Speaker Nancy Pelosi (D-Calif.) and the House Democratic leadership opted to pass a budget enforcement resolution rather than a full budget. (EPA/ZUMApress.com)

On Tuesday, the Treasury Department announced that the country’s deficit had hit the $1 trillion mark just nine months into the fiscal year. Fear of the deficit had already led Congress to kill or delay an administration-backed jobs bill, a federal extension of unemployment benefits, a war funding bill and federal funding for Medicaid. Now, the 13-digit monster has claimed its latest victim: a full budget for the coming fiscal year.

[Congress1] Recognizing that Democrats would be reluctant to record “yes” votes for a budget that would augment the deficit, the House leadership opted to deem as passed a “budget enforcement resolution” instead, just before the July 4 recess. While the distinction between an enforcement resolution and a full budget is largely technical, there is one crucial difference: Under the enforcement resolution, Democrats can no longer use a parliamentary tactic known as budget reconciliation next year — a process Democrats had hoped might allow them to pass key pieces of legislation, such as a jobs bill, with 51 votes in the Senate, as opposed to the usual 60 needed to overcome a filibuster.

Under the arcane rules of the Senate, budget reconciliation can only be used if it was written into the budget rules passed the previous year. With no full budget, there can be no reconciliation. As a consequence, Democrats lose a valuable tool for passing budget-related items on a majority-rules vote. Stimulus and jobs measures, if they combined short-term spending with longer-term deficit reduction, would have qualified for reconciliation.

Some policy advisers and members of Congress pushing for a such a measure — and recognizing that it could not make it past a Republican filibuster — viewed reconciliation as a last hope. “What we want to do is end up with legislation that is going to create a substantial number of jobs,” Sen. Bernie Sanders (I-Vt.) told reporters. “We don’t have 60 votes to do that. We could do that through majority rule, 51 votes.”

But a desire among Democrats to avoid voting on a deficit-increasing budget won out over the need to preserve reconciliation in creating the budget enforcement resolution. “Members looked at the budget and said, ‘We might need more deficit spending,’” said Jim Horney, the director of federal fiscal policy at the Center for Budget and Policy Priorities. “And anything you do to try to reduce those deficits would necessarily include policies that might not be popular — tax increases, cuts in major programs.” The House leadership judged the enforcement resolution as less of a political risk for moderate Democrats who will face difficult re-election campaigns in the fall.

It wasn’t either chamber’s first choice. Throughout the spring, both House and Senate leaders promised that a full budget was coming down the pipeline. “The plan is to work to bring a budget resolution to the floor,” House Speaker Nancy Pelosi (D-Calif.) told reporters in April. And Sen. Kent Conrad managed to pass a budget through the Senate Budget Committee, a major step in getting a budget to the floor.

But behind closed doors, the budget process caused considerable tensions — both between the House and Senate and between more and less liberal members of each chamber. In one of the few on-the-record comments made about the process, Rep. Earl Blumenauer (D-Ore.) told Fox News: “There is some real tension within our caucus. … But it is still an item of open discussion. … I, for one, feel better about putting [a budget] out for everybody to see — but that’s a little above my pay grade.”

Off the record, Senate and House staffers have pointed fingers at one another as to who is to blame for the lack of a full budget. The Senate is the chamber that cannot get enough votes to pass anything, House staffers say, and the House should not be required to do the Senate’s work. The House did not even put together an actual budget — unlike the Senate Budget Committee — Senate staffers retort. The House side proffers that it did not pass a budget because the Senate said it could not get 51 members to stand up and vote for a deficit-increasing measure.

Ultimately, reconciliation and the broader budget both died due to a lack of conviction on the part of Democrats about the need to spend more. Democrats knew in advance that they absolutely wanted the reconciliation option available for health care, and so they kept it on the table in last year’s budget. But they never committed to more stimulus, jobs funding or other types of bills for fiscal year 2011.

“Even if they had gotten a full budget, there was no agreement that they would want to have reconciliation instructions for any big, significant legislation,” Horney said, noting that Democrats had promised not to move cap-and-trade or a carbon tax via reconciliation. “There was just no consensus among Democrats about what to do here.”

The budget enforcement resolution passed the House quietly, attached to a war spending bill. Nevertheless, the maneuver ginned up considerable criticism. “There is not a big functional difference between [a budget and a budget enforcement resolution], but there is a big symbolic difference,” said Maya MacGuineas, the head of the Committee for a Responsible Federal Budget. “Having Congress neglect to create a budget for political reasons is disturbing, to say the least, this year. In terms of the symbolism, for the credit markets, it is a strike against us, if Congress will not talk about where responsible cuts are going to come from. And in terms of partisan politics, it is fuel for the fire, too.”

And Republicans have been happy to fan the flames. “Facing a record deficit and a tidal wave of debt, House Democrats decided it was politically inconvenient to put forward a budget and account for their fiscal recklessness,” Rep. Paul Ryan (R-Wis.), the ranking member of the House Budget Committee, said on the House floor. “With no priorities and no restraints, the spending, taxing and borrowing will continue unchecked for the coming fiscal year. The so-called ‘budget enforcement resolution’ enforces no budget, but instead provides a green light for the appropriators to continue spending, exacerbating our looming fiscal crisis.”

So despite their efforts to avoid deficit-related criticisms, Democrats are being hammered for deficits and for obfuscation. And in the process, they’ve made it almost impossible to imagine a meaningful jobs bill passing next year.

The reconciliation bill, which will be the vehicle for the health care “fixes” the Democrats will add later this week, passed through the panel on a 21-16 vote. Two Democrats, Reps. Allen Boyd (Fla.) and Chet Edwards (Tex.), joined every Republican in opposing the measure. The process is starting in the House because, by law, any legislation that raises revenues (i.e., imposes taxes) must originate in the lower chamber.

The proposal now moves to the House Rules Committee, where Democrats are expected to attach the health reform language later this week before moving the package to the chamber floor. Democratic leaders have been mostly tight-lipped about the specifics of the health reform fixes, largely because they’re still waiting for the official cost estimates to come back from the Congressional Budget Office.

At least as controversial as the Democrats’ plan to go the reconciliation route has been their strategy, announced today, to pass the reconciliation bill alone, and then use an obscure rule to “deem” the larger Senate bill to be passed as well. Still, even Rep. David Dreier (Calif.), senior Republican on the Rules panel, conceded today that, if the Democrats can rally the votes behind the reconciliation bill, there’s nothing that GOP leaders can do to block the deeming strategy.

This morning, Sen. Richard Durbin (D-Ill.) told MSNBC’s Joe Scarborough why party leaders won’t go that route.

Scarborough: Why don’t you blow the whole place up and just say majority rules, 51 is enough?

Durbin: We’ve been blowing things up on this issue for decades, and as a result, we’ve accomplished nothing. Reconciliation is a very spare and thin process with limited opportunities. For example, no insurance reform if we do reconciliation. We won’t give American consumers the tools that they need to fight back against the health insurance companies.

And I think they understand, as we do, that’s a very, very important element in this package.

Also of note, Bingaman said he would join fellow Democrats to pass reforms using the budget reconciliation process if Republicans successfully filibuster the bill.

He also said that while he still hopes to craft a bipartisan bill in the Senate, if that effort fails he would support pushing a health care reform bill through this year using the budget reconciliation bill.

Reconciliation is a special process through which the Senate deals with budget issues. Only 51 votes are needed to pass a budget reconciliation bill on the floor of the Senate, whereas all other bills are susceptible to a filibuster which requires 60 votes to overcome.

“We made a provision in the budget resolution [earlier this year] that it [the reconciliation bill] could be used to try to enact health care provisions related to health care reform,” he said. “There are restrictions to what you can include in that … but I would support it if that’s the only way.”

But not Rep. Paul Ryan (R-Wis.). Speaking to ABC News today, Ryan, who’s the senior Republican on the House Budget Committee, said that the recent elections leave Democrats every right to push their health care agenda, by reconciliation or otherwise.

From The Note:

“It’s their right. They did win the election,” said Ryan, R-Wis. “That’s what I tell all my constituents who are worried about this. They won the election. They did run on these ideas. They did run on nationalizing health care. So, you’re right about that. They have the votes with reconciliation. They nailed down the process so that they can make sure they have the votes and that they can get this thing through really fast. It is their right. It is what they can do.”

“They hold the power, and they’re probably going to exercise it.  We don’t like it because we don’t like what looks like the outcome,” he added.

The prospects for congressional approval of climate change legislation this year have dimmed but not disappeared. Yesterday the Senate voted against using the filibuster-proof reconciliation process to consider climate change legislation by a 67-31 vote and the House-approved budget did not include cap-and-trade in its budget reconciliation provisions.

That makes it more likely that cap-and-trade legislation, now being drafted by Rep. Henry Waxman (D-Calif.), will have to win 60 votes in the Senate to become law. With Democratic qualms mounting (see Aaron’s post yesterday on Majority Leader Harry Reid’s meeting with coal state senators) and potential Republican supporters hanging back, 60 votes seems to be a tall order.

But cap-and-trade advocates are not deterred, notes The Washington Post today, with this significant aside: “Administration officials support leaving the door open in the budget blueprint when it emerges from conference committee for a final vote this month.”

President Obama might still ask congressional leaders to take the more partisan route to get climate change legislation passed this year. Keeping the threat of reconciliation on the table has its uses. It was only after Office of Management and Budget director Peter Orszag’s threat of reconciliation that GOP Sens. John McCain (R-Ariz.) and Lindsey Graham (R-S.C.) reiterated their support for cap and trade. Sen. Benjamin Cardin (D-Md.) told the Post “a lot of us don’t want to give up without a fight.” Reconciliation remains a weapon in that fight.

All 41 Republican senators have signed an open letter asking Democratic leadership not to use the filibuster-proof reconciliation process to pass health care reform, a sure sign that the threat of reconciliation, which would allow the Senate to pass a health care reform bill with 51 votes instead of 60–issued again yesterday by Secretary of Health and Human Services nominee Kathleen Sebelius—is working for the Democrats.

The Weekly Standard (PDF) has the letter, which includes the usual minority party talking points: Reconciliation “would be a tremendous disservice to the country” that would “restrict the ability of Senators to amend and perfect” a health care plan, and so on.

The reality is that faced with possible exclusion from health care negotiations, GOPers have to at least pretend to be open to compromise. The threat imposes a choice: If Republicans don’t want a simple majority vote, then two more Republicans have to show they are serious about “amending and perfecting” health care by making real concessions and signing on to an Obama plan. Then the threat goes away—and the country gets health care reform. If all the Republicans choose the partisan route (as they did on the stimulus bill) then guess what? They’ll get the dreaded partisanship of a simple majority vote on health care—and the country gets health care reform.

Either way, Obama wins. Which is why Republicans are objecting more and more.

Office of Management and Budget Director Peter Orszag kept up the pressure on Senate Republicans over the weekend by continuing to raise the possibility that the White House may use the filibuster-proof budget reconciliation process to pass comprehensive health care reform if the Republicans don’t show more flexibility.

From a Bloomberg report on Saturday.

Democrats probably won’t decide whether to use the procedure until next month when they complete their budget plans for the fiscal year that begins Oct. 1. Orszag said lawmakers could use reconciliation as a backup plan if Republicans prove unwilling to compromise on health care legislation. “If, by September, nothing has happened, reconciliation would be a fallback option,” he said.

While Orszag singled out the Republicans, the threat actually applies equally, if not more, to Senate Democrats like Max Baucus (D-Mont.) and Kent Conrad (D-N.D.) who keep saying (Friday and today, respectively) that they oppose the use of reconciliation — which would allow passage with a straight majority vote, rather than the usual 60 votes required to overcome a filibuster and end debate –  to pass major legislation. As Jonathan Chait at The New Republic notes, at this point, it is Senate Democrats who are undermining President Obama’s agenda more effectively than Republicans.

Perhaps it is not coincidence that the two Republicans spoke out after Democrats began floating the idea that Obama would stop negotiating with Senate Republicans and use the filibuster-proof budget reconciliation process to pass health and energy reforms with 51 votes in the Senate. Just yesterday, Office of Management and Budget Director Peter Orszag pointedly declined to renounce the budget reconciliation strategy, saying “we’re not taking it off the table at this point.”

The two Republicans, Grim notes, “insisted that any effort to sidestep a filibuster by using the budget reconciliation process would erode the bipartisan support.” As I argued here Tuesday, using the budget reconciliation strategy is tempting but probably premature for Obama — and Graham and McCain’s statements show why. By endorsing the concept of cap-and-trade and signaling their willingness to negotiate, the GOP duo has boosted  the administration’s chances of getting climate change action with Republican support — and their own chances of shaping legislation.

Grim again:

Graham and McCain both said their support of bipartisan legislation had several conditions, citing the need for investment in so-called “clean coal” as well as nuclear power.

Those are not likely to be deal breakers for Obama. His 2010 budget proposal allocates billions in cap-and-trade revenues to “clean energy technologies” which, despite the objections of environmentalists, can be defined to include coal and nuclear.

There’s no way to prove that the threat of being excluded from cap-and-trade negotiations prompted McCain and Graham to act today. But the fact remains, they didn’t speak up until the threat was made.