Congress Must Cut Deficit if Reconciliation is Used Again
TL/DR –
The US Congress is considering using a special budget process to provide $200 billion for the war in Iran and additional money for immigration enforcement. The article argues that this spending does not merit new spending and needs to be made fiscally responsible by targeting reduction of deficits to 3% of GDP or lower. It suggests that any new proposed spending should involve a binding requirement for a net deficit reduction of at least $600 billion, as without this, the ever-growing national debt cannot be curtailed.
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Congress Considers $200 Billion Reconciliation for Iran War and Immigration Enforcement
Reports suggest that Congress is considering using reconciliation to allocate $200 billion towards the war in Iran and additional funding for immigration enforcement. Reconciliation is a special budget process that allows legislative changes to be enacted with a mere majority vote in the Senate, making it an attractive tool for lawmakers. The looming question is whether the decision to allocate these funds, and the associated immigration enforcement issues, warrant new spending.
Should the Reconciliation Be Used?
If Congress chooses to proceed with the reconciliation for these causes, it carries a responsibility to ensure fiscal responsibility. Experts suggest that the goal should be to reduce deficits to 3 percent of GDP or lower to maintain debt sustainability. If that objective seems unreachable, Congress must at least aim to achieve $600 billion in net deficit reduction, matching the total amount the final 2025 reconciliation bill exceeded in non-interest borrowing. Anything less would fall short of the minimum needed to combat a growing fiscal crisis.
Facing the Grim Reality of U.S. Deficits
The United States is currently grappling with habitual $2 trillion annual deficits. Publicly held federal debt is projected to surpass the country’s annual economic output this year. The forecast for 2030 shows debt surpassing the World War II debt-to-GDP record. By 2056, debt could reach a startling 175 percent of GDP, assuming no new wars, pandemics, or economic recessions occur.
Major factors contributing towards these persistent deficits are old-age entitlement programs, primarily Medicare and Social Security. These programs, coupled with other mandatory spending programs and interest costs, are set to consume all federal revenue by 2036. The proposal for additional deficit spending given this trajectory has been widely criticized, with experts suggesting that even aiming for deficit-neutrality is not enough.
Consequences of the Proposed Spending
The proposed $200 billion spend for the Iran war and additional immigration enforcement is projected to add around $87 billion in interest costs between FY2026 and FY2036. This figure does not take into account the hidden health care costs for veterans of the war, additional immigration enforcement expenditure, or potential spending provisions to secure votes. Such fiscal irresponsibility could turn Reconciliation 2.0 into another budget-buster, unless legislators commit to a significant deficit reduction target.
A Case of Deja Vu: The ‘One Big Beautiful Bill Act’
Last year, Republicans used reconciliation to pass the One Big Beautiful Bill Act (OBBBA), a tax-and-spending bill that added $3.4 trillion to 10-year primary deficits. The final law exceeded the initially allowed 10-year primary deficit increase of $2.8 trillion by $600 billion. Drawing from this experience, experts suggest that any future reconciliation efforts should include a binding requirement for a net deficit reduction of at least $600 billion.
Cost-Cutting Measures to Achieve Deficit Reduction
There are numerous options available for Congress to achieve at least $600 billion in net deficit reduction. These include reforms to Medicare, Medicaid, Obamacare, SNAP, and the tax code. For instance, eliminating a loophole used to dodge SNAP eligibility standards, ending Medicaid financing scams, and cutting Medicare Advantage subsidies connected to wastage could save over $1.1 trillion. This amount could more than offset the proposed $200 billion spending increase and hit a $600 billion deficit reduction target.
Restoring Fiscal Responsibility
New spending for the Iran war and immigration enforcement without offsets would be fiscally irresponsible. It would hasten the growth of the deficit and continue the abuse of using reconciliation as a blank check. Therefore, legislators need to ensure that the Reconciliation 2.0 process meaningfully reduces the deficit by at least $600 billion and upholds fiscal discipline.
Reconciliation: A Tool Not to Be Abused
Over time, Congress has perverted the original intention of reconciliation to facilitate deficit reduction by using it to widen deficits and sidestep appropriations. If unchecked, this abuse of reconciliation could lead to bigger deficits and more partisan policies, further jeopardizing fiscal responsibility. Therefore, Congress should consider reviving the Conrad Rule, which prohibited reconciliation from adding to deficits, or even adopting a “Super” Conrad Rule, requiring any new deficit spending be offset on a 2:1 basis. This would ensure reconciliation is used to enhance the fiscal outlook, rather than worsen it.
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