Will the “Byrd Bath” Turn into a Tax Credit Bloodbath?
While most of official Washington waits for word—expected early this week—from the Congressional Budget Office (CBO) about the fiscal effects of House Republicans’ “repeal-and-replace” legislation, another, equally critical debate is taking place within the corridors of the Capitol. Arcane arguments behind closed doors about the nuances of parliamentary procedure will do much to determine the bill’s fate in the Senate—and could lead to a vastly altered final product.
In recent days, House leaders have made numerous comments highlighting the procedural limitations of the budget reconciliation process in the Senate. However, those statements do not necessarily mean the legislation released last week comports with all of those Senate strictures. Indeed, my conversations with more than half a dozen current and former senior Senate staff, all of whom have years of expertise in the minutiae of Senate rules and procedure, have revealed at least four significant procedural issues—one regarding abortion, two regarding immigration, and one regarding a structural “firewall”—surrounding the bill’s tax credit regime.
It is far too premature to claim that any of these potential flaws will necessarily be fatal. The Senate parliamentarian’s guidance to senators depends on textual analysis—of the bill’s specific wording, the underlying statutes to which it refers, and the CBO scores (not yet available)—and arguments about precedent made by both parties. Senate staff could re-draft portions of the House bill to make it pass procedural muster, or make arguments to preserve the existing language that the parliamentarian accepts as consistent with Senate precedents.
Nevertheless, if the parliamentarian validates even one of the four potential procedural problems, Republicans could end up with a tax credit regime that is politically unsustainable, or whose costs escalate appreciably.
In 2009, Democratic Sen. Kent Conrad famously opined that passing health care legislation through budget reconciliation would make the bill look like “Swiss cheese.” (While Democrats did not pass Obamacare through reconciliation, they did use the reconciliation process to “fix” the bill that cleared the Senate on Christmas Eve 2009.)
In reality, it’s much easier to repeal provisions of a budgetary nature—like Obamacare’s taxes, entitlements, and even its major regulations—through reconciliation than to create a new replacement regime. The coming week may provide firsthand proof of Conrad’s 2009 axiom.
The ‘Byrd Rule’ and Abortion
The Senate’s so-called “Byrd rule” governing debate on budget reconciliation rules, named after former Senate Majority Leader and procedural guru Robert Byrd (D-WV), consists of not one rule, but six. The six points of order (codified here) seek to keep extraneous material out of the expedited reconciliation process, preserving the Senate tradition of unlimited debate, subject to the usual 60-vote margin to break a filibuster.
The Byrd rule’s most famous test states that “a provision shall be considered extraneous if it produces changes in outlays or revenues which are merely incidental to the non-budgetary components of the legislation.” If the section in question primarily makes a policy change, and has a minimal budgetary impact, it remains in the bill only if 60 senators (the usual margin necessary to break a filibuster) agree to waive the Byrd point of order.
One example of this test may apply to the House bill’s tax credits: “Hyde amendment” language preventing the credits from funding plans that cover abortion. Such language protecting taxpayer funding of abortion coverage occurs several places throughout the bill, including at the top of page 25 of the Ways and Means title.
The question will then occur as to what becomes of both the credit and the Hyde protections. Some within the administration have argued that the Department of Health and Human Services (HHS) can institute pro-life protections through regulations, but administration insiders doubt HHS’ authority to do so. Moreover, most pro-life groups publicly denounced President Obama’s March 2010 executive order, which he claimed would prevent taxpayer funding of abortion coverage in Obamacare, as 1) insufficient and 2) subject to change under a future administration. How would those pro-life groups view a regulatory change by the current administration any differently?
Two Procedural Problems Related to Immigration
A similarly controversial issue—immigration—brings an even larger set of procedural challenges. Apart from the separate question of whether the current verification provisions in the House bill are sufficiently robust, any eligibility verification regime for tax credits faces not one, but two major procedural obstacles in the Senate.
Of the six tests under the Byrd rule, some are more fatal than others. For instance, if the Hyde amendment restrictions outlined above are ruled incidental in nature, then those provisions merely get stricken from the bill unless 60 Senators vote to retain them—a highly improbable scenario in this case.
Page 37 of the Ways and Means title of the bill requires creation of a verification regime for tax credits similar to that created under Sections 1411 and 1412 of Obamacare. As Joint Committee on Taxation Chief of Staff Tom Barthold testified last week during the Ways and Means Committee markup, verifying citizenship requires use of a database held by the Department of Homeland Security’s Bureau of Citizenship and Immigration Services (CIS).
That admission creates a big problem: The tax credit lies within the jurisdiction of the Senate Finance Committee, but CIS lies within the jurisdiction of the Senate Homeland Security and Governmental Affairs Committee. And because the Finance Committee’s portion of the reconciliation bill can affect only programs within the Finance Committee’s jurisdiction, imposing programmatic requirements on CIS to verify citizenship status could exceed the Finance Committee’s scope—potentially jeopardizing the entire bill.
The verification provisions in Sections 1411 and 1412 of Obamacare also require using Social Security numbers, triggering another potentially fatal blow to the entire bill. Senate sources report that, during drafting the original reconciliation bill repealing Obamacare in the fall of 2015, Republicans attempted to repeal the language in Obamacare (Section 1414(a)(2), to be precise) giving the HHS secretary authority to collect and use Social Security numbers to establish eligibility. However, because Section 1414(a)(2) of Obamacare amended Title II of the Social Security Act, Republicans ultimately did not repeal this section of Obamacare in the reconciliation bill because it could have triggered a point of order fatal to the legislation.
If both the points of order against the verification regime are sustained, Congress will have to re-write the bill to create an eligibility verification system that 1) does not rely on the Department of Homeland Security and 2) does not use Social Security numbers. Doing so would create both political and policy problems. On the political side, the revised verification regime would exacerbate existing concerns that undocumented immigrants may have access to federal tax credits.
But the policy implications of a weaker verification regime might actually be more profound. Weaker verification would likely result in a higher score from CBO and JCT—budget scorekeepers would assume a higher incidence of fraud, raising the credits’ costs. House leaders might then have to reduce the amount of their tax credit to reflect the higher take-up of the credit by fraudsters taking advantage of lax verification. Any reduction in the credit amounts would bring with it additional political and policy implications, including lower coverage rates.
Concerns over the Tax Credit Firewall
Finally, the tax credit “firewall”—designed to ensure that only individuals without access to other health insurance options receive federal subsidies—could also present procedural concerns. Specifically, pages 27 and 28 of the bill make ineligible for the credit individuals participating in other forms of health insurance, several of which—Tricare, Veterans Administration coverage, coverage for Peace Corps volunteers, etc.—lie outside the Finance Committee’s jurisdiction.
If the Senate parliamentarian advises for the removal of references to these programs because they lie outside the Finance Committee’s jurisdiction, then participants in those programs will essentially be able to “double-dip”—to receive both the federal tax credit and maintain their current coverage. As with the immigration provision outlined above, such a scenario could significantly increase the tax credits’ cost, requiring offsetting cuts elsewhere, which would have their own budgetary implications.
Senate sources indicate this “firewall” concern could prove less problematic than the immigration concern outlined above. While the immigration provision extends new programmatic authority to the administration to develop a revised eligibility verification system, the “firewall” provisions have the opposite effect—essentially excluding Tricare and other program recipients from the credit. However, if the parliamentarian gives guidance suggesting that some or all of the “firewall” provisions must go, that will have a significant impact on the bill’s fiscal impact.
Broader Implications Of These Procedural Problems
Both individually and collectively, these four potential procedural concerns hint at an intellectual inconsistency in the House bill’s approach, one Yuval Levin highlighted in National Review last week. House leaders claim their bill was drafted to comply with the Senate reconciliation procedures. But the bill itself contains numerous actual or potential violations of those procedures and amends some of Obamacare’s insurance regulations, rather than repealing them outright, making their argument incoherent.
Particularly on Obamacare’s costly insurance regulations, there seems little reason not to make the “ol’ college try,” and attempt to repeal the major mandates that have raised premium levels. According to prior CBO scores, other outside estimates, and the Obama administration’s own estimates, the major regulations have significant budgetary effects.
Republicans can and should argue to the parliamentarian that the regulations’ repeal would be neither incidental nor extraneous—their repeal would remove the terms and conditions under which Obamacare created its insurance subsidies in the first place, thus meeting the Byrd test. If successful, such efforts would provide relief on the issue Americans care most about: Reducing health costs and staggering premium increases.
On the tax credit itself, Republicans may face some difficult choices. Abortion and immigration present thorny—and controversial—issues, either of which could sink the legislation. On the bill’s tax credits, the “Byrd bath,” in which the parliamentarian gives guidance on what provisions can remain in the reconciliation bill, could become a bloodbath. If pro-life protections and eligibility verification come out of the bill, a difficult choice for conservatives on whether to support tax credits will become that much harder.
This post was originally published at The Federalist.