The Budget Control Act of 2011: Budgetary Effects of Proposals to Replace the FY2013 Sequester

This is not possible for other amounts, which are subject to caps or other constraints.

The two percentages would be identical if the basic non-defense sequestration had been allocated proportionally across all non-exempt programs, and if the additional cuts needed to offset the effect of the 2 percent limit on the sequestration of some health programs had likewise been allocated proportionally across all other non-exempt programs. But the Budget Control Act does not work that way. To begin with, the 2 percent limit on the cut to discretionary community and migrant health centers and Indian health is offset only by increasing the cut to other non-defense discretionary NDD programs.

In contrast, the Act specifies that the 2 percent limit on the cut to Medicare is offset by deeper cuts to both non-exempt mandatory programs and non-exempt NDD programs. These rules result in somewhat different sequestration percentages applying to those two categories of non-exempt non-defense programs. The defense cuts will occur through across-the-board, proportional reductions in the funding provided for defense accounts in the appropriations bills.

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War costs within the National Defense function are subject to sequestration, as are defense unobligated balances carried over from prior years. Although war costs, like other emergency costs, are effectively outside the discretionary caps that the BCA created, the sequestration resulting from the failure of the Supercommittee is a separate process, and war and other emergency costs are subject to sequestration. In , the one year in which the cuts will affect defense funding that Congress will already have appropriated, the President can exempt some or all military personnel funding from the sequestration.

To the extent he chooses that option, the cuts in other defense funding would increase. The percentage cuts in If the President chooses to exempt some military personnel, the percentage cut on the other defense accounts would rise, to 9.

The process for years after is quite different. Unlike in , there will be no automatic cut of all affected defense programs by the same percentage ; instead, the Appropriations Committees will decide how to live within the newly reduced defense funding caps. For non-defense programs, the process in years after is the same as in for entitlements but different for non-defense discretionary programs.

CBO has taken a broad-brush approach to calculating sequestration; a more precise approach produces somewhat different results. Specifically, the sequestration of Medicare is required to start on February 1, , and remain in effect for 12 months. However, under the Statutory PAYGO Act, which the Budget Control Act cross-references in describing how sequestration is to be implemented, the fiscal year Medicare savings from the cut in reimbursement rates ordered in January will count toward meeting the sequestration target for fiscal year The same phenomenon applies in each subsequent year, but we will illustrate this point by reference to the sequestration.

The effect of our approach, then, is to attribute more Medicare savings to the sequestration than CBO did. The term does not include unobligated balances carried over from prior years. PDF of this report 7pp. Report that provides information on the levels of deficit reduction if the Budget Control Act's BCA automatic cuts are implemented as under current law and contrasts that with the alternative proposals offered by some Members of Congress and President Obama. This report is part of the collection entitled: It has been viewed 13 times. More information about this report can be viewed below.

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