Congressional Budget Will Offer Clues to Republican Priorities, Potential Threats to Programs, as Soon as Early January

As Republican leaders prepare for the new Congress, in which they will control both the Senate and House, they are already debating different approaches to advance their agenda. What’s clear is that they aim to use a fact-track legislative process known as “reconciliation” ^[1] — and that they may use it twice in the coming year. A reconciliation bill, which is not subject to the Senate’s filibuster and so can pass with only 51 votes in the Senate, can be used to push through tax cuts worth trillions to wealthy households and corporations. It can also be used to advance policies highlighted in past Republican budgets and Project 2025 that would take health coverage and food assistance away from millions, driving up the number of people who can’t get the health insurance they need or afford to put food on the table.^[2]

The Republican-led Congress appears poised in January to quickly pass a budget resolution, an internal budget plan for Congress that unlocks the reconciliation process. The budget resolution does not require the President’s signature, so congressional Republicans could complete their first resolution even before President Trump is inaugurated. They could then pass a second budget resolution later in the year to allow for a second reconciliation bill. Some Republicans are calling for addressing border, defense, and energy-related issues in the first bill, and allowing more time to develop their tax package, including extension of expiring 2017 tax provisions and other tax policies.^[3] Others want to prioritize tax cuts. Regardless, areas like health coverage, food assistance, and climate investments could be at risk in either or both reconciliation bills.

So what should you look for in the first budget resolution to understand which direction their initial legislative efforts might take and what’s at risk?

Take note of which committees receive “reconciliation directives.” The most important component of the budget resolution will be the reconciliation “directives” or “instructions” to different authorizing committees of Congress. Which committees receive reconciliation directives will hint at policies the Republican majority plans to pursue in the first reconciliation bill. For instance, a directive to the House Homeland Security Committee suggests a focus on border funding.

Identify the committees’ dollar targets. The reconciliation directives will be a distinct dollar figure, or a numerical target, for each committee selected, and it will dictate how much that committee may increase the deficit or must reduce the deficit. Each committee can meet its target by making changes to any programs in its jurisdiction (except for Social Security).

A directive to the House Energy and Commerce Committee to reduce the deficit by a large amount indicates spending cuts, with a likely target being Medicaid, which provides health coverage to about 72 million people. Proposed cuts that could gain traction would result in millions of people losing coverage, along with dramatic cost shifts to states.^[4]

Importantly, a very small target for the Energy and Commerce Committee or the Agriculture Committee does not mean that funding for health coverage or food assistance under those committees’ jurisdictions is “safe.” Instead, it likely means that Republicans have agreed they intend to cut Medicaid or the Supplemental Nutrition Assistance Program (SNAP), respectively, but they have not made final decisions about how deep those cuts should be. That’s because directives to reduce the deficit are floors, so committees are required to propose at least as much deficit reduction as their dollar target, but they can do more. Therefore, a committee that receives a directive to reduce the deficit by $1 could still propose large program cuts (or revenue increases, if it has jurisdiction), and that would be consistent with the reconciliation rules.

Directives to increase the deficit are ceilings, so on net, committees cannot increase the deficit by more than their dollar target, but they can propose legislative changes that increase the deficit by a smaller amount. If the House Ways and Means Committee gets a reconciliation directive to increase the deficit by a large amount, it will likely be expected to cut taxes, which could include extending expiring provisions of the 2017 tax law.

Both the House Energy and Commerce and Ways and Means committees also have jurisdiction over certain energy programs, so efforts to roll back investments in addressing climate change could be in the mix if these committees receive reconciliation directives. Republicans have indicated a desire to repeal Inflation Reduction Act provisions designed to lessen the effects of climate change as well as to expand production of fossil fuels.^[5] The House Natural Resources Committee also has jurisdiction over some energy-related programs.

The reconciliation directives represent the net total for all of the policy changes to be made by the specified committee. Assume, for example, that Ways and Means is directed to increase the deficit by $2 trillion over ten years. To meet the target, the committee could draft legislation with any combination of policies that total $2 trillion. The committee could propose $3 trillion of tax cuts and offset $1 trillion of those costs by raising revenue or cutting spending in its jurisdiction to comply with the $2 trillion target. (Extending the 2017 tax law would cost almost $4 trillion over ten years, as discussed below.)

Understand whether the dollar target is measured against a projection of current law — the official approach defined in the law. Typically, the reconciliation directives in a budget resolution reflect an increase or decrease in the deficit measured relative to the Congressional Budget Office’s standard “current law” baseline, a baseline that has been defined in budget law since 1990.^[6]

A current law baseline assumes expiration of the individual and estate tax provisions in the 2017 tax law that are scheduled to expire under current law in 2025; relative to that baseline, extending those policies would be costly. Republican leaders, including incoming Senate Finance Committee Chair Mike Crapo and House Ways and Means Committee Chair Jason Smith, have suggested using a “current policy” baseline instead, which would assume the expiring tax cuts are extended. Measured against that baseline, extending the expiring provisions would have no cost, at least on paper.^[7]

Using such a baseline for official purposes would be unprecedented and is at odds with existing budget rules.^[8] It is notable that the budget resolutions designed by the House Budget Committee’s Republican majority in the past two years, as well as budget plans published by the House Republican Study Committee last year, have used the current law baseline specified in budget law as their benchmark.

If the reconciliation directives work from a current law baseline, as all past directives have, then extending the expiring individual and estate and gift tax provisions of the 2017 tax law would be measured as increasing the deficit by about $4 trillion over ten years, and the House Ways and Means and Senate Finance committees would need corresponding directives. If the total were less than $4 trillion, it could mean the tax-writing committees would extend the tax cuts for a shorter period, extend only some of them, or find offsets to cover their cost. But if the directives are constructed from a current policy baseline, then the directive would only show the increase in the deficit corresponding to tax changes beyond extension of the 2017 law, such as tax policies that President-elect Trump floated during his campaign.

To be clear, extending the expiring tax provisions would increase deficits and debt by the same amount under either baseline scenario. The choice of baseline indicates whether Congress acknowledges that cost or not. (See Figure 1.)

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Look for additional information provided by the budget committees. The directives are the most important numbers in the budget resolution because they set the contours of the fast-track reconciliation bill. But they still only shed light in the most general terms about what the authorizing committees will do. The budget committees may have based the reconciliation directives on certain policy assumptions and, if so, they may include that information in a committee report. However, there is no requirement for committees to put out such information or for it to be comprehensive. More detail on the spending side may be contained in the tables that are part of the resolution, which show spending by broad policy areas, such as defense, energy, education, health, and income security (known as budget “functions”). That additional information may be helpful for giving a sense of the actions the different committees will take.

But none of these assumptions bind the authorizing committees. Their only mandate is to meet the numerical target by changing the programs, tax law, or both under their jurisdiction. Moreover, a budget resolution might display the numerical consequences of policy assumptions that are unrelated to the reconciliation directives, which could indicate policies that Republicans support and hope to address in the future, including later next year. At the extreme, the budget resolution could effectively be a “shell,” reflecting no underlying policy assumptions, intended only to serve as a vehicle for the reconciliation directives.

Anticipate two reconciliation bills in 2025. Finally, it is worth remembering that congressional Republicans appear inclined to adopt two budget resolutions — one each for fiscal years 2025 and 2026 — which would allow for two reconciliation bills.^[9] So policies that are not part of the first reconciliation bill may appear in the second reconciliation bill, which would not be considered until later in 2025.

Additional vehicles for potentially harmful legislation. In addition to reconciliation, Republicans will also pursue their agenda through the appropriations process, which will include finalizing the fiscal 2025 appropriations bills next spring and then crafting appropriations bills for fiscal 2026 (the fiscal year that starts on October 1, 2025). Pursuant to the budget resolution for fiscal 2026, there will be figures that constitute a dollar limit, enforced by congressional rules, for the roughly one-third of the budget whose funding is determined by annual appropriations bills.^[10] The statutory caps established by the 2023 Fiscal Responsibility Act covered only fiscal years 2024 and 2025.

Previous House Republican budget plans have called for deep cuts in this part of the budget, which support a wide range of important investments and services that people depend on, from the weather-forecasting system and food safety, to education from pre-school through college, and processing Social Security applications and benefits, to name just a few. In addition, Congress will need to suspend or raise the debt limit at some point next year, and that must-pass legislation has sometimes included policy changes. Unlike reconciliation, however, appropriations could be subject to a Senate filibuster, requiring 60 votes to pass. And unless Republicans choose to include a debt limit increase in a reconciliation bill, debt limit legislation could also be subject to a Senate filibuster.^[11]

Whichever combination of legislative vehicles is used, it’s key to keep the focus on the specific policies that Congress puts forward. The 2017 tax law that Congress plans to extend is heavily skewed to the wealthy, would add trillions to the national debt over the coming decade, and has failed to deliver on its proponents’ economic promises.^[12] Tens of millions of people rely on the economic and health security programs that some Republicans have suggested should be cut.^[13] The budget resolution will be the first step in a long process of understanding and scrutinizing Congress’ legislative agenda next year.