How Congress Passes a Budget

Editorial Note: The June 2, 2025, post, “Learning About Congressional Budgeting,” focuses on Congress’s role in budgeting, particularly the budget resolution and committee actions. This post broadly covers the entire federal budget process, including the President’s proposal and agency roles. The former is Congress-specific, while this is more comprehensive.

The federal budgeting process in the United States is a sprawling, intricate endeavor, a high-stakes balancing act where lawmakers navigate competing priorities to keep the government humming. Under “regular order,” as outlined by the Congressional Budget and Impoundment Control Act of 1974, Congress follows a deliberate, structured path to fund the government, ensuring transparency and accountability. This process involves distinct tools-appropriations bills, omnibus bills, continuing resolutions, and reconciliation-each with unique roles, constraints, and consequences. To fully grasp how Congress funds the government and the pivotal role of reconciliation, including what happens when it fails, we must journey through this complex system, weaving together its mechanisms, historical context, and political realities.

The process begins each February when the President submits a budget proposal to Congress, a voluminous document laying out the administration’s fiscal vision for the upcoming fiscal year, which starts October 1. This proposal, while not binding, sets the stage, offering a blueprint for spending and revenue priorities. For example, in February, the President’s budget might emphasize infrastructure or defense, signaling priorities to Congress. The House and Senate Budget Committees then take the lead, crafting a concurrent budget resolution by mid-April. This resolution sets overall spending, revenue, and debt limits, serving as a fiscal roadmap without the force of law or need for presidential approval. It divides the budget into two core categories: mandatory and discretionary spending, each governed by different rules and processes.

Mandatory spending, comprising roughly two-thirds of the federal budget (about $4.4 trillion of the $6.8 trillion budget in FY 2023), funds entitlement programs like Social Security, Medicare, and Medicaid. These programs, established by permanent laws like the Social Security Act, operate automatically based on eligibility criteria and formulas. If more people qualify-say, an aging population swells Medicare rolls-spending rises without congressional intervention. This stability makes mandatory spending a fiscal juggernaut, but altering it requires amending authorizing laws, a politically contentious task. For instance, attempts to reform Social Security often stall due to its entrenched support among voters. Discretionary spending, by contrast, covers about one-third of the budget ($1.7 trillion in FY 2023), split between defense (e.g., military operations) and non-defense programs (e.g., education, transportation, NASA). Controlled annually through appropriations, discretionary spending is more flexible but vulnerable to political gridlock, as Congress must approve it each year.

The heart of discretionary funding lies in the appropriations process, a cornerstone of regular order. The House and Senate Appropriations Committees, each with 12 subcommittees, draft 12 individual appropriations bills, each targeting specific agencies or programs, such as the Department of Defense or the National Institutes of Health. These bills undergo a rigorous journey: subcommittees hold hearings, mark up drafts, and propose amendments before the full committee approves them. The bills then face floor debates and votes in both chambers, where differences are reconciled through conference committees or amendments. The goal is to pass all 12 bills and secure the President’s signature by September 30, ensuring seamless funding for the new fiscal year. When this process works, as it did in the early 1980s under regular order, it’s a model of deliberative governance, allowing lawmakers to scrutinize spending priorities.

Yet regular order often falters under the weight of partisan disputes, tight deadlines, or competing agendas. When Congress can’t pass all 12 appropriations bills by October 1, it turns to temporary or consolidated solutions. A continuing resolution (CR) is a stopgap, extending funding at prior-year levels for weeks or months to avoid a government shutdown. CRs, like the one passed in September 2024 to fund the government through mid-December, maintain the status quo without new policy changes, offering breathing room but no long-term resolution. Historically, CRs have been frequent; in FY 2020, Congress passed multiple CRs before finalizing appropriations. Alternatively, Congress may combine multiple appropriations bills into an omnibus bill, a massive package funding various agencies in one go. The Consolidated Appropriations Act of 2023, for example, bundled several bills to keep the government running but faced criticism for its rushed process and limited debate. Omnibus bills sacrifice regular order’s transparency for expediency, often including last-minute provisions or “riders” that spark controversy.

Amid these mechanisms, reconciliation stands out as a specialized tool for tackling mandatory spending, revenue, or debt limits. Authorized by the budget resolution’s reconciliation instructions, it directs specific committees-like House Ways and Means or Senate Finance-to draft legislation meeting fiscal targets, such as reducing Medicare costs or cutting taxes. These proposals are merged into a single reconciliation bill per chamber, debated under expedited rules. In the Senate, debate is capped at 20 hours, and passage requires only a simple majority, sidestepping the filibuster’s 60-vote threshold. The Byrd Rule, named after Senator Robert Byrd, ensures provisions have a direct budgetary impact, excluding non-fiscal policies. After both chambers pass identical bills, the President signs or vetoes the result. Reconciliation’s power lies in its ability to enact sweeping fiscal changes, as seen in the 2001 and 2003 Bush tax cuts or the 2017 Tax Cuts and Jobs Act, which reshaped the tax code.

How does reconciliation differ from its counterparts? Appropriations bills fund discretionary programs annually, each focused on specific agencies, and follow regular order’s full debate process. Omnibus bills consolidate these appropriations when deadlines are missed, trading precision for speed. CRs are temporary, preserving existing discretionary funding to prevent shutdowns. Reconciliation, however, targets mandatory spending, revenue, or debt limits, using a streamlined process to enact long-term fiscal shifts. Unlike appropriations, it faces no annual deadline, and unlike CRs or omnibus bills, it’s not about short-term funding but structural policy changes. Its scope is narrow, constrained by the Byrd Rule, while appropriations and omnibus bills can include broader provisions, and CRs avoid policy shifts entirely.

What happens if a reconciliation bill fails? Unlike a missed appropriations deadline, which risks a shutdown, a reconciliation failure doesn’t halt government operations. Mandatory programs continue under existing laws, as their funding is automatic. However, the budget resolution’s fiscal goals-say, a tax cut or debt ceiling increase-go unrealized, preserving the status quo. This can have significant consequences. For example, if a reconciliation bill aimed to raise the debt ceiling fails, the government risks hitting the debt limit, potentially triggering a default, as nearly occurred in 2011 and 2023. Politically, failure can spark blame and delay priorities, as seen in 2017 when a reconciliation bill to repeal the Affordable Care Act failed in the Senate. The ACA remained intact, forcing Republicans to pivot to tax reform, which later passed via reconciliation. Congress may respond by revising the bill, pursuing regular legislation (facing filibuster hurdles), or abandoning the effort, depending on political dynamics.

Historically, reconciliation failures have reshaped policy landscapes. In 1995, a reconciliation bill under President Clinton aimed to cut Medicare and taxes but was vetoed, leading to government shutdowns tied to broader budget disputes. The failure forced negotiations, resulting in a compromise budget. Conversely, successful reconciliation bills, like the 1996 welfare reform, show its potential to drive change when votes align. These cases highlight reconciliation’s high stakes and the ripple effects of its failure, from market uncertainty to stalled reforms.

The federal budget’s dual nature-mandatory spending’s automatic stability versus discretionary spending’s annual volatility-underscores the distinct roles of these tools. Mandatory spending, managed through reconciliation or authorizing laws, is a long-term commitment, driven by demographics like an aging population. Discretionary spending, handled by appropriations, omnibus bills, or CRs, reflects immediate priorities but risks disruption, as seen in the 1995-96 and 2013 shutdowns. Reconciliation bridges these worlds, offering a path to adjust mandatory programs or taxes, but its failure underscores the budget’s complexity and Congress’s challenge in balancing deliberation with action.

In practice, regular order is more aspiration than norm. Deadlines slip, CRs multiply, and omnibus bills balloon, while reconciliation is reserved for fiscal heavyweights. Yet this messy system funds a $6.8 trillion government, from aircraft carriers to hospital beds to Social Security checks. Appropriations provide annual control, omnibus bills offer expediency, CRs ensure survival, and reconciliation drives structural change. When reconciliation fails, the system doesn’t collapse, but the missed opportunity can reshape policy, politics, and economic expectations, reminding us that governing is a delicate dance of compromise, vision, and resilience.

What is Regular Order?

Under regular order, Congress funds the government through a structured process outlined by the Congressional Budget and Impoundment Control Act of 1974. Here’s how it works:

1. President’s Budget Submission: By the first Monday in February, the President submits a budget proposal to Congress, detailing spending and revenue priorities for the upcoming fiscal year (starting October 1).

2. Congressional Budget Resolution: The House and Senate Budget Committees develop a concurrent budget resolution, setting overall spending, revenue, and debt limits. This resolution, which does not require presidential approval, is typically adopted by April 15. It includes budget authority (the amount agencies can obligate) and budget outlays (actual payments).

3. Appropriations Process:

   • Subcommittee Work: The House and Senate Appropriations Committees, each with 12 subcommittees, draft 12 annual appropriations bills covering discretionary spending (about one-third of federal spending, including defense, education, and transportation). Each bill corresponds to specific agencies or programs.

   • Markup and Amendments: Subcommittees hold hearings, mark up the bills, and propose amendments. The full Appropriations Committee then reviews and approves them.

   • Floor Action: Each chamber debates and votes on its version of the appropriations bills. The House and Senate must reconcile differences through a conference committee or amendments to produce identical bills.

   • Passage: Both chambers pass the reconciled bills, which are then sent to the President for approval or veto by September 30, the end of the fiscal year.

4. Mandatory Spending and Revenues: The budget resolution also covers mandatory spending (e.g., Social Security, Medicare) and tax policies, handled by authorizing committees like Ways and Means (House) or Finance (Senate). These are separate from appropriations but part of the overall budget framework.

5. Execution: Once signed into law, the Office of Management and Budget (OMB) allocates funds to federal agencies, which must spend according to congressional intent.

If Congress fails to pass all appropriations bills by October 1, it may pass a continuing resolution (CR) to temporarily fund the government at prior-year levels, or a government shutdown may occur. Regular order requires adherence to deadlines and avoids omnibus bills (combining multiple appropriations) or excessive emergency spending, ensuring transparency and debate.

This process, when followed, promotes accountability but is often disrupted by political disagreements, leading to CRs or omnibus packages.

What is Reconciliation?

In the context of regular order, budget reconciliation is a legislative process used by Congress to expedite the passage of certain budget-related laws by aligning federal spending, revenue, and debt limit policies with the congressional budget resolution. It’s an optional step, typically used when the budget resolution includes reconciliation instructions. Here’s how it works:

1. Budget Resolution with Reconciliation Instructions: The congressional budget resolution, adopted by both the House and Senate, may include specific instructions directing certain committees to propose changes to mandatory spending (e.g., Social Security, Medicare), revenue (taxes), or the debt ceiling. These instructions set dollar targets or policy goals and are binding for the committees named.

2. Committee Action: The designated committees (e.g., House Ways and Means, Senate Finance) draft legislation to meet the reconciliation instructions. Each committee’s proposal is combined into a single reconciliation bill for its respective chamber.

3. Limited Debate and Amendments: Reconciliation bills are subject to special rules under the Congressional Budget Act of 1974:

   • In the Senate, debate is limited to 20 hours, and a simple majority (51 votes) is sufficient for passage, bypassing the filibuster’s 60-vote threshold.

   • Amendments must be germane and deficit-neutral or deficit-reducing, per the Byrd Rule, which prohibits extraneous provisions (e.g., non-budgetary policy changes).

   • In the House, debate is also limited, and rules are set by the Rules Committee, often restricting amendments.

4. Reconciliation and Passage: After each chamber passes its version of the reconciliation bill, differences are resolved through a conference committee or amendments. The final bill must pass both chambers with identical language and is then sent to the President for approval or veto.

5. Scope and Limitations: Reconciliation is restricted to fiscal matters-spending, revenues, or debt limits. The Byrd Rule in the Senate ensures provisions have a direct budgetary impact, excluding unrelated policy changes. This makes reconciliation a powerful tool for tax reform or mandatory spending adjustments but limits its use for broader legislation.

Reconciliation under regular order ensures a streamlined process for budget-related changes, avoiding procedural gridlock while adhering to the budget resolution’s framework. It’s often used for significant legislation, like tax cuts or entitlement reforms, but its scope is tightly constrained to maintain fiscal focus.

Reconciliation, Omnibus Bills, & Appropriations Bills

Reconciliation, omnibus bills, appropriations bills, and continuing resolutions (CRs) are distinct mechanisms in the congressional budgeting process under regular order, each serving unique purposes. Here’s how they differ:

1. Reconciliation:

   • Purpose: Used to align federal spending, revenue (taxes), or debt limits with the congressional budget resolution, focusing on mandatory spending (e.g., Medicare, Social Security) or tax policy.

   • Process: Triggered by reconciliation instructions in the budget resolution, directing specific committees to draft legislation. The resulting reconciliation bill is debated under expedited rules (e.g., 20-hour Senate debate limit, simple majority vote, no filibuster). Subject to the Byrd Rule in the Senate, which limits provisions to those with direct budgetary impact.

   • Scope: Limited to fiscal matters (spending, revenue, debt). Cannot include non-budgetary policy changes.

   • Frequency: Optional, used only when the budget resolution includes reconciliation instructions (not every year).

   • Example: Tax Cuts and Jobs Act of 2017, passed via reconciliation to adjust tax policy.

2. Appropriations Bills:

   • Purpose: Fund discretionary spending for federal agencies and programs (e.g., defense, education, transportation), covering about one-third of the federal budget.

   • Process: Congress passes 12 individual appropriations bills annually, drafted by the House and Senate Appropriations Committees’ subcommittees. Each bill is debated, amended, and voted on separately in both chambers, then reconciled and sent to the President by September 30 for the fiscal year starting October 1.

   • Scope: Covers specific discretionary programs and agencies for one fiscal year. Does not address mandatory spending or revenue.

   • Frequency: Annual, required to keep the government funded.

   • Example: The Department of Defense Appropriations Act, funding military operations for a single fiscal year.

3. Omnibus Bill:

   • Purpose: A single, large bill combining multiple appropriations bills (or portions thereof) to fund various government agencies and programs in one package.

   • Process: Used when Congress cannot pass all 12 individual appropriations bills by the fiscal year deadline. Combines several bills into one to streamline passage. Debated and voted on as a single bill, often with limited amendment opportunities due to time constraints.

   • Scope: Covers discretionary spending, like appropriations bills, but consolidates multiple agencies or programs. May include emergency funding or unrelated provisions (though less constrained than reconciliation).

   • Frequency: Not part of regular order; used when regular appropriations process stalls, often near fiscal year-end.

   • Example: The Consolidated Appropriations Act of 2023, which combined multiple appropriations bills to fund the government.

4. Continuing Resolution (CR):

   • Purpose: Temporarily funds the government at prior-year levels when Congress fails to pass appropriations bills (or an omnibus bill) by October 1, preventing a government shutdown.

   • Process: A short-term bill passed by both chambers and signed by the President, extending funding for a set period (e.g., weeks or months) until regular appropriations are enacted.

   • Scope: Maintains existing discretionary funding levels without new policy changes or significant adjustments. Does not address mandatory spending or revenues.

   • Frequency: Common when appropriations deadlines are missed, often multiple times in a fiscal year.

   • Example: A CR passed in September 2024 to fund the government through mid-December 2024.

Key Differences:

• Scope: Reconciliation focuses on mandatory spending, revenue, or debt limits; appropriations and omnibus bills cover discretionary spending; CRs maintain status quo funding.

• Process: Reconciliation uses expedited rules to bypass filibusters; appropriations follow regular order with full debate; omnibus bills consolidate appropriations under time pressure; CRs are stopgap measures with minimal debate.

• Constraints: Reconciliation is limited by the Byrd Rule; appropriations and omnibus bills are broader but tied to discretionary programs; CRs avoid new policy.

• Outcome: Reconciliation enacts long-term fiscal changes; appropriations and omnibus fund annual operations; CRs prevent shutdowns temporarily.

In summary, reconciliation is a targeted, expedited process for fiscal policy, while appropriations, omnibus bills, and CRs focus on discretionary funding with varying levels of scope and urgency. Regular order prioritizes individual appropriations, but omnibus bills and CRs often emerge when deadlines are missed.