This is a process initiated by the annual budget resoluion, in which the House and Senate agree to effect changes in existing law to modify entitlement programs or tax policy. The term comes from the concept of reconciling current law with the requirements of the budget resolution.

The instructions that are included in the budget resolution direct the appropriate Congressional committees to make changes in their programs to bring about the budget result required in the resolution. The products of the various committees are then combined into a package, known as reconciliation, which must be agreed to by the House and the Senate, and signed into law by the President.