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Reconciliation Available for Lame Duck Session

If you want to know how Democrats could force a vote on the Bush tax cuts on their terms, David Waldman has figured it out. Yes, it’s complicated; yes, it involves budget reconciliation; yes, it involves extending all the tax cuts and then coming back to repeal those on the high-end earners; yes, it has some of the same pitfalls as the straight vote under normal rules; yes, it has no chance of happening.

But it’s useful, if only to show how crazy Congressional rules have become. As Waldman points out, the reconciliation instructions for fiscal year 2010, even though the FY has expired, are still available until the end of the 111th Congress, because the Democrats never passed a budget resolution. Because we’re in the FY2011 budget cycle, Democrats could use reconciliation one last time in the lame duck.

The only way to use this with respect to the Bush tax cuts to get the preferred option is this:

Pass the tax cut extensions for everyone, across the board. Send it to the president, and get it signed into law.

Then come back with a reconciliation bill repealing the extension for the top brackets. Since current law at that point will score the repeal as a $700 billion savings over 10 years, you’re good to go on the deficit reduction requirement. Move it under the FY2010 reconciliation instructions, and you’re done.

Why not just pass the extensions you want under reconciliation instead? Well, the Senate actually changed its rules in 2007 to prevent the use of reconciliation for measures that increase the deficit the way the 2001 and 2003 tax cuts did. So that option isn’t really available.

Reconciliation would be necessary because of the pesky motion to recommit, which House Republicans would use on a tax cut vote to force the high-end tax rates to get extended (and lots of Democrats would join them in that effort). Republicans in the Senate, who would have the ability to make unlimited changes to the reconciliation bill through amendments, would not have the ability to restore the tax cuts they want without voting down the bill overall, and they’d need 51 votes to do that. Increasing the deficit would violate the reconciliation instructions.

This is more of an entertaining exercise that anything; if Democrats actually took this advice I’d be shocked. Here’s the larger point, however: reconciliation is still an open option. Democrats, then, could pass a jobs bill using reconciliation. They could even offset it in the out years so as not to run afoul of the paygo restrictions. But they could put together a package that would create jobs through government spending right away. Heck, if they can’t get the unemployment extension through they could use reconciliation for that purpose.

In doing so, Democrats would be fulfilling the promise of actual deficit reduction. Because only economic growth will get you to that point, and anyway the main problem in the country at the moment is not the deficit but the 15 million people out of work.

The economy is on the brink of a period of prolonged deflation. With the Obama stimulus of February 2009 already starting to peter out, state budgets in free fall, home foreclosures proceeding at the rate of several hundred thousand a month, and job creation too low to cut the unemployment rate, the outlook is for endless slump — unless we get more public investment, not less.

The Fed’s policy of resorting to the printing press and buying up Treasury bonds to keep interest rates low is having only limited effect. Housing prices, after rebounding very slightly, are falling again.

In other words, restoring job and wage growth is the path forward on the budget, the path forward on the economy, and fortunately, the path forward for the President’s re-election. So if he’s serious about getting another term, and if Democrats are serious about getting the economy moving again, they could do it now. In the lame duck session.

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David Dayen

David Dayen