As the One Big Beautiful Bill (OBBB) Act, a major reconciliation package aligned with President Donald Trump’s agenda, returns to the House for approval, confusion surrounds its provisions. We want to clarify what the bill is and is not by focusing on the differences between reconciliation and rescissions, two distinct legislative tools addressing federal spending and budgetary policy.
Misinformation about the OBBB’s scope has spread, with some critics mistakenly focusing on its limited discretionary spending cuts. For example, Elon Musk has publicly criticized the bill for not cutting enough discretionary spending, arguing it fails to address federal bureaucracy bloat. This critique reflects a misunderstanding of the bill’s purpose: The OBBB is a reconciliation package designed to address mandatory spending, revenues, and the debt limit, not a rescission package targeting discretionary spending. Significant discretionary cuts, as Musk advocates, would require separate legislative action through rescissions processes or appropriations bills, not reconciliation.
Reconciliation: A Budget-Focused Process
Established in 1974, budget reconciliation expedites passage of budget-related legislation by bypassing the Senate filibuster, requiring only a simple majority of 51 votes. Reconciliation is limited to matters affecting federal spending, revenues, and the debt limit, as outlined in a budget resolution.
Key reconciliation provisions in the OBBB include:
- Permanently extending the 2017 Tax Cuts and Jobs Act tax cuts
- Increasing the child tax credit to $2,500 per qualifying child through 2028
- Eliminating taxes on overtime and tips, with income-based phaseouts
- Cutting mandatory spending programs, such as Medicaid, through work requirements and stricter eligibility, and reducing SNAP funding
- Repealing clean energy tax credits from the Inflation Reduction Act
- Raising the debt ceiling
As a reconciliation bill, the OBBB focuses on budgetary impacts and must comply with the Senate’s Byrd Rule, which prohibits provisions unrelated to the budget. The Senate’s “Byrd bath” process removed non-budgetary provisions, such as AI regulation bans and Medicaid carveouts, to ensure compliance, complicating the inclusion of rescissions for non-budgetary purposes.
Rescissions: Canceling Unspent Funds
Rescissions, often confused with reconciliation, involve canceling or clawing back previously appropriated funds before they are spent, primarily targeting discretionary spending. Unlike reconciliation, which addresses mandatory (entitlement) spending and revenues, rescissions focus on unspent funds from annual appropriations bills (discretionary spending). While rescissions require a simple majority, they are subject to Senate filibuster unless included in a reconciliation bill.
The OBBB includes limited rescissions, such as canceling unobligated funds from the Inflation Reduction Act’s clean energy projects. A separate rescission package proposed by Trump targets spending for entities like the Corporation for Public Broadcasting. However, the OBBB’s rescissions are minimal, as the bill primarily addresses mandatory spending and revenues, not discretionary spending. Discretionary cuts, such as those to federal bureaucracy, would require separate rescission processes or appropriations bills.
Key Differences and the OBBB’s Impact
The OBBB leverages reconciliation to enact significant tax cuts, reduce mandatory spending, and increase the debt ceiling. Rescissions play a smaller role, targeting specific unobligated funds to offset costs, but they are constrained by reconciliation’s focus on mandatory spending and revenues. While reconciliation drives the bill’s broad fiscal changes, rescissions are a targeted tool for canceling specific appropriations, often requiring separate legislative action.
The OBBB is a reconciliation-driven bill with limited rescissions, carefully crafted to comply with Senate rules while advancing Trump’s fiscal priorities. Understanding the distinction between reconciliation and rescissions is crucial to grasping the bill’s scope and impact.