Romina Boccia, Adam N. Michel, and Dominik Lett
Congress is reportedly weighing whether to use reconciliation—a special budget process that allows certain legislative changes to be enacted with a simple majority vote in the Senate—to provide $200 billion for the war in Iran, plus additional money for immigration enforcement. Neither issue merits new spending. But if legislators nevertheless choose to use reconciliation, they must make the package fiscally responsible.
Ideally, Congress should aim to reduce deficits to 3 percent of GDP or lower, a commonsense target to achieve debt sustainability. Short of that, Congress should, at a minimum, achieve $600 billion in net deficit reduction. That’s the amount the final 2025 reconciliation bill exceeded the House-passed maximum allowable non-interest borrowing. Anything less falls short of the bare minimum amid a mounting fiscal crisis.
A $600 Billion Deficit Reduction Target Should Be the Bare Minimum
The federal government routinely runs annual deficits of $2 trillion. Publicly held federal debt is projected to exceed the nation’s entire annual economic output this year. By 2030, debt is projected to surpass the World War II debt-to-GDP record high. By 2056, the debt will reach 175 percent of GDP, even under optimistic projections with no new wars, pandemics, or economic recessions.
The main culprits of America’s persistent and growing deficits are old-age entitlement programs, chiefly Medicare and Social Security. These two programs, along with interest costs and other mandatory spending programs, dominate the federal budget, growing on autopilot without regular congressional approval or review. Absent reform, entitlements and interest costs will consume all federal revenue by 2036.
Additional deficit spending is inexcusable given this trajectory, and simply aiming for deficit neutrality is insufficient. Consider that the $200 billion being currently floated for the Iran war would add roughly $87 billion in additional interest costs between FY2026 and FY2036. That $287 billion price tag does not account for the hidden health care costs for veterans of the war, additional immigration enforcement spending Congress is talking about adding, or the enormous constellation of deal-sweetening spending provisions that might be tacked on to secure votes in an election year with tight vote margins in both chambers. Reconciliation 2.0 could easily spiral into another budget buster unless legislators set a firm deficit-reduction target early in the process.
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. Originally, the House budget resolution—the fiscal framework that guides reconciliation—allowed for a maximum 10-year primary deficit increase of $2.8 trillion. The final law exceeded this threshold by $600 billion.
Accordingly, legislators should demand that any reconciliation 2.0 effort include a binding requirement for a net deficit reduction of at least $600 billion—ideally aiming much higher, with the objective of reducing deficits to 3 percent of GDP or less. Only deficit reduction of this magnitude can arrest the growth of America’s national debt.
Cost-Saving Measures Abound
There is no shortage of options to secure at least $600 billion in net deficit reduction. We catalog a range of options here, including reforms to Medicare, Medicaid, Obamacare, SNAP, and the tax code. Reforms to Social Security are also needed, but changes to the government pension program are not eligible for reconciliation. A variety of deficit-reducing budget options are included in the PDF here.
As an illustrative example, Congress could eliminate a loophole used to avoid SNAP eligibility standards (Broad-Based Categorical Eligibility), end Medicaid financing scams, and eliminate Medicare Advantage subsidies linked to waste. Those three reforms would save upwards of $1.1 trillion, more than offsetting a $200 billion spending increase and surpassing the $600 billion deficit-reduction target.
The offset exercise itself—rather than any particular combination of reforms—is the main point of requiring at least $600 billion in deficit reduction early on. Congress needed to start offsetting every new piece of legislation yesterday. With interest costs already exceeding what the United States spends on defense, taxpayers cannot afford existing deficits, let alone for Congress to increase them.
Fix the Process
Beyond offsets, Congress should also address the recurring abuse of reconciliation to widen deficits and bypass appropriations. Reconciliation was originally intended to facilitate deficit reduction, increase revenues, and cut mandatory spending on programs like Medicare and food stamps.
Over the last decade, Congress has increasingly used it for opposite ends. Under Biden, Democrats used reconciliation for new stimulus checks with the American Rescue Plan, as well as green energy subsidies and IRS funding through the Inflation Reduction Act. Under Trump, Republicans added nearly $375 billion in new spending via the OBBBA, primarily for defense and immigration. Now, a second reconciliation bill is again being pitched as an opportunity to spend more.
This has insidious consequences. The appropriations process is supposed to be Congress’s annual opportunity to scrutinize spending levels and consider tradeoffs. That’s particularly true if discretionary spending caps are in place.
By contrast, using reconciliation for new spending lowers the bar for enactment, encouraging lawmakers to prioritize speed and political wins over prudent design. And when discretionary programs are shifted over to the mandatory side of the ledger, reconciliation erodes fiscal controls and the checks and balances embedded in the appropriations process.
The long-term consequences will be larger deficits and more partisan policies. Future Congresses and administrations will face political pressure to use reconciliation for whatever the day’s political priority is. And when they do, fiscal responsibility will suffer.
One option Congress should consider is to restore the Conrad Rule, a simple Senate rule that prohibited reconciliation from adding to deficits. Better yet, Congress could adopt a “Super” Conrad Rule, requiring any new deficit spending to be offset on a 2:1 basis—two dollars in savings for every new dollar spent. Congress routinely underestimates the true fiscal costs of new tax and spending measures. A 2:1 offset ratio would deter the kind of excessive logrolling that ballooned IRA and OBBBA’s deficit impact and help ensure reconciliation is used to improve the fiscal outlook rather than worsen it.
Pay for It, or Don’t Spend
New spending for the Iran war and immigration enforcement without offsets would be fiscally irresponsible and institutionally corrosive. It would accelerate the growth of the deficit and continue a now-bipartisan abuse of using reconciliation as a blank check.
Reconciliation 2.0 must follow through on the promises made during the OBBBA process and meaningfully reduce the deficit. At a minimum, legislators should demand at least $600 billion in net deficit reduction and commit to using reconciliation as a tool for fiscal discipline.
The message is simple: pay for what you want to spend, or don’t spend at all.
