Abolition of the Senate's Byrd Rule Is Long Overdue

A central aspect of the U.S. Senate’s “Byrd Rule” is biased against tax relief, and it needs to be tossed out.

With the battle over repealing ObamaCare, we’ve heard a good deal this year about “budget reconciliation.” What is this arcane federal budget term? Quite simply, budget reconciliation means that the U.S. House of Representatives and the Senate hammer out, in effect, a budget outline that provides marching orders for various House committees dealing with the budget. Eventually, an omnibus budget bill is voted on. Budget reconciliation operates under expedited procedures, including being subject to only a majority vote in the Senate, that is, no filibuster.

Reconciliation was first adopted in the Congressional Budget Act of 1974. But the process was quickly abused – how shocking! – with non-budget issues being slipped into the reconciliation process. These “extraneous” issues led to adoption of the “Byrd Rule,” named for Senator Robert Byrd, Democrat of West Virginia, in the mid-1980s, and being integrated into the Congressional Budget Act in 1990.

So far, so good, right? Well, no.

The problem emerges when considering how the term “extraneous” is defined. Unfortunately, a provision is considered “extraneous” if it would increase the budget deficit in a fiscal year beyond the budget window laid out in the reconciliation measure. Given how D.C. works in terms of the immortality of federal government programs and the desire to drain ever more resources from the private sector, this seems designed to make tax relief measures temporary while leaving spending programs chugging along.

Similarly, the notion that federal government budgeteers could possibly know the full impact on the budget of tax relief measures more than a decade after being passed is rather ridiculous, as are the static tools by which the budgeteers make such guesses.

Finally, there is no recognition of the simple economic fact that all budget deficits are not the same. A budget deficit that might emerge due to pro-growth tax relief is far different from a budget deficit resulting from more government spending guided by political incentives.

We saw the consequences of this portion of the “Byrd Rule” with the expiration of the Bush tax relief measures, and a resulting massive tax increase agreed to and imposed at the start of 2013. That, of course, was another blow to the economy, along with increased costs and uncertainties that came with, for example, ObamaCare, Dodd-Frank, and an array of other regulatory intrusions during the Obama years.

And now, the “Byrd Rule” stands in the way of pro-growth measures like repealing ObamaCare, and passing tax reform. Clearly, for the sake of improving the policy environment for economic growth, it’s long overdue time to rein in the “Byrd Rule.”