Congressional Outlook: Reconciliation Paths
January 7, 2025
Senate Republicans officially took control of the chamber on Jan. 3, and House Republicans re-elected Speaker Mike Johnson (R-LA) on the first ballot after some initial internal sparring among Republican lawmakers.
Why it matters: With the speakership race out of the way, lawmakers now will chart key legislative priorities to address ahead of President-Elect Donald Trump’s inauguration on Jan. 20. Immigration, energy, and tax are the top priorities, and policymakers are jockeying on how to structure legislative vehicles amidst narrow congressional majorities.
What they’re saying: A key question is whether Republicans will move their top priorities in one or two reconciliation bills. Recall that reconciliation is a legislative process that allows the Senate to consider certain bills (tied to spending) with a simple majority rather than a 60-vote threshold.
- The current plan points to one reconciliation bill encompassing tax, border, energy, and a debt ceiling increase. Part of the calculus is to craft a bill addressing key campaign promises and priorities to ensure Republican support.
- Senate Majority Leader John Thune (R-SD) said late last year that Trump advisors and the Senate would move two reconciliation bills, first immigration/energy and then tax. House Ways and Means Chairman Jason Smith (R-MO) pushed back against the two bills, instead arguing for one bill encompassing all priorities.
- Proponents of two bills argue that border/energy should go first for easy and early wins, while tax should be separate due to its complexities.
- Trump has changed course on this posting Sunday for “one powerful bill,” but kept his option open for two bills in an interview on Monday morning.
The big picture: Both paths will be politically challenging in a narrow trifecta in which House Republicans can lose one or two votes at most.
- Reconciliation processes involve complex legislative procedures where committees propose instructions on modifying federal inlays, outlays, and the debt limit.
- Just reauthorizing expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) will have budgetary costs in the trillions of dollars. But with additional priorities — including state and local tax (SALT) reform, lower corporate rates, and other tax cuts — the “cost” of the bill would increase.
- The GOP is looking to cut some spending via reconciliation, but the politically palatable cuts are unlikely to approach anything close to the “cost” of the bill, which may be an issue for deficit hawks.
- Tariffs will be part of the calculus, but Trump is likely to implement those outside of the legislative process using executive authority.
What’s next: Speaker Johnson has set an ambitious agenda with budget instructions passed in February with a House-passed bill by early April and the final legislation on Trump’s desk by the end of April. He acknowledged that the timeline may slip.
Contact David McCarthy (dmccarthy@crefc.org) with questions.