission's authority to auction licenses to use the electromagnetic spectrum, federal assistance to consumers for the transition to digital television, and grants to public safety agencies of interoperable communications systems (Title III); vessel tonnage charges levied by the U.S. Customs Service on ships entering the United States (Title IV); Medicare (Title V); Medicaid and the State Children's Health Insurance Program (SCHIP) (Title VI); welfare, including the Temporary Assistance for Needy Families (TANF) program (Title VII); federal higher education programs and the operations of the Pension Benefit Guaranty Corporation (PBGC) (Title VIII); the Low-Income Home Energy Assistance Program (LIHEAP) (Title IX); and civil filing fees for federal courts and filing fees for bankruptcy relief (Title X).

According to CBO, enactment of the conference agreement would result in net costs for FY2007 ($3.635 billion in outlays), but net savings in outlays in each of the other four years encompassed by the reconciliation instructions (see Table 14). Net savings would amount to $4.847 billion in FY2006 and $4.474 billion in FY2008, would peak in FY2009 at $20.780 billion, and would decline to $12.342 billion in FY2010. Net savings in the ensuring five fiscal years, FY2011-FY2015, would range between $11.0 billion and $13.6 billion each year.

In total, net savings in outlays would amount to $38.810 billion over five years (FY2006-FY2010) and $99.263 billion over ten years (FY2006-FY2015).

In its cost estimate on the conference agreement, CBO identified apparent drafting errors in two sections -- Section 8006, regarding direct loans to parents of postsecondary students, and Section 10002(a)(2), dealing with bankruptcy fees. If it is assumed that the apparent drafting errors will be corrected, then the projected five- year net outlay savings increase by $713 million, to $39.523 billion, and the 10-year savings increase by $2.013 billion, to $101.276 billion.

 Table 14. CBO Scoring of Spending Reconciliation Legislation:

         Table 15. Spending Reconciliation Legislation:

Initial Senate Action. The Senate Finance Committee considered, amended, and approved S. 2020, the Tax Relief Act of 2005, on November 15, by a vote of 14-6. The committee reported the bill without a written report.⁴⁶

According to estimates prepared by the Joint Committee on Taxation (JCT), the bill as reported would have reduced revenues in the net by $59.594 billion over FY2006-FY2010.⁴⁷ Although the reconciliation instructions in the FY2006 budget resolution allow revenue reductions of as much as $70 billion over FY2006-FY2010, the amount of revenue reduction in the bill was reduced because of concerns regarding the Senate's "pay-as-you-go" (PAYGO) rule.⁴⁸ The PAYGO rule, which remains in effect through September 30, 2008, bars the consideration of revenue or direct spending legislation that violates certain budgetary constraints for three different time periods; during this session, the time periods are FY2006, FY2006-FY2010, and FY2011-FY2015. A motion to waive a point of order under the PAYGO rule requires the affirmative vote of three-fifths of the Senate membership (60 Senators, if no seats are vacant).

Under current practices, a balance for each of the three time periods is established each session on a PAYGO scorecard set forth in the joint explanatory statement accompanying the conference report on the annual budget resolution. The PAYGO scorecard is maintained by the Senate Budget Committee and is adjusted each time a revenue or direct spending measure passes the House and Senate in identical form.

A revenue or direct spending measure may not be considered if the balances on the PAYGO ledger are not adequate to cover its costs. Although the PAYGO balance for FY2006-FY2010 was expected to be adequate later in the session to accommodate a measure reducing revenues by $70 billion over that period, at that time it stood at about $60 billion.

The Senate began consideration of S. 2020 on November 16, continued consideration on November 17, and passed it early on November 18, by a vote of 64-33.

During Senate consideration of the bill, seven amendments were adopted, four were rejected, one was withdrawn, and 18 fell on points of order. According to the JCT, the bill as passed would reduce revenues in the net by $57.756 billion over FY2006-FY2010, $1.838 billion less than the reported bill.⁴⁹

Initial House Action. The House Ways and Means Committee considered, amended, and approved H.R. 4297, the Tax Relief Extension Reconciliation Act of 2005, on November 15. The bill was reported on November 17 (H.Rept. 109-304). The committee approved the measure by a vote of 24-15. During the markup, Chairman Bill Thomas offered an amendment in the nature of a substitute that removed many of the provisions, reducing the total revenue reductions to $31.947 billion over FY2006-FY2010.⁵⁰ Before approving the chairman's substitute, the committee adopted several amendments to it that restored particular provisions, thereby further reducing revenues. According the JCT, the bill as reported would reduce revenues in the net by $5.773 billion in FY2006 and $56.082 billion in FY2006- FY2010.⁵¹

On December 7, the House Rules Committee reported a special rule, H.Res. 588 (H.Rept. 109-330), providing for the consideration of H.R. 4297. The special rule provided (under a self-executing feature) for the adoption of the amendment in the nature of a substitute recommended by the Ways and Means Committee. In addition, the special rule allowed one amendment in the nature of a substitute, to be offered by Representative Charles Rangel, the ranking member of the Ways and Means Committee, and one motion to recommit with instructions.

The House considered H.R. 4297 on December 8. After defeating the Rangel substitute, by a vote of 192-239, and a Rangel motion to recommit with instructions, by a vote of 193-235, the House passed the bill, by a vote of 234-197.

Action on the Conference Report. In order to facilitate a conference with the House, the Senate took up H.R. 4297 on February 1 and passed it the next day, by a vote of 66-31. During action on February 2, the Senate adopted a substitute amendment (Grassley/Baucus Amendment 2707) to the House-passed bill, as well as six amendments to the substitute amendment. In addition, one amendment was rejected, one amendment and a motion to commit were withdrawn, and several amendments fell, generally upon the successful raising of points of order.

According to the JCT, H.R. 4297, as passed by the Senate, would reduce revenues by $69.415 billion over FY2006-FY2010, reflecting about $12 billion in further revenue reduction compared to the levels in S. 2020, as passed earlier by the Senate.⁵² House action to clear S. 1932, the spending reconciliation measure, for action by the President provided sufficient room on the Senate's PAYGO scorecard to accommodate the additional revenue reductions without incurring a violation of the PAYGO rule.⁵³ The JCT estimated the five-year revenue reduction in the Housepassed version of H.R. 4297 at $55.627 billion.

On February 8, the House by unanimous consent disagreed to the Senate amendment and requested a conference, and the Speaker appointed conferees.⁵⁴ The House also rejected, by a vote of 185-297, a motion to instruct conferees on alternative minimum tax relief, dividends and capital gains relief, and other matters, offered by Representative Richard Neal.

On February 13, the Senate agreed to a conference and agreed to one motion to instruct conferees (Grassley, 92-0) and rejected another (Dodd, 40-53). On the next day, February 14, the Senate appointed conferees and agreed to five more motions to instruct conferees: Grassley (53-47), DeWine (voice vote), Wyden (voice vote), Talent/Snow/Lincoln (voice vote), and Hutchison (75-25). Additionally, the Senate rejected three motions to instruct conferees: Kennedy (47-53), Reed (45-55), and Lautenberg (46-54); another eight motions to instruct conferees were withdrawn.

The conferees met on March 15 and informal negotiations continued thereafter.

In the House, a motion to instruct conferees was agreed to on March 15 (Tanner, 222-187). Three motions to instruct conferees were rejected -- on March 29 (Rangel, 192-229), on April 6 (Cardin, 196-232), and, following debate the previous day, on April 27 (McDermott, 190-232).

The conference report (H.Rept. 109-455) on H.R. 4297, which was renamed the Tax Increase Prevention and Reconciliation Act of 2005, was reported on May 9, 2006.⁵⁵Appendix B provides a contents listing of H.R. 4297 as set forth in the conference report.

According to the JCT, the conference agreement is estimated to reduce revenues by $69.960 billion over the five-year period, FY2006- FY2010.⁵⁶ CBO also issued a cost estimate, indicating that the conference agreement is not estimated to have an effect on federal spending.⁵⁷ Further, CBO noted that the conference agreement contains, as determined by the JCT, two unfunded private- sector mandates (involving repeal of the FSC-ETI grandfather rule and an amendment to the Section 911 housing exclusion), as well as an intergovernmental mandate (pertaining to withholding on certain government payments, in Section 511), which exceed annual cost thresholds established in the Unfunded Mandates Reform Act.

The conference agreement recommends significant revenue reduction beyond the five-year budget "window" (FY2006-FY2020) encompassed by the reconciliation instructions, principally with respect to extensions of current capital gains and dividends provisions through December 31, 2010.⁵⁸ The Senate's "Byrd rule" (Section 313 of the Congressional Budget Act of 1974) prohibits the consideration of reconciliation legislation that increases the deficit beyond the budget window; the prohibition is enforced by a point of order in the Senate which requires the affirmative vote of three-fifths of the Members (60 Senators, if no seats are vacant) to waive. Past tax-cut reconciliation acts have included sunset provisions in order to comply with the Byrd rule, but the conference agreement on H.R. 4297 includes offsets of the revenue losses instead. The JCT estimates the total revenue loss over ten years (FY2006-FY2015) at $69.084 billion, an amount nearly $900 million smaller than the five-year revenue loss.

On May 9, the House Rules Committee reported a special rule, H.Res. 805 (H.Rept. 109-458) providing for the consideration of the conference report on H.R. 4297. The next day, on May 10, the House agreed to the special rule, by a vote of 228-194, and then agreed to the conference report, by a vote of 244-185. During action on the conference report, the House rejected a motion to recommit with instructions offered by Representative Charles Rangel, the ranking member of the Ways and Means Committee, by a vote of 190-239.

The Senate considered the conference report on May 11, agreeing to it by a vote of 54-44.

A second package of revenue changes, which may include some matters dropped from the initial House and Senate revenue reconciliation bills in conference, is expected to be considered later this session, outside of the reconciliation process.

Approval by the President. President Bush signed the measure into law on May 17, as P.L. 109-222 (120 Stat. 345- 373).⁵⁹

Debt-Limit Reconciliation Legislation

Neither the House Ways and Means Committee nor the Senate Finance Committee scheduled any meetings to consider debt-limit reconciliation legislation.

On November 15, 2005, the Treasury Department indicated that the level of public debt subject to the statutory limit had exceeded $8 trillion for the first time ($8,002,607,000,000).⁶⁰ In view of the pattern of monthly deficits and surpluses in the last several years, the current limit of $1.184 trillion was expected to suffice into about the middle of the first quarter of calendar year 2006.

In a letter to Senate Majority Whip Mitch McConnell, dated December 29, 2005, Treasury Secretary John W. Snow indicated that the debt limit would become insufficient in mid-February 2006, and that "all available prudent and legal actions" to finance government operations within that limit would be exhausted by mid-March.⁶¹ Thus, by using various financing techniques that have been employed in the past, the Treasury Department was expected to be able to cope with an insufficient debt limit for about a month before defaulting on government obligations.⁶²

In addition to the reconciliation process, the House and Senate may use other procedures to develop and consider debt-limit legislation.⁶³ Pursuant to House Rule XXVII (the "Gephardt rule"), H.J.Res. 47 was deemed to have passed the House automatically on April 28, 2005, in conjunction with House approval of the conference report on the FY2006 budget resolution. The measure proposed an increase of $781 billion in the statutory debt limit, to $8.965 trillion, the same increase recommended in the budget resolution and contained in the reconciliation instructions. On March 16, 2006, the Senate passed H.Res. 47 without amendment, by a vote of 52-48.

President Bush signed the measure into law on March 20, as P.L. 109-182. The enactment of the measure obviated the need for any action on debt-limit legislation under the reconciliation process.

The Congressional Research Service also has prepared reports and issue briefs on major issues addressed in reconciliation legislation; they are identified on the CRS website under the Current Legislative Issues term "Reconciliation, Budget" and are available at [http://www.crs.gov]. The CRS reports and issue briefs posted on the website so far are listed below by major category; additional products will be listed as they become available.

Spending Reconciliation Legislation

Agriculture and Nutrition

CRS Report RS22086, Agriculture and FY2006 Budget Reconciliation, by Ralph M. Chite.

CRS Issue Brief IB97011, Dairy Policy Issues, by Ralph M. Chite.

Arctic National Wildlife Refuge (ANWR)

CRS Report RS22304, ANWR and FY2006 Budget Reconciliation Legislation, by Bill Heniff Jr. and M. Lynne Corn.

CRS Issue Brief IB10136, Arctic National Wildlife Refuge (ANWR): Controversies for the 109th Congress, by M. Lynne Corn, Bernard A. Gelb, and Pamela Baldwin.

"Byrd Amendment" on Anti-Dumping

CRS Report RL33045, The Continuing Dumping and Subsidy Offset Act ("Byrd Amendment"), by Jeanne J. Grimmett and Vivian C. Jones.

Deposit Insurance

CRS Report RS20724, Federal Deposit and Share Insurance: Proposals for Change, by William D. Jackson.

CRS Report RL33143, Federal Deposit Insurance Reform Legislation (Including Budgetary Implications), by Barbara Miles and William Jackson.

Energy and Minerals

CRS Report RS22313, Energy and Minerals Issues in the FY2006 Budget Reconciliation Bill, by Marc Humphries.

Federal Judicial System

CRS Report RL33189, Proposals in the 109th Congress to Split the Ninth Circuit Court of Appeals, by R. Sam Garrett.

Medicare, Medicaid, and SCHIP (State Children's Health Insurance Program)

CRS Report RL33131, Budget Reconciliation FY2006: Medicaid, Medicare, and State Children's Health Insurance Program (SCHIP) Provisions, by Evelyne C. Baumrucker, Hinda Chaikind, April Grady, Jim Hahn, Jean Hearne, Elicia Herz, Bob Lyke, Paulette Morgan, Jennifer O'Sullivan, Rich Rimkunas, Julie Stone, Sibyl Tilson, and Karen Tritz.

CRS Report RS22333, Budget Reconciliation FY2006: Provisions Affecting the Medicaid Federal Medical Assistance Percentage, by April Grady.

CRS Report RL33130, Budget Reconciliation: Projections of Funding in the State Children's Health Insurance Program, by Chris L. Peterson.

CRS Report RL33121, Medicaid Issues for the 109th Congress, by Jean Hearne.

CRS Report RL33251, Side-by-Side Comparison of Medicare, Medicaid, and SCHIP Provisions in the Deficit Reduction Act of 2005, by Karen Tritz, Sibyl Tilson, Julie Stone, Chris Peterson, Jennifer O'Sullivan, Paulette C. Morgan, Elicia J. Herz, Jeanne Hearne, Jim Hahn, April Grady, Hinda Chaikind, and Evelyne P. Baumrucker.

Outer Continental Shelf Leasing

CRS Issue Brief IB10149, Outer Continental Shelf: Debate Over Oil and Gas Leasing and Revenue Sharing, by Marc Humphries.

Pension Benefit Guaranty Corporation (PBGC)

CRS Report RS22315, Budget Reconciliation and the PBGC, by Neela K. Ranade.

Spectrum Auction and Fees and Transition to Digital Television

CRS Report RL31260, Digital Television: An Overview, by Lennard G. Kruger.

CRS Report RS22218, Spectrum Auctions and Deficit Reduction: FY2006 Budget Reconciliation, by Linda K. Moore.

CRS Report RS22306, Spectrum Use and the Transition to Digital TV, by Linda K. Moore.

Student Loans

CRS Report RS22308, Student Loans and FY2006 Budget Reconciliation, by Adam Stoll.

Welfare

CRS Report RL33155, Child Welfare: Foster Care and Adoption Assistance Provisions in the Budget Reconciliation Bills, by Emilie Stoltzfus.

CRS Report RS22377, Child Support Provisions in the Deficit Reduction Act of 2005 (P.L. 109-171), by Carmen Solomon-Fears.

CRS Report RS22369, TANF, Child Care, Marriage Promotion, and Responsible Fatherhood Provisions in the Deficit Reduction Act of 2005 (S. 1932), by Gene Falk.

CRS Report RL33157, Welfare Reauthorization: A Side-by-Side Comparison of Current Law, Senate Committee Approved and House Budget Reconciliation Bill Provisions, by Gene Falk, Melinda Gish, Carmen Solomon-Fears, and Emilie Stoltzfus.

CRS Issue Brief IB10140, Welfare Reauthorization: Overview of the Issues, by Gene Falk, Melinda Gish, and Carmen Solomon-Fears.

Revenue Reconciliation Legislation

CRS Report RS21992, Extending the 2001, 2003, and 2004 Tax Cuts, by Gregg Esenwein.

CRS Report RL32781, Federal Deductibility of State and Local Taxes, by Steven Maguire.

CRS Report RL32719, Major Tax Issues in the 109th Congress, by David L. Brumbaugh.

CRS Report RL31181, Research Tax Credit: Current Status, Legislative Proposals, and Policy Issues, by Gary Guenther.

CRS Report RL31852, Small Business Expensing Allowance: Current Status, Legislative Proposals, and Economic Effects, by Gary Guenther.

CRS Report RS22322, Taxes and Fiscal Year 2006 Budget Reconciliation: A Brief Summary, by David L. Brumbaugh.

CRS Report RS22100, The Alternative Minimum Tax for Individuals: Legislative Initiatives and Their Revenue Effects, by Gregg Esenwein.

CRS Report RS21682, The Tax Deduction for Classroom Expenses of Elementary and Secondary School Teachers, by Linda Levine.

CRS Report RL30089, The Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work (WtW) Tax Credit, by Linda Levine.

      Appendix A. Deficit Reduction Act of 2005 (S. 1932):

² For background information on budget resolutions, see CRS Report RL30297, Congressional Budget Resolutions: Selected Statistics and Information Guide, by Bill Heniff Jr.

³ The congressional budget process, and its enforcement procedures, are discussed in more detail in CRS Report 98-721, Introduction to the Federal Budget Process, by Robert Keith and Allen Schick. Also, see CRS Report 97-865, Points of Order in the Congressional Budget Process, by James V. Saturno.

⁴Mandatory spending, also referred to as direct spending, is provided mainly in substantive law under the jurisdiction of the legislative committees, in contrast to discretionary spending, which is provided in annual appropriations acts under the jurisdiction of the House and Senate Appropriations Committees. Most direct spending programs are entitlements, such as Social Security, Medicare, federal civilian and military retirement, and unemployment compensation.

⁵ See CRS Report RL33030, The Budget Reconcilliation Process: House and Senate Procedures, by Robert Keith and Bill Heniff Jr., for more information on the process.

⁶ See CRS Report RL30714, Congressional Action on Revenue and Debt Reconciliation Measures in 2000, by Robert Keith.

⁷ The March baseline budget projections are presented in: Congressional Budget Office, An Analysis of the President's Budgetary Proposals for Fiscal Year 2006, March 2005, Table 1-10, p. 23.

⁸ Office of Management and Budget, Budget of the United States Government, Fiscal Year 2006, Analytical Perspectives, Feb. 7, 2005, Chapter 25 (Current Services Estimates), Table 25-1, pp. 389-404.

⁹ The OMB current services estimates, unlike the CBO baseline budget projections, were not prepared strictly in accordance with the baseline rules established in the Budget Enforcement Act (BEA). Accordingly, some of the differences in the amounts presented by OMB and CBO are attributable to conceptual differences, as discussed in CBO, An Analysis of the President's Budgetary Proposals, ibid., p. 17.

¹⁰ Office of Management and Budget, Budget of the United States Government, Fiscal Year 2006, "Overview of the President's 2006 Budget," p. 3.

¹¹ President's FY2006 Budget, ibid., Summary Table S-2, p. 344.

¹² President's FY2006 Budget, ibid., Summary Table S-6, pp. 348-353.

¹³ President's FY2006 Budget, ibid., Summary Table S-7, pp. 354-359.

¹⁴ Office of Management and Budget, Budget of the United States Government, Fiscal Year 2006, Mid-Session Review, July 13, 2005.

¹⁵ House Budget Committee, Concurrent Resolution on the Budget -- Fiscal Year 2006 (to accompany H.Con.Res. 95), H.Rept. 109-17, Mar. 11, 2005. The Senate Budget Committee issued a committee print, Concurrent Resolution on the Budget, FY 2006 (committee print to accompany S.Con.Res. 18), S.Prt. 109-18, 2005, in lieu of a written report.

¹⁶Concurrent Resolution on the Budget for Fiscal Year 2006, conference report to accompany H.Con.Res. 95, H.Rept. 109-62, Apr. 28, 2005.

¹⁷ The committee issued a print in lieu of a report: Senate Budget Committee, Concurrent Resolution on the Budget, Fiscal Year 2006 (committee print to accompany S.Con.Res. 18), S.Prt. 109-18, 2005.

¹⁸ For two committees, the House Education and Workforce Committee and the Senate Health, Education, Labor, and Pensions Committee, the period of savings includes FY2005 as well.

¹⁹ Hurricane Katrina made landfall in Louisiana, Mississippi, and Alabama on August 29, 2005 (after impacting Florida on August 25), and Hurricane Rita made landfall in Louisiana and Texas on September 24. CRS reports on different aspects of this issue are listed on the CRS Web page [http://www.crs.gov] under the Current Legislative Issues term "Disaster -- Hurricanes."

²⁰ Speaker's Press Office, Speaker Hastert Comments on Republicans' Initial Spending Cut Proposal, Oct. 6, 2005, available on the Web at [http://www.speaker.gov].

²¹ For more information on this topic, see CRS Report RL33127, Speaker Hastert's Plan to Offset Spending: A Procedural Perspective, by Robert Keith.

²² Procedures for revising a budget resolution are discussed in CRS Report RL33122, Congressional Budget Resolutions: Revisions and Adjustments, by Robert Keith.

²³ See (1) "Leaders Delay Budget Vote in House," by Susan Davis and Peter Cohn, CongressDaily AM, Oct. 20, 2005; (2) "Senate Panel Looks to Finish Cuts Oct. 24; Blunt Plans to Try Again on Amendment," by Jonathan Nicholson, BNA Daily Report for Executives, no. 203, Oct. 21, 2005, p. G-9; and (3) "Blunt Won't Gamble on Budget Votes," by Alexander Bolton, The Hill, Oct. 21, 2005.

²⁴ See, for example, "House Looking to Two Committees to Boost Reconciliation Spending Cut Totals," by Jonathan Nicholson, in BNA's Daily Report for Executives, no. 206, Oct. 26, 2005, p. G-14.

²⁵ The statement is available on the website of the Senate Budget Committee (Republican) at [http://www.senate.gov/~budget/republican/] under "News Room."

²⁶ Examples of the letters, as well as a Sept. 28, 2005 press release issued by Budget Committee Chairman Gregg on the subject, are available on Senate Budget Committee website, cited above.

²⁷ In lieu of a written report, the Senate Budget Committee issued a print, Deficit Reduction Omnibus Reconciliation Act of 2005, S.Prt. 109-37, October 2005.

²⁸ The impact of the amendments is assessed in: Congressional Budget Office, Letter to the Honorable Judd Gregg, Nov. 8, 2005, Table 2.

²⁹ The estimated outlay savings for the bill, as passed by the Senate, reflect in Title I (Committee on Agriculture, Nutrition, and Forestry) the enactment of H.R. 2744, the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2006 (which became P.L. 109-97 on Nov. 10, 2005).

³⁰ Letter from CBO Director Holtz-Eakin to Budget Committee Chairman Nussle, Nov. 18, 2005, Table 1, available on the CBO website at [http://www.cbo.gov/] The estimate reflects scorekeeping adjustments for agricultural commodity programs made by the House Budget Committee that affect FY2010 and beyond. See also the document on the House Budget Committee's website [http://www.house.gov/budget/], The Deficit Reduction Act of 2005 As Amended by the Manager's Amendment, Nov. 17, 2005.

³¹ The conference report also is set forth in the Congressional Record (daily ed.) of Dec. 18, 2005, vol. 151, no. 164, book II, at pages H12641-H12737.

³² See the CBO Cost Estimate on S. 1932, Jan. 27, 2006, 80 p., available on the CBO website at [http://www.cbo.gov] CBO identifies the apparent drafting errors as occurring in Section 8006, regarding direct loans to parents of postsecondary students, and Section 10002(a)(2), dealing with bankruptcy fees.

³³ The raising and disposition of the point of order, and other procedural actions related thereto, appear in the Congressional Record (daily ed.) of Dec. 21, 2005, at pages S14204-S14205.

³⁴ BNA Daily Report for Executives, "Senate OKs Budget Bill by Thin Margin, But Changes Send Package Back to House," by Kurt Ritterpusch, Dec. 22, 2005, p. G-2.

³⁵ House consideration of H.Res. 653 appears in the Congressional Record (daily ed.) of Feb. 1, 2006, at pages H37-H60 and H68-H114.

³⁶ The signing statement by President Bush, and a fact sheet on the law, are available at the White House website under "Current News" for Feb. 8, 2006 [http://www.whitehouse.gov].

³⁷ See Deficit Reduction Act of 2005, conference report to accompany S. 1932, H.Rept. 109-362, Dec. 19, 2005, pp. 215-216.

³⁸ Congressional Budget Office, letter of February 13, 2006, to the Honorable John Spratt Jr. from Acting Director Donald B. Marron.

³⁹Congressional Record (daily ed.), Feb. 8, 2006, p. S870.

⁴⁰BNA Daily Report for Executives, "Despite Clerical Error, White House Says New Deficit Reduction Act Still Valid Law," by Jonathan Nicholson, Feb. 14, 2006, p. A-21.

⁴¹Congressional Record (daily ed.), Feb. 16, 2006, pp. H351-H352.

⁴² See, for example, the following: (1) BNA Daily Report for Executives, "Corrections Bill Expected for Budget; Consequence of Clerical Error Uncertain," by Jonathan Nicholson, Feb. 16, 2006, p. A-1; (2) CQ Today, "Partisan Bickering Escalates in House Over Glitch in Budget Savings Bill," by Steven T. Dennis, Feb. 16, 2006; and (3) The Hill, "House GOP: No New Vote on Budget," by Jeffrey Young and Patrick O'Connor, Feb. 16, 2006.

⁴³CQ Today, "Lawsuit by Conservative Alabama Lawyer Seeks to Invalidate Savings Law," by Steven T. Dennis, Feb. 15, 2005.

⁴⁴ See, for example, the following: (1) Washington Post, "Spending Measure Not a Law, Suit Says," by Jonathan Weisman, Mar. 22, 2006, p. A4; and (2) CQ Today, "Another Lawsuit Takes Aim at Glitch in Budget Savings Law," by Steven T. Dennis, Mar. 22, 2006. Information on the lawsuit is available at Public Citizen's website at [http://www.citizen.org/hot_issues/issue.cfm?ID=1335].

⁴⁵ For more information on this action, see the press release of Apr. 27, 2006, on the minority website of the House Judiciary Committee at [http://www.house.gov/judiciary_democrats/releases- /budgetlawsuitpr42706.pdf]

⁴⁶ See Summary of the Tax Relief Act of 2005, Nov. 8, 2005, and related items under "Legislation" at the Senate Finance Committee website [http://www.senate.gov/~finance/]

⁴⁷ Joint Committee on Taxation, Estimated Revenue Effects Of S. 2020, The "Tax Relief Act Of 2005," Scheduled For Consideration On The Senate Floor On November 16, 2005, JCX-80- 05, Nov. 16, 2005, available on the Web at [http://www.house.gov/jct/].

⁴⁸ The Senate's PAYGO rule is set forth in Section 505 of the FY2004 budget resolution. For detailed information on the origin, development, and operation of the Senate's PAYGO rule, see (1) CRS Report RL31943, Budget Enforcement Procedures: Senate's "Pay-As-You-Go" (PAYGO) Rule, by Bill Heniff Jr.; and (2) CRS Report RL32835, PAYGO Rules for Budget Enforcement in the House and Senate, by Robert Keith and Bill Heniff Jr.

⁴⁹ Joint Committee on Taxation, Estimated Revenue Effects Of The Tax Provisions Contained in S. 2020, "The Tax Relief Act of 2005," As Passed By The Senate On November 18, 2005, JCX- 82-05 R, Nov. 29, 2005, available on the Web at [http://www.house.gov/jct/]. The initial estimate made by the JCT, issued as JCX-82-05 on Nov. 28, 2005, placed the five-year revenue loss an $57.761 billion.

⁵⁰ Joint Committee on Taxation, Estimated Revenue Effects Of The Chairman's Amendment In The Nature Of A Substitute To H.R. 4297, The "Tax Relief Extension Reconciliation Act Of 2005," Scheduled For Markup By The Committee On Ways And Means On November 15, 2005, JCX-79-05, Nov. 15, 2005, available on the Web at [http://www.house.gov/jct/].

⁵¹ Joint Committee on Taxation, Estimated Revenue Effects Of H.R. 4297, The "Tax Relief Extension Reconciliation Act Of 2005," As Reported By The Committee On Ways And Means, JCX-81-05, Nov. 18, 2005, available on the Web at [http://www.house.gov/jct/].

⁵² Joint Committee on Taxation, Comparison of the Estimated Revenue Effects of the Tax Provisions Contained in H.R. 4297, the "Tax Relief Extension Reconciliation Act of 2005," as Passed by the House, and H.R. 4297, the "Tax Relief Act of 2005," as Amended by the Senate, JCX-10-06, Feb. 9, 2006.

⁵³ See the Feb. 3, 2006, edition of the Senate Budget Committee's newsletter, Informed Budgeteer, for a discussion of the PAYGO rule and the status of reconciliation legislation.

⁵⁴ See the Congressional Record (daily ed.) of Feb. 8, 2006, at pp. H185-H191.

⁵⁵ The House Ways and Means Committee issued a 6-page summary, Detailed Summary of Conference Report, May 9, 2006, available on the Committee's website at [http://waysandmeans.house.gov/media/pdf/taxdocs/ 050906longsummary4297.pdf]. In addition, the Senate Finance Committee issued a 10-page summary, Summary of the Tax Prevention Increase and Reconciliation Act of 2005, available on the Committee's website at [http://www.senate.gov/~finance/sitepages/leg/leg050906sum.pdf]

⁵⁶ Joint Committee on Taxation, Estimated Revenue Effects of the Conference Agreement for the "Tax Increase Prevention and Reconciliation Act of 2005," JCX-18-06, May 9, 2006.

⁵⁷ Congressional Budget Office, Letter to the Honorable William "Bill" M. Thomas, Chairman, Committee on Ways and Means, from Acting Director Donald B. Marron, May 9, 2006.

⁵⁸ Although the capital gains and dividends provisions would sunset on December 31, 2010, they would incur revenue losses in succeeding years (e.g., in FY2012, a $12.698 billion revenue loss for the capital gains provision and a $6.326 billion revenue loss for the dividends provision).

⁵⁹ The remarks of President Bush during a signing ceremony, and a fact sheet on the law, are available at the White House website under "Current News" for May 17, 2006 [http://www.whitehouse.gov].

⁶⁰ See the Daily Treasury Statement for November 15, 2005, Table III-C, p. 2, available on the web at [http://www.fms.treas.gov/dts/].

⁶¹ Quoted in "Treasury Secretary Urges Speedy Action on Debt Limit Increase," by CQ Staff, CQ Today, December 30, 2005.

⁶² For further information on this topic, see CRS Report RL31967, The Debt Limit: The Ongoing Need for Increases, by Philip D. Winters.

⁶³ These procedures are reviewed in CRS Report RS21519, Legislative Procedures Adjusting the Public Debt Limit, by Robert Keith and Bill Heniff Jr.

⁶⁴ For the spending reconciliation bill, see (1) Senate Budget Committee, Deficit Reduction Omnibus Reconciliation Act of 2005 (print to accompany S. 1932), S.Prt. 109-37, October 2005 (the print is not yet available online), and (2) House Budget Committee, Deficit Reduction Act of 2005 (report to accompany H.R. 4241), H.Rept. 109-276, Nov. 7, 2005.

For the revenue reconciliation bill, see (1) Senate Finance Committee, Summary of the Tax Relief Act of 2005, Nov. 8, 2005, and other materials (in lieu of a committee report) under "Legislation" at the Committee's website [http://www.senate.gov/~finance/], and (2) House Ways and Means Committee, Tax Relief Extension Reconciliation Act of 2005 (report to accompany H.R. 4297), H.Rept. 109-304, Nov. 17, 2005.

⁶⁵ Congressional Budget Office, "Cost Estimates for Reconciliation Legislation," available at [http://www.cbo.gov/] and Joint Committee on Taxation, various reports, available at [http://www.house.gov/jct/].