Reconciliation and the Size of the Budget

Reconciliation has become a regular feature of the congressional budget process. We address the question of whether or under what conditions the budget process with reconciliation (modeled as selection of the size of the budget first and its division second) produces smaller budgets than a piecemeal appropriations process in which the size of the budget is determined residually. The theoretical result is that reconciliation sometimes results in relatively large budgets. A testable implication of the theory is that given a choice of how stringently reconciliation is to be employed, congressmen will jointly consider preferences and the expected outcomes under the available institutional arrangements and select the arrangement (usually a rule) that yields the most favorable outcome. Empirical results from the budget process in the House from 1980-83 are generally supportive of the hypothesis of rational choice of institutional arrangements which is derived from the theory.