Budget sequestration is a provision of United States law that causes an across-the-board reduction in certain kinds of spending included in the federal budget. Sequestration involves setting a hard cap on the amount of government spending within broadly defined categories; if Congress enacts annual appropriations legislation that exceeds these caps, an across-the-board spending cut is automatically imposed on these categories, affecting all departments and programs by an equal percentage. The amount exceeding the budget limit is held back by the Treasury and not transferred to the agencies specified in the appropriation bills. The word sequestration was derived from a legal term referring to the seizing of property by an agent of the court, to prevent destruction or harm, while any dispute over said property is resolved in court. The term "budget sequestration" was first used to describe an enforcement procedure of the

Balanced Budget and Emergency Deficit Control Act of 1985 In telecommunications and professional audio, a balanced line or balanced signal pair is a circuit consisting of two conductors of the same type, both of which have equal impedances along their lengths and equal impedances to ground and to other ...

(BBEDCA) designed to keep Federal deficits below a maximum level limit. The hard caps were abandoned and replaced with a

PAYGO PAYGO (Pay As You GO) is the practice in the United States of financing expenditures with funds that are currently available rather than borrowed. Budgeting The PAYGO compels new spending or tax changes not to add to the federal debt. Not to be co ...

system by the Budget Enforcement Act of 1990, which was in effect until 2002. Sequestration was later included as part of the Budget Control Act of 2011, which resolved the debt-ceiling crisis; the bill set up a Congressional debt-reduction committee and included the sequestration as a disincentive to be activated only if Congress did not pass deficit reduction legislation. However, the committee did not come to agreement on any plan, activating the sequestration plan. The sequestration was to come into force on January 1, 2013 and was considered part of the fiscal cliff, but the

American Taxpayer Relief Act of 2012 The American Taxpayer Relief Act of 2012 (ATRA) was enacted and passed by the United States Congress on January 1, 2013, and was signed into law by US President Barack Obama the next day. ATRA gave permanence to the lower rates of much of the "Bu ...

delayed it until March 1 of that year.

Gramm–Rudman–Hollings Act

Budget sequestration was first authorized by the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, Title II of Pub. L. 99-177). This is colloquially referred to as the Deficit Control.Spar, K. (October 2, 2012). Budget "sequestration" and selected program exemptions and special rules. Retrieved fro

They provided for automatic spending cuts (called "sequesters") if the deficit exceeded a set of fixed deficit targets. The process for determining the amount of the automatic cuts was found unconstitutional in the case of '' Bowsher v. Synar,'' and Congress enacted a reworked version of the law in 1987. Gramm-Rudman failed, however, to prevent large budget deficits. The Budget Enforcement Act of 1990 supplanted the fixed deficit targets.

PAYGO era

From 1990 until 2002, and again since 2010, Congress has operated under a system called PAYGO, under which any new government spending needs to be offset by savings from (or cuts to) current programs. In the initial PAYGO regimen, enacted in the Omnibus Budget Reconciliation Act of 1990 (OBRA '90), by statutory requirement, if legislation enacted during a session of Congress had the effect of increasing the projected deficit for the following year, a sequestration would be triggered. These rules were in effect from FY1991-FY2002. Enacted in 1990, it was extended in the Omnibus Budget Reconciliation Act of 1993 and the

Balanced Budget Act of 1997 The Balanced Budget Act of 1997 () was an omnibus legislative package enacted by the United States Congress, using the budget reconciliation process, and designed to balance the federal budget by 2002. This act was enacted during Bill Clinton's ...

. Beginning in 1998, in response to the first federal budget surplus since 1969, Congress started enacting, and the President signing, increases in discretionary spending above the statutory limit using creative means such as advance appropriations, delays in making obligations and payments, emergency designations, and specific directives.http://www.cbo.gov/ftpdoc.cfm?index=4032&type=0&sequence=7 The Budget and Economic Outlook: Fiscal Years 2004-2013, Appendix A, The Expiration of Budget Enforcement Procedures: Issues and Options While staying within the technical definition of the law, this allowed spending that otherwise would not be allowed. The result was emergency spending of $34 billion in 1999 and $44 billion in 2000. The PAYGO statute expired at the end of 2002. After this, Congress enacted President George W. Bush's proposed 2003 tax cuts (enacted as the

Jobs and Growth Tax Relief Reconciliation Act of 2003 The Jobs and Growth Tax Relief Reconciliation Act of 2003 ("JGTRRA", , ), was passed by the United States Congress on May 23, 2003 and signed into law by President George W. Bush on May 28, 2003. Nearly all of the cuts (individual rates, capita ...

), and the Medicare Prescription Drug, Improvement, and Modernization Act. The White House acknowledged that the new Medicare prescription drug benefit plan would not meet the PAYGO requirements. The PAYGO system was reestablished as a standing rule of the House of Representatives (which does not have the force of law) on January 4, 2007 by the Democratic-controlled 110th Congress, but less than one year later, facing widespread demand to ease looming tax burdens caused by the

Alternative Minimum Tax The alternative minimum tax (AMT) is a tax imposed by the United States federal government in addition to the regular income tax for certain individuals, estates, and trusts. As of tax year 2018, the AMT raises about $5.2 billion, or 0.4% of all ...

, Congress abandoned its pay-go pledge. The point of order was also waived for the

Economic Stimulus Act of 2008 The Economic Stimulus Act of 2008 () was an Act of Congress providing for several kinds of economic stimuli intended to boost the United States economy in 2008 and to avert a recession, or ameliorate economic conditions. The stimulus package was ...

passed during the Bush administration, which included revenue reducing provisions and increases in spending that increased the deficit. At the beginning of the 111th Congress, PAYGO was modified by including an "emergency" exemption, which was provided for the

American Recovery and Reinvestment Act of 2009 The American Recovery and Reinvestment Act of 2009 (ARRA) (), nicknamed the Recovery Act, was a stimulus package enacted by the 111th U.S. Congress and signed into law by President Barack Obama in February 2009. Developed in response to the Gr ...

during the Obama administration. In 2010 President Obama signed the Statutory Pay-As-You-Go Act into law, making PAYGO again mandatory.

Budget Control Act era

In 2011, sequestration was used in the Budget Control Act of 2011 (Pub. L. 112-25) as a tool in federal budget control. This 2011 act authorized an increase in the

debt ceiling A debt limit or debt ceiling is a legislative mechanism restricting the total amount that a country can borrow or how much debt it can be permitted to take on. Several countries have debt limitation restrictions. Description A debt limit is a l ...

in exchange for $2.4 trillion in deficit reduction over the following ten years. This total included $1.2 trillion in spending cuts identified specifically in the legislation, with an additional $1.2 trillion in cuts that were to be determined by a bipartisan group of Senators and Representatives known as the "Super Committee" or officially as the

United States Congress Joint Select Committee on Deficit Reduction The Joint Select Committee on Deficit Reduction,Budget Control Act of 2011, , Title IV colloquially referred to as the Supercommittee, was a joint select committee of the United States Congress, created by the Budget Control Act of 2011 on Augus ...

. The Super Committee failed to reach an agreement. In that event, a trigger mechanism in the bill was activated to implement across-the-board reductions in the rate of increase in spending known as "sequestration". The Sequestration Transparency Act of 2012 (Pub. L. 112-155) requires the president to submit a report to Congress on a potential sequestration which may be triggered by the failure of the "Super Committee" to propose and for Congress to enact, a plan to reduce the U.S. Federal Budget by $1.2 trillion as required by the Budget Control Act. The report which was issued September 14, 2012, and was close to 400 pages long provided the warning that "sequestration would be deeply destructive to national security... and core government functions". The start of the sequestration was delayed from January 2, 2013 to March 1, 2013 by the

, which was passed by both houses of Congress on January 1, 2013 as a partial resolution to the fiscal cliff crisis. The bill also lowered the sequestration cap for 2014 to offset the two-month delay in 2013. Also, for 2013 only, certain "security" funding such as homeland security and international affairs were included in the sequestration cut in order to lessen the cuts to defense. In December 2013, the

Bipartisan Budget Act of 2013 The Bipartisan Budget Act of 2013 (; ) is a federal statute concerning spending and the budget in the United States, that was signed into law by President Barack Obama on December 26, 2013. On December 10, 2013, pursuant to the provisions of ...

increased the sequestration caps for fiscal years 2014 and 2015 by $45 billion and $18 billion, respectively, in return for extending the imposition of the cuts to mandatory spending into 2022 and 2023, and miscellaneous savings elsewhere in the budget.

Discretionary spending caps

The Budget Control Act of 2011 set limits on discretionary spending, with separate pools for defense and non-defense spending. The act specified one set of caps to be enforced if the

Joint Select Committee on Deficit Reduction The Joint Select Committee on Deficit Reduction,Budget Control Act of 2011, , Title IV colloquially referred to as the Supercommittee, was a joint select committee of the United States Congress, created by the Budget Control Act of 2011 on Augus ...

would produce a plan to reduce deficits by $1.2 trillion over 10 years, and Congress would enact it by January 15, 2012; if this did not happen, "automatic enforcement procedures" would impose a lower set of caps. Because the Joint Select Committee on Deficit Reduction did not come to agreement on any plan, the lower caps went into effect. The values in the table below reflect these lower caps. The BCA column shows the discretionary caps in the original Budget Control Act, as estimated in 2012. (Some of the automatic spending reductions target mandatory spending, leading to some fluctuation in estimates of the discretionary funding.) The actual caps, as modified by subsequent legislation, are also shown.

References

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