Critical policy fights sometimes happen long before a bill comes up for a vote. Legislative process and strategy intersect early to determine the balance of power for a future vote on policy. Health care legislation is several months away from a floor vote, but the tactical maneuvering has already begun.

Fair warning: we’re going to work through some fairly thick procedural weeds. This is the most in-depth post I have written so far. If you really want to understand the tactical chess of legislating and its enormous effects on policy, you need to know this level of detail. With that caution … <deep breath>

The House and Senate each have passed their versions of the Congressional budget resolution, which sets the procedural rules for spending and tax legislation throughout the year. For these rules to take effect, designees from each body must now work out their differences and produce a common text (a “conference report”) that then passes both the House and Senate. The Congressional budget resolution is an internal management tool of the Congress, and never goes to the President for a signature or veto.

The New York Times argues (“The First Showdown on Health Care“) that Senate Majority Leader Harry Reid (D-NV) and Senate Budget Committee Chairman Kent Conrad (D-ND) should put into the budget resolution conference report a Senate reconciliation instruction, to give Leader Reid leverage over moderate Senate Republicans in future negotiations on health care legislation.

If Senators Reid and Conrad do what the Times recommends, then Senate Democrats can in theory, pass a special type of bill, called a reconciliation bill, with only a majority of the Senate. Since the Minnesota Senate seat is still vacant, this means Leader Reid would need 50 of 99 Senators to vote for a health care bill if he uses the reconciliation process. If the budget resolution conference report does not create the process for a reconciliation bill, then he would need 60 votes to overcome any Republican filibuster. There are now 58 Senators who “caucus” as Democrats, including two labeled as Independents, Sen. Lieberman (CT) and Sen. Sanders (VT).

I assume that if he only needs 50 votes to pass a health care bill, Leader Reid will try to start the policy near the left edge of his caucus and then negotiate toward the center as needed to get to 50 votes. The bulk of his caucus is liberal, especially on health care. He will have an eight vote margin to play with, if he limits his universe to just the 58 Democrats and Independents. That gives him a lot of room to maneuver.

If instead he needs 60 votes, he will have to win the support of the most conservative of the 58, and at least two Senate Republicans. Obvious targets would include Senators Snowe and Collins from Maine, or maybe Senator Specter from Pennsylvania.

Thus, I would expect a bill passed under reconciliation to be much farther Left than a bill passed outside of reconciliation. But as we will see in a moment, reconciliation is a limited tool, and cannot be used for every kind of legislative change he might want.

The Times argues that Senator Reid should make sure he has a stick to use against moderate Senate Republicans, in case carrots don’t work. Having this fast-track process in which he would not need their votes would appear to give him and his designees (Sen. Baucus? Sen. Rockefeller? Sen. Kennedy?) leverage in negotiations with those moderates. Note the Times‘ use of the word “weapon”:

Reconciliation is not a weapon that should be deployed immediately. The conferees should agree on language that would allow it to kick in by a date in the fall if the two parties cannot agree on a reform bill. A bipartisan agreement would be nice, but what the country needs right now is effective health care reform.

The Times is imagining a scenario in which Leader Reid would say to moderate Senate Republicans, “I would like to have your votes, and I’m willing to compromise somewhat to get them, but not too much. If you’re not willing to be reasonable, then I will use this reconciliation weapon and pass a more liberal bill without you.”

What does the Times want in this health care reform legislation?

That would make it easier to adopt such important measures as a tightly regulated insurance exchange for those without group coverage, a new public plan to compete with private plans, and mandates that employers contribute to the cost of covering their employees.

The Times wants Leader Reid to wield a stick as he negotiates with moderate Republicans. But if the stick is only a twig, then it will not provide leverage to Leader Reid or his negotiators, and the moderate Senate Republicans are smart enough to know this. The reconciliation threat is effective only if it is a viable path to producing the kind of health care reform that Leader Reid or the Times wants.

The Times hints at why the stick may only be a twig:

The reconciliation approach is not bulletproof. It is primarily designed to deal with spending and revenue issues that affect the deficit. Under current rules, senators can seek to remove any provisions deemed extraneous or “merely incidental” to such budgetary concerns. Nobody is quite sure how the Senate parliamentarian would rule on such items as tighter regulation of private insurers or creation of a new public plan or incentives to improve the coordination of care.

Let’s examine in a bit more detail how the reconciliation rules make this an imperfect weapon for Leader Reid. The Senate reconciliation process is a fast-track procedure that limits the rights of Senators to amend, filibuster, or otherwise delay a bill that they strongly oppose. It is an incredibly powerful legislative tool, created in 1974 as part of a law that comprehensively changed Congressional budget procedures. The law that creates the reconciliation process strictly limits its use to matters that have to do with spending and taxes. (The process exists in the House as well, but I’m going to focus on the Senate where it has a greater effect and is more relevant to the current tactical issue.)

To oversimplify, you can use a reconciliation bill only to change taxes or spending. The process was created to facilitate deficit reduction — various Senate committees would each be given a deficit reduction target, and would be “instructed” by the budget resolution to produce bills that reduced the deficit by those amounts. The Senate Budget Committee would then package all those deficit reduction bills into a single bill, and report it to the Senate floor for debate, amendments, and voting, all under a fast-track process that limits the minority’s ability to filibuster or kill the bill by amendment.

Laws that reduce the deficit either cut spending or raise taxes. Both are politically painful votes for Senators. By combining several smaller deficit reduction bills into a single bill, the reconciliation process was used to create a single bill that reduced the budget deficit by a lot. This gave Senators the excuse to say, “While I oppose the spending cut in section XXX of this bill that would hurt people in my State, the overall benefits of shared sacrifice and deficit reduction make it worth it. I wish

[not really] that I had unlimited opportunity to amend or even delay this bill, so that I could remove section XXX, but I do not, so I will vote for final passage.”

Now any time there is a change of party control in the Senate, advocates for the new majority party argue that reconciliation should be used for everything. If you don’t have the support of 60 Senators to do what you want, then you cry “Let’s put that in reconciliation!” based on a mistaken (or misleading) view that reconciliation can be used to bypass any filibuster or delaying tactic on any type of legislation.

It cannot because of the Byrd Rule, named after Sen. Robert Byrd (D-WV), who included it in the law that originally created the reconciliation process. Basically, the Byrd rule limits reconciliation bills to containing only provisions that turn spending or tax dials. You cannot make broader policy changes that are unrelated to increasing or decreasing spending or taxes, unless you can demonstrate that those policy changes are a “necessary term or condition” of another provision that turns a tax or spending dial. And while this is an exception that lets you include some non-budgetary policies in a reconciliation bill, in practice it is a narrow and limited exception. You cannot in a reconciliation bill make a major non-budgetary policy change if it has a budgetary effect that is “merely incidental” to the scope of the non-budgetary change.

Let us follow the path of the Times’ recommendation, and suppose that the budget resolution conference report were to contain a reconciliation instruction, either to be used to pass health care reform legislation with only 50 votes, or instead to create leverage for Senate Democrats as they negotiate with moderate Senate Republicans (or both).

Now suppose Senate Democrats produced a bill like the Times describes, which created “a tightly regulated insurance exchange for those without group coverage, a new public plan to compete with private plans, and mandates that employers contribute to the cost of covering their employees.”

Creating a new insurance exchange is a policy change that does not affect the federal budget. Sure there would be some expenses for the setup and administration of the exchange (possibly totaling billions of dollars) , but clearly the tax or spending change is incidental to the creation of the new insurance market, which is an enormous policy change by itself. This policy would violate the Byrd rule. If it were included in a final reconciliation bill conference report and there were not 60 Senate votes to waive the Byrd rule, the entire health care reform bill would die. Knowing this, Senator Reid would have no choice but to jettison this policy to avoid jeopardizing the entire bill.

The same is true for an employer mandate. Technically, such a mandate would reduce federal revenues for reasons I won’t get into, but the budgetary effects would again be incidental to the overall policy change proposed. I cannot see how an employer mandate could be included in such a bill and still allow the bill “protected” reconciliation status that would allow Senator Reid to avoid a filibuster.

I think the same is true for the establishment of “a new public plan to compete with private plans,” precisely because it is new. I am less certain of this, and it might depend on how it was written.

The same is true for many other elements of what you would expect in a big health care reform bill. This parliamentary vetting process, which occurs at the very end of a conference negotiation, is called a “Byrd bath.” Budget Committee staff from both sides of the aisle argue their cases to the Senate Parliamentarian. If the Parliamentarian says that a provision violates this rule, then the majority always chooses to remove it rather than risk losing the entire bill. I was the Senate Budget Committee staffer responding for the health portion of the Byrd Bath in the 1995 reconciliation bill, and I helped manage the Byrd Bath process in reconciliation bills in the late 90’s when I worked for Senate Majority Leader Trent Lott.

Returning to the beginning, Senator Reid’s stick is not as big as the Times might like. Yes, he can use reconciliation to expand Medicaid or S-CHIP, or even Medicare, especially if he’s willing to offset those spending increases with spending cuts or tax increases. To the extent he is willing to limit his threat to these areas, reconciliation provides him with leverage.

If, however, he wants health care reform to include the creation of a national health insurance exchange, or employer (or individual) mandates, or other insurance mandates, or a wide range of other health care policy changes that are not principally about taxes or spending, then he won’t be able to use reconciliation to do these things, and he will need moderate Republicans. Those moderate Republicans know that, and should not be fooled if he tries to bluff them.

Speak softly, Mr. Leader. That big stick the New York Times wants you to wield is more like a twig.