History

Calendar Year 2017:

  • March 30, 2017:  The nonpartisan Congressional Budget Office released its Long-Term Budget Outlook which reports the following: “At 77 percent of gross domestic product (GDP), federal debt held by the public is now at its highest level since shortly after World War II. If current laws generally remained unchanged, the Congressional Budget Office projects, growing budget deficits would boost that debt sharply over the next 30 years; it would reach 150 percent of GDP in 2047. The prospect of such large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges.  In CBO’s projections, deficits rise over the next three decades—from 2.9 percent of GDP in 2017 to 9.8 percent in 2047—because spending growth is projected to outpace growth in revenues. In particular, spending as a share of GDP increases for Social Security, the major health care programs (primarily Medicare), and interest on the government’s debt.”
  • March 16, 2017:  Trump Administration released a budget outline addressing the 30% of the budget that is appropriated annually by Congress (i.e. defense and non-defense discretionary spending). Proposals on entitlement programs and tax reform are expected to be released in May.   Link to Trump Administration Budget Outline: titled “America First: A Budget Blueprint to Make America Great Again.”  Link to Press Briefing by OMB Director Mick Mulvaney,   Sign-up above or click here to receive FedWeb blogs as more information becomes available.  The funding levels in today’s release are the President’s requested funding. Congress writes the appropriations bills  (following adoption of a Budget Resolution) and can accept, ignore, or change the requested funding for each  program. Appropriations bills effectively require 60 votes in the Senate, requiring bipartisan agreement. Most striking about the Administration’s budget plan are: (1) the decision to fund massive increases in defense spending through massive cuts in domestic and other non-defense spending;  (2) the reduction in foreign aid and development assistance (sometimes called “soft power”) in favor of defense spending (“hard power”); (3) the heavy emphasis on eliminating ineffective programs in the domestic budget but the absence of similar scrutiny on the defense side;  (4) scaling back federal support for health research, environmental protection, job training, education, rural programs, low-income energy and housing assistance; (5) no indication of how the infrastructure initiative or the border wall will be financed without increasing the debt;  and (6) elimination of numerous programs with small budgets but high-impact results including Appalachian Regional Commission; AmeriCorps; the Corporation for Public Broadcasting; the Legal Services Corporation; the Overseas Private Investment Corporation; and the United States Interagency Council on Homelessness….  Read More…
  • March 13, 2017:  Senate Democratic Leaders, in letter to Leader McConnell and Appropriations Committee Chair Cochran, urging compliance with the Bipartisan Budget Agreement in 2015 that laid out defense and non-defense funding levels for FY 2017, provided that any supplemental funding be divided equally between defense and non-defense, and agreed to avoid “poison pill” riders.  The letter also raised concerns about including border wall funding in a “must-pass appropriations bill.” March 13 2017 Senate Dem Appropriations Letter
  • March 13, 2017:  CBO (Congressional Budget Office) and JCT (Joint Committee on Taxation) released their nonpartisan Analysis of the GOP Repeal and Replace Legislation (“American Health Care Act”) finding that: (1) in 2018, 14 million more people would be uninsured rising to 24 million by 2026 , with the increase resulting from cuts in Medicaid, repealing the penalties associated with the individual mandate, and people not being able to afford higher premiums.; and (2) enacting the legislation would reduce federal deficits by $337 billion over 10 years, with the largest savings coming from reductions in outlays for Medicaid and from the elimination of the Affordable Care Act’s (ACA’s) subsidies for health insurance, and the largest costs under the legislation would come from establishment of a new tax credit for health insurance and lost revenues from repealing taxes including the increase in payroll taxes and net investment income for high-income taxpayers and annual fees imposed on health insurers. The analysis notes that under the legislation, premiums would go up substantially for older people, and down for younger adults, because the legislation would allow insurers to charge 5 times more for older enrollees than younger ones.
  • March 8, 2017:  The Hill:  Battle Erupts Over “Trumpcare”
  • March 8, 2017:  FedWeb Blog on House GOP repeal-and-replace legislation
  • March 6, 2017:  House Republicans release legislation to repeal and replace the Affordable Care Act.
    Ways and Means Committee Print
    Ways and Means Section by Section Summary
    Ways and Means Two Page Summary
    Energy and Commerce Committee Print
    Energy and Commerce Section by Section Summary
  • March 3, 2017:  CBO releases new estimates on cost of the Affordable Care Act, which shows the cost of insurance coverage provisions dropping substantially compared to original projections.
  • Feb. 24, 2017:  Obamacare repeal-and-replace leaked House draft
  • Feb. 16, 2017:  House Republicans released a brief outline of their plan to “repeal and replace” the Affordable Care Act that calls for:  eliminating the health insurance mandate and federal standards for insurance coverage;  replacing health insurance subsidies with monthly refundable tax credits and an expansion of tax-preferred health savings accounts; and repealing the expansion of Medicaid for “able-bodied adults” while capping federal Medicaid payments to States, in an effort to cut projected Medicaid expenditures. The outline includes a goal of “protecting patients with pre-existing conditions,” although details are unclear. Tax credits would not be available to pay for any insurance plans that cover abortions. Taxes enacted to pay for Affordable Care Act subsidies would be repealed without details on how refundable tax credits would be paid for.  See our Affordable Care Act page for ongoing coverage.
  • Feb. 16, 2017:  Senate confirmed Rep. Mick Mulvaney as the new Director of the White House Office of Management and Budget (OMB) by a 51-49 vote.
  • Feb. 15, 2017:  GAO releases a new report estimating the cost of cleaning up dangerous waste at federal facilities, mostly from nuclear weapons installations, has more than doubled in the past 20 years to nearly a half trillion dollars.
  • Feb. 2, 2017:  CBO released interest rate projections for 2017-2020:  “As slack (that is, unused productive resources) in the economy keeps diminishing, the Federal Reserve will continue to reduce its support of economic growth, in CBO’s view. As a result, CBO expects the federal funds rate–the interest rate that financial institutions charge each other for overnight loans of their monetary reserves–to rise gradually over the next few years, reaching 1.1 percent in the fourth quarter of 2017 and 2.8 percent by the end of 2020.”
  • Feb 1, 2017:  CBO Director Keith Hall testified at Senate Budget Committee on the budget and economic outlook:  “In fiscal year 2016, for the first time since 2009, the federal budget deficit increased in relation to the nation’s economic output. CBO projects that over the next decade, if current laws remained generally unchanged, budget deficits would eventually follow an upward trajectory—the result of strong growth in spending for retirement and health care programs targeted to older people and rising interest payments on the government’s debt, accompanied by only modest growth in revenue collections. Those accumulating deficits would drive debt held by the public from its already high level up to its highest percentage of gross domestic product (GDP) since shortly after World War II.”
  • Jan. 24, 2017:  The nonpartisan Congressional Budget Office released it’s annual report, The Budget and Economic Outlook: 2017-2027including the following findings and projections:
    • Continued economic expansion over the next two years will virtually eliminate slack in the economy, thus putting upward pressure on inflation and interest rates. After that, the economy is expected to grow a bit more slowly….CBO estimates that, in real terms, GDP will expand at an average annual pace of 2.1 percent from the fourth quarter of 2016 to the fourth quarter of 2018, after having risen at an annual rate of 1.8 percent last year
    • Labor Market:  The shortfall between actual and potential employment, CBO’s primary measure of slack in the labor market, was about 1.6 million people at the end of 2016.  That shortfall is projected to disappear in 2018 as the result of two developments. First, the strengthening economy is expected to slow the downward trend in the rate of labor force participation as the increase in employers’ demand for labor continues to draw workers back into the labor force. Second, increases in hiring will lower the unemployment rate, which is projected to reach 4.4 percent by the end of 2018.
    • Budget Deficits:  In CBO’s baseline projections, budget deficits remain below 3.0 percent of GDP through 2019. But subsequently, continued growth in spending—particularly for Social Security, Medicare, and net interest—would outstrip growth in revenues, resulting in larger deficits and increasing debt. By 2027, the deficit would reach 5.0 percent of GDP—$1.4 trillion.
    • Revenues:  If current laws generally remained unchanged, revenues would rise from 17.8 percent of GDP in 2017 to 18.4 percent by 2027. They have averaged 17.4 percent of GDP over the past 50 years.
    • Discretionary spending (including defense and non-defense) drops from 6.3 percent of GDP in 2017 to 5.3 percent in 2027—a smaller percentage relative to the size of the economy than in any year since 1962.  See FedWeb’s Defense and Non-Defense Discretionary web-pages.
    • Outlays would rise to 23.4 percent of GDP. That increase reflects significant growth in mandatory spending and interest payments, which is offset somewhat by a decline in discretionary spending as a share of GDP.
    • Mandatory/Entitlement Spending: Outlays for mandatory programs increase as a share of GDP by 2.4 percentage points from 2017 to 2027—mainly because of the aging of the population and rising per capita health care costs. Social Security and Medicare account for nearly all of that increase.
    • Net Interest:  Because of rising interest rates and, to a lesser extent, growing federal debt held by the public, the government’s interest payments on that debt rise sharply over the next 10 years—nearly tripling in nominal terms and almost doubling relative to GDP.
    • Debt:  As deficits accumulate in CBO’s baseline, debt held by the public rises from 77 percent of GDP ($15 trillion) at the end of 2017 to 89 percent of GDP ($25 trillion) by 2027. At that level, debt held by the public would be the largest since 1947 and more than twice the average over the past five decades in relation to GDP.  Such high and rising debt would have serious negative consequences….Federal spending on interest payments would increase substantially….Because federal borrowing reduces total saving in the economy over time, the nation’s capital stock would ultimately be smaller, and productivity and total wages would be lower….The likelihood of a fiscal crisis in the United States would increase. There would be a greater risk that investors would become unwilling to finance the government’s borrowing unless they were compensated with very high interest rates; if that happened, interest rates on federal debt would rise suddenly and sharply.
    • Inflation:  CBO expects prices to rise at a modest pace over the next few years. The agency anticipates that the diminishing slack in the economy and higher oil prices will put upward pressure on prices for goods and services. That pressure will be somewhat alleviated by the effects of a strong dollar in relation to other currencies, which will reduce the cost of imported goods. In CBO’s projections, the rate of inflation, as measured by the price index for personal consumption expenditures, rises to 1.9 percent in 2017 and to 2.0 percent in 2018. It remains, on average, at the Federal Reserve’s longer-run goal of 2 percent throughout the rest of the coming decade.
    • Interest Rates: As the slack in the economy continues to diminish, the Federal Reserve will continue to reduce its support of economic growth, in CBO’s view. Thus, the federal funds rate— the interest rate that financial institutions charge one another for overnight loans of their monetary reserves—is expected to rise gradually over the next few years, reaching 1.1 percent in the fourth quarter of 2017, 1.6 percent in the fourth quarter of 2018, and 3.1 percent in the later part of the projection period. Interest rates on short-term Treasury securities are expected to follow a similar pattern
  • Jan. 18, 2017:  CBO and JCT released nonpartisan analysis of the effects of repealing Affordable Care Act subsidies and mandate penalties, while leaving the ACA’s insurance market reforms in place.
  • Jan. 17, 2017:  GAO released “The Nation’s Fiscal Health – Action is Needed to Address the Federal Governments Fiscal Future” finding that “Federal spending continues to outpace revenue—by $587 billion in 2016—and, absent policy changes, the structural gap between revenues and spending puts the federal government on an unsustainable long-term fiscal path.”
  • Jan. 12-13, 2017:  The Senate voted 51-48 on Jan. 12 and the House voted 227-198 on Jan. 13 to adopt S Con Res 3, the FY 2017 Congressional Budget Resolution, clearing the way for relevant congressional committees (Senate Finance and HELP; and House Energy & Commerce and Ways & Means) to report filibuster-proof Budget Reconciliation legislation to repeal and replace the Affordable Care Act.
    Details of the forthcoming legislation — in particular, when the repeal will be effective and what will replace the Affordable Care Act’s health insurance coverage — remain unclear.
    Text of Budget Resolution as Adopted
    Congressional leadership has opted to use the budget reconciliation process, because reconciliation bills cannot be filibustered in the Senate due to a time limit on debate — the result being that reconciliation bills can pass with a simple majority of 50 votes (rather than the 60 votes that would normally be required to end a filibuster on controversial legislation). Reconciliation bills are also nearly immune from amendments due to very strict germaneness requirements.
    However, Reconciliation bills are also limited in what they can include;  all provisions in a Reconciliation bill must be “budgetary” in nature in order to avoid violating the Senate’s “Byrd Rule.”  The Byrd Rule was crafted by the late Senate Robert C. Byrd in 1985 in order to prevent the filibuster-proof Reconciliation procedure from being used to enact major policy changes with “merely incidental” budget effects.

Calendar Year 2016:  Gridlock on Appropriations

Calendar Year 2015:   Bipartisan Budget Act increases ’16 and ’17 BCA Spending Caps;  PATH Tax Extenders make some Provisions Permanent; 5-Year Highway Bill Enacted

Calendar Year 2014:  “FY 15 Cromnibus” and Tax Extenders

Calendar Year 2013:   “Fiscal Cliff” Deal trims Sequester, extends most Bush Tax Cuts; October Government Shutdown leads to Bipartisan Budget Act of 2013 increasing ’14 and ’15 BCA Spending Caps

  • Dec. 26, 2013:  President signs into law Bipartisan Budget Act of 2013, PL 113-67
  • Dec. 18, 2013: Senate passes the Bipartisan Budget Act of 2013 64-36.
  • Dec. 12, 2013: Before adjourning for the year, House passed the Bipartisan Budget Act of 2013, 332-94. The deal, although not addressing long-term entitlement issues, makes some limited progress by:  (1) establishing total appropriations levels for 2014 and 2015 enabling congressional appropriators to draft funding measures for departments and agencies before temporary funding runs out January 15, 2014;  (2) avoiding automatic spending cuts for 2014 that would have kicked in absent an agreement — with the costs of the canceled cuts offset by increasing airport security and PBGC fees for private pension plans, extending customs user fees, extending Medicare and other mandatory spending cuts two more years beyond 2021, increasing new federal employee retirement contributions, trimming cost of living adjustments for military retirees under age 62, and adopting various anti-fraud and other provisions; and (3) passing a 3-month “doc fix” to avoid major cuts in Medicare physician payments.
  • Nov. 13, 2013: The nonpartisan Congressional Budget Office (CBO) released their updated deficit reduction options book laying out 103 ways Congress and the Administration could cut spending or raise revenues to reduce projected deficits.
  • Nov. 12, 2013: NDD United releases Faces of Austerity: How Budget Cuts Have Made Us Sicker, Poorer, and Less Secure.
  • Nov. 11, 2013: Private and public research universities release a report citing the negative impact of sequestration on research in the U.S.
  • Oct. 31, 2013: In a rare, joint letter Chairman Harold Rogers (R-Ky) and Chairwoman Barbara Mikulski (D-Md), of the House and Senate Appropriations Committees, respectively, asked the leaders of the ongoing budget conference to settle on a top line appropriations number for 2014 before Thanksgiving, but certainly no later than December 2d. The two chairs said, “we believe that if an agreement on a discretionary spending number can be reached early, it will allow for more thoughtful and responsible spending decisions.” Text of Appropriations Letter However, the House and Senate budget plans for FY 2014 are far apart — $91 billion — on their funding levels for 2014.
  • Oct. 18, 2013: Early October 18th, President Obama signed into law a measure that: (1) ends the federal shutdown and pulls the nation back from the brink of default; (2) temporarily funds the federal government through January 15, 2014 at the sequester-reduced levels in effect at the end of FY 2013; and (3) temporarily suspends the debt ceiling through February 7, 2014 (although Treasury’s cash management tools could push the debt ceiling into March 2014); and (4) provides retroactive back pay for federal workers furloughed during the shutdown. On the evening of October 17th, the Senate-brokered measure passed 81-18 and the House approved it 285-144. Senate Appropriations Committee Summary.  As part of the agreement, congressional leaders also agreed to convene a long-delayed House-Senate budget resolution conference in the hopes of agreeing on total appropriations levels for 2014 and 2015, and developing a package of entitlement and tax reforms in order to stabilize long-term U.S. debt. However, Budget Alert has low expectations for the conference as explained above.
  • Oct. 5, 2013: New York Times reports that the strategy to force the de-funding of Obamacare by shutting down the government was months in the planning.
  • Oct. 3, 2013: Treasury Dept. released a report warning, “a default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, and U.S. interest rates could skyrocket, potentially resulting in a financial crisis and recession that could echo the events of 2008 or worse.”
  • Oct. 1, 2013: Government Shutdown.–With no appropriations having passed Congress for FY 2014 due to disagreements over funding levels, the government shutdown Monday at midnight due to the absence of a temporary funding measure (known as a CR or “continuing resolution”).  President Obama has asked for a “clean” CR (without any amendments) but House Republicans have insisted on including amendments to de-fund or delay Obamacare.
    Click here for detailed information on the implications of a government shutdown provided by the nonpartisan Congressional Research Service.
    Federal Agency Shutdown Contingency Plans
    Consequences of prior shutdowns
  • Sept. 17, 2013:   The nonpartisan Congressional Budget Office (CBO) releases The 2013 Long-Term Budget Outlook.
  • Aug. 29, 2013: Washington Post releases the first-ever detailed look at the U.S. intelligence budget.
  • April 10, 2013:  President transmits FY 2014 Budget.
  • March 21, 2013: Congress completes action on H.R. 933, funding government for the remainder of FY 2013.
  • May 14, 2013: CBO releases new projections for 2013 -2023
  • March 1, 2013: OMB sequestration report to Congress;  President’s sequester order.
  • FY ’13 Sequester Facts:
  • The “fiscal cliff agreement” in January of 2013 postponed the start of the FY 2013 automatic spending reductions until March 1, 2013 and canceled the first two months of spending cuts reducing the cuts from $109 billion to $85 billion.
  • $85 billion in budget authority (aka “appropriations”) were canceled on March 1, 2013 (click here for the sequester report). However, as noted by the Congressional Budget Office, this will result in a lesser amount of outlay reductions for FY 2013 ($42 billion) — with the remainder occurring after the current fiscal year.
  • Impact of sequester: CBO estimated that the sequester will cut GDP growth by 0.6 percentage and job growth by 750,000 full-time jobs during this calendar year.
  • Of the $85 billion, half is from defense discretionary spending and half from non-defense spending. Of the non-defense cuts, about $29 billion is from nondefense discretionary programs, $10 billion is from Medicare, and $4 billion is from other mandatory spending. (Source: Table 1.2, CBO annual report.)
  • Some of the government’s largest programs are exempt from the cuts including Social Security, Medicaid, veterans programs and some low income programs including food stamps (SNAP). Medicare, though not fully exempt, is limited to a 2 percent cut in payments to providers. The President also exercised statutory authority to exempt military personnel.
  • There is very little flexibility in FY 2013 on how the cuts are administered because the law requires that a uniform percentage reduction be applied across-the-board to all “programs, projects and activities.” Congress has recently allowed flexibility in some limited circumstances, for example, air traffic controllers.
  • However, there is flexibility on when the cuts are applied, although as a result of the sequester budget officers have less money to operate their programs through the end of the fiscal year. Consequently, the longer they wait to furlough employees and reduce operations and services, the deeper the cuts will need to be to fulfill their agency missions through September 30 (the end of the fiscal year).
  • Feb 11, 2013: A new broad-based coalition of healthcare, education, housing and other groups focused on the impact of sequestration sends a letter to Congress, signed by more than 3000 organizations, calling for “a balanced approach to deficit reduction that does not include further cuts to discretionary programs.” The letter points out that the sequestration levels required by the Budget Control Act of 2011 will result in nondefense discretionary levels falling to 2.5% of GDP by 2021, “the lowest level in at least 50 years.”
  • Feb 5, 2013: CBO annual report projects low growth in 2013 of just 1.4%, due in part to automatic cuts scheduled to take effect on March 1, 2013.
  • Feb 4, 2013: The President signed on Monday, February 4, 2013 a short-term suspension of the debt ceiling – but only through May 18, 2013. The short-term measure, crafted by the House, is aimed at pressuring the Senate to pass a Budget Resolution this spring that addresses entitlement reform.
  • Jan 17, 2013: In the wake of assertions that simple “prioritization” of government payments could enable Treasury to operate after the debt ceiling is reached, a bipartisan analysis concludes that (1) choosing to pay some and not other commitments would be of “questionable legality and may not even be practical”; and (2) delaying each day’s millions of disbursements until sufficient revenues come in would quickly result in intolerable payment delays:
  • Jan 4, 2013: Nonpartisan congressional research service summary of the fiscal cliff deal.
  • Jan 2, 2013: President Obama signed into law the “American Taxpayer Relief Act of 2012” (ATRA) which, in general permanently extended the Bush tax cuts for most taxpayers, allowed expiration of the payroll tax cut, delayed automatic spending cuts “sequestration” for two months, and extended expiring unemployment insurance for one year.
    • CRS summary of the fiscal cliff agreement
    • Highlights of the January 1, 2013 Fiscal Cliff Agreement:
    • Makes permanent the Bush tax rates for income up to 400k for individuals and 450k for joint filers
    • Above that threshold the tax rate increases from 35% to 39.6%
    • Above that threshold tax rates for capital gains and dividends increase from 15% to 20%
    • Reinstates limits on the personal exemption and itemized deductions on income above 250k/300k
    • Extends the current estate tax exemption amount, but raises the rate to 40%
    • “Tax extender” provisions extended through 2013
    • Alternative Minimum Tax (AMT) permanently fixed (i.e. indexed to inflation)
    • Avoids the “SGR” automatic cuts (27%) in Medicare physician pay for another year
    • Extends through 2013 long-term unemployment benefits
    • Extends through FY 2013 most federal farm programs and policies, including dairy prices, in order to prevent a spike in milk prices
    • Delays automatic spending cuts to March 1, 2013 and reduces the required $109 billion across the board cuts in defense and nondefense spending (“sequestration”) from $109 billion to $85 billion. (It also delays until March 27 a separate $11 billion sequester of defense spending scheduled to occur because current defense spending exceeds the statutory cap set in 2011.)

Calendar Year 2012:  “Fiscal Cliff” fears lead to year-end negotiations 

Calendar Year 2011:  Summer Debt Ceiling impasse leads to enactment of Budget Control Act (BCA) w/ Discretionary Spending Caps through 2021, but Congressional “Super Committee” fails in November to act on entitlement and tax reform setting up additional reductions in Spending Caps and a Sequester 

  • Nov 21, 2011: Congressional “Super Committee” announces inability to reach a budget deal, triggering automatic budget cuts (“sequestration”) on January 2, 2013
  • Aug. 2, 2011:  The Treasury was close to hitting the statutory ceiling on the (gross) U.S. debt (about $15 trillion), threatening a possible default. Deficit hawks used the threat of default to leverage enactment of the Budget Control Act of 2011 (“BCA”) to cut projected deficits by $2.1 trillion over 10 years.
    The BCA had two key provisions:

    •  1. $900 billion in cuts from discretionary spending over 10 years:
      The BCA imposed tight caps for the next 10 years on total discretionary spending, amounting to more than $750 billion in spending cuts (compared with what discretionary spending would have been if appropriations were allowed to grow with inflation) . Including interest savings, this totals up to deficit reduction of more than $900 billion. Under the spending caps, total discretionary spending remains well below FY 2011 levels for the next decade (see the table below).
      The challenges for congressional appropriators are daunting because: (1) the costs of a growing and aging population must be absorbed within declining spending caps; (2) vital transportation infrastructure repairs and expansions must be absorbed within the caps; (3) the rapidly growing costs of veterans health care must be accommodated; and (4) the costs of inflation must be fully absorbed. (Adjustments are permitted for emergencies and military operations.)
      To put this in perspective, under the spending caps total discretionary spending declines as a percent of Gross Domestic Product (GDP) from 9% in FY 2011 to 6.1% in FY 2021. Since FY 1962—the first year for which data is available—discretionary spending has only been that low as a percent of the economy in one other year.
      The spending caps are enforced through automatic across-the-board cuts implemented by the Office of Management and Budget — if the caps for any year are exceeded.
    • 2. $1.2 billion in additional cuts over 10 years from entitlement and tax reforms (but defaulting to additional discretionary cuts if agreement on entitlements and taxes could not be reached):  The Agreement also established a Joint Select Committee on Deficit Reduction to address taxes and entitlements – the so-called “Super Committee” of 6 Democrats and 6 Republicans – which was required to report to the full Congress by Thanksgiving a plan to reduce projected deficits by another $1.2 trillion over 10 years. Republicans hoped the Super Committee would tackle entitlement reform and Democrats hoped the Super Committee would tackle tax reform.However, on November 21, 2011 the Super Committee announced failure to reach agreement.  Under the terms of the Budget Control Act, failure of the Super Committee to come up with $1.2 trillion in budget savings from entitlement and tax reforms, triggered in 2013 additional automatic across-the-board cuts that drove discretionary spending even lower than the already established caps. Automatic cuts were also made in some mandatory (entitlement) programs, primarily Medicare.
    • Mechanics of the Sequester:The automatic cuts are designed to save $1.2 trillion by FY 2021, since the Joint Committee failed to do so. Excluding interest savings, this requires about $1 trillion in program cuts.
      These are cuts in Congress’ appropriations of spending authority to agencies, rather than cuts to annual outlays — which is most significant in 2013, when the outlay reductions will appear considerably lower than the cuts in spending authority (due to the time lag between budget cuts and reduced outlays).
      The cuts were to be divided evenly between defense and non-defense programs – about a half trillion from defense and a half trillion from non-defense over the 9 years.
      The cuts were to be spread evenly over the 9 years (2013-2021), requiring about $55 billion in cuts from defense and $55 billion in cuts from non-defense in each of the nine years.
      Most of the cuts would come from discretionary spending programs (i.e., programs that are annually appropriated) because most of the entitlement programs – such as Social Security, Medicaid, Veterans Compensation and Food Stamps — are exempted by law.
      Medicare, however, is only partially exempted and is subject to a 2 percent cut in most areas of the program in each of the years, amounting to $123 billion in benefit cuts over 9 years.
      In each of the years after FY 2013, Congress and the President can avoid across-the-board cuts as long as they enact appropriations bills that produce the required $55 billion in defense and $55 billion in non-defense savings (as compared with the original Budget Control Act spending caps).  However, if Congress and the President fail to enact the required amount of savings, the Office of Management and Budget is required to make up the difference in each year through 2021 with across-the-board cuts.

The Chart below shows the original caps on discretionary spending imposed by the Budget Control Act of 2011; the additional cuts imposed on discretionary spending (and some mandatory spending) resulting from the failure of the Joint Committee in the fall of 2011; and the subsequent upward adjustment in the caps for 2014, 2015, 2016, and 2017 as agreed to in the Bipartisan Budget Act of 2013 and 2015, respectively.

Calendar Year 2010:   Re-enactment of Statutory Pay-As-You-Go (PAYGO) 

  • Feb 12, 2010:  President Obama signed into law H.J.Res. 45, including the Statutory Pay-As-You-Go Act of 2010, requiring generally that new entitlement spending and revenue legislation not increase the deficit.  However, provisions designated as emergencies are exempt, as are costs associated with Medicare physicians’ payments, the estate and gift tax, the alternative minimum tax, and certain “middle-class” tax cuts.  Under the Act, after a congressional session ends, the Office of Management and Budget determines whether a violation of the PAYGO requirement has occurred, i.e., whether a net deficit increase has been recorded for the budget year from new, non-exempt legislation.   If so, the President issues an automatic sequestration order that implements largely across-the-board cuts in nonexempt direct spending programs in amounts sufficient to remedy the violation.  However, many direct spending programs and activities are exempt from sequestration cuts in others,  such as Medicare, are limited.
  • Feb 1, 2010:  President transmits FY 2011 Budget

Calendar Year 2009:  Enactment of Stimulus Bill (American Recovery and Reinvestment Act of 2009 – ARRA)