Budget Control Act of 2011
Health, Education, Labor, and Pensions on August 2, 2011 |
The Budget Control Act of 2011 (
The law involves the introduction of several complex mechanisms, such as creation of the Congressional
Provisions
Debt ceiling:
- The debt ceiling was increased by $400 billion immediately.[2]
- The President could request a further increase of $500 billion, which is subject to a congressional motion of disapproval which the President may veto, in which case a two-thirds majority in Congress would be needed to override the veto.[3] This has been called the 'McConnell mechanism' after the Senate Minority Leader Mitch McConnell, who first suggested it as part of another scheme.[4]
- The President could request a final increase of $1.2–1.5 trillion, subject to the same disapproval procedure. The exact amount depends on the amount of cuts in the "super committee" plan if it passes Congress, and whether a Balanced budget amendment has been sent to the states.[3]
Deficit reduction:
- Spending was reduced more than the increase in the debt limit. No tax increases or other forms of increases in revenue above current law were included in the bill.[5]
- The bill directly specified $917 billion of cuts over 10 years in exchange for the initial debt limit increase of $900 billion.[5] This is the first installment ("tranche") of cuts. $21 billion of this will be applied in the FY2012 budget.[4]
- Additionally, the agreement established the Joint Select Committee on Deficit Reduction, sometimes called the "super committee",[1] to produce deficit reduction legislation by November 23, 2011, that would be immune from amendments or filibuster (similar to the Base Realignment and Closure).[4][6] The goal of the legislation was to cut at least $1.5 trillion over the coming 10 years and be passed by December 23, 2011.[6] Projected revenue from the committee's legislation could not exceed the revenue budgeting baseline produced by current law. (Current law had the Bush tax cuts expiring at the end of 2012.) The committee would have 12 members, 6 from each party.[5]
- The agreement also specified an incentive for Congress to act. If Congress failed to produce a deficit reduction bill with at least $1.2 trillion in cuts, then Congress could grant a $1.2 trillion increase in the debt ceiling but this would trigger across-the-board cuts ("sequestrations"[note 1]), as of January 2, 2013.[3] These cuts would apply to mandatory and discretionary spending in the years 2013 to 2021 and be in an amount equal to the difference between $1.2 trillion and the amount of deficit reduction enacted from the joint committee. There would be some exemptions: reductions would apply to Medicare providers, but not to Social Security, Medicaid, civil and military employee pay, or veterans.[4][5] Medicare benefits would be limited to a 2% reduction.[7]
- As originally envisioned, these caps would equally affect security and non-security programs. Security programs would include the fiscal cliff.[10]
Balanced Budget Amendment:
- Congress was required to vote on a balanced budget amendment between October 1, 2011, and the end of 2011,[3] but is not required to pass it and send it to the states in order for the debt limit increases to occur. (This is unlike the previously proposed Cut, Cap and Balance Act, which was not enacted, which would have required Congress to actually pass such an amendment).[4]
Other provisions:
- Pell Grant funding was increased, but other financial aid was cut. Graduate and professional students were no longer eligible for interest subsidized loans.[11] Repayment incentives will also be done away with after July 1, 2012.[12]
- Section 106 of the Budget Control Act amends the Congressional Budget Act of 1974 to provide a two-year Senate budget, adopting in law what would usually be a Concurrent Resolution. Senate Budget Committee Chairman explains in this video.
Legislative history
The bill was the final chance in a series of proposals to resolve the 2011 United States debt-ceiling crisis, which featured bitter divisions between the parties and also pronounced splits within them. Earlier ideas included the Obama-Boehner $4 trillion "Grand Bargain",[13] the House Republican Cut, Cap and Balance Act, and the McConnell-Reid "Plan B" fallback. All eventually failed to gain enough general political or specific Congressional support to move into law, as the midnight August 2, 2011, deadline for an unprecedented U.S. sovereign default drew nearer and nearer.[14]
The solution came from White House National Economic Council Director Gene Sperling, who, on July 12, 2011, proposed a compulsory trigger that would go into effect if another agreement was not made on tax increases and/or budget cuts equal to or greater than the debt ceiling increase by a future date.
Ultimately, the intent of the sequester was to secure the commitment of both sides to future negotiation by means of an enforcement mechanism that would be unpalatable to Republicans and Democrats alike. President Obama agreed to the plan. House Speaker John Boehner expressed reservations, but also agreed.[15]
On July 26, 2011, White House Budget Director Jack Lew and White House Legislative Affairs Director Rob Nabors met with Senate Majority Leader Harry Reid to discuss the plan. Reid, like Boehner several days before, was initially opposed to the idea, but was eventually convinced to go along with it, with the understanding that the sequester was intended as an enforcement tool rather than a true budget proposal.[16]
On the evening of July 31, 2011, Obama announced that the leaders of both parties in both chambers had reached an agreement that would reduce the deficit and avoid default.[6] The same day, Speaker of the House John Boehner's office outlined the agreement for House Republicans.[17] One key element in the deal being reached and the logjam being broken earlier that afternoon was U.S. Vice President Joe Biden's ability to negotiate with his 25-year Senate colleague, Senate Minority Leader Mitch McConnell.[18][19][20] Biden had spent the most time bargaining with Congress on the debt question of anyone in the administration, and McConnell had viewed him as the one most trustworthy.[18][19]
Vote by party | Yea | Nay | NV | Total |
---|---|---|---|---|
Democrats | 95 | 95 | 3 | 193 |
Republicans | 174 | 66 | 0 | 240 |
Total | 269 | 161 | 3 | 433 |
House vote
The House passed the Budget Control Act[1] on August 1, 2011, by a vote of 269–161. 174 Republicans and 95 Democrats voted for it, while 66 Republicans and 95 Democrats voted against it.[14]
Vote by party | Yea | Nay | NV | Total |
---|---|---|---|---|
Democrats | 45 | 6 | 0 | 51 |
Republicans | 28 | 19 | 0 | 47 |
Independents | 1 | 1 | 0 | 2 |
Total | 74 | 26 | 0 | 100 |
House Speaker Boehner then announced that he got "98% of what I wanted" in the deal.
Senate vote
The Senate passed the Act on August 2, 2011, by a vote of 74–26. 6 Democrats and 19 Republicans voted against it.[23]
Presidential signature
President Obama signed the bill shortly after it was passed by the Senate.[14] In doing so, the president said, "Is this the deal I would have preferred? No. But this compromise does make a serious down payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year."[13]
Contingent votes
The Budget Control Act immediately raised the debt limit to $14.694 trillion. In October 2011, the president requested the $500 billion increase, to $15.194 trillion. A motion in the Senate to block it failed 45–52, so the increase was approved.
On November 18, 2011, the
On November 21, 2011, the Joint Select Committee on Deficit Reduction announced that it was not able to advance any legislation to the full Congress, issuing a statement that began with the following: "After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline."[27]
In January 2012, the U.S. debt hit the new limit of $15.194 trillion and the treasury began using extraordinary measures once again. The President requested the final increase, to $16.394 trillion. On January 18, 2012, the House passed a disapproval of the second debt limit increase by a vote of 239–176. The measure failed to pass the Senate and the debt limit was raised accordingly on January 27.[28]
Projected and known impacts
This section needs to be updated.(March 2019) |
The act will not actually reduce the nominal U.S. debt over the 10-year period. But it will reduce the real (inflation adjusted) growth of the debt, by reducing real Federal spending (the amount of spending with inflation included). However, every plan will increase or keep constant nominal spending.
The debate on the bill was driven by the Republicans' insistence on spending cuts as their condition for agreeing to raise the debt ceiling. This raised concern because of the relationship between aggregate demand and unemployment; as Patrick Lunsford, Senior Editor of insideARM.com stated in a Forbes magazine blog, "when government spending is slashed, jobs are lost and consumer demand falls."[29] In analyzing the specific bill that emerged, the Economic Policy Institute stated, "The spending cuts in 2013 and the failure to continue two key supports to the economy (the payroll tax holiday and emergency unemployment benefits for the long term unemployed) could lead to roughly 1.8 million fewer jobs in 2013, relative to current budget policy."[30] Most of the $900 billion in the first tranche of cuts occur in future years and so will not remove significant aggregate demand from the economy in the current and following year.[4] Only $25 billion in federal discretionary spending is required to be removed for 2012.[2] Regarding the across-the-board cuts, these will take effect on January 2, 2013, unless the Republicans in the US House can agree on a substitute with the Democratic president and US Senate.[4]
Passage of the Budget Control Act of 2011 was not enough to avert, three days later,
2012 election and layoff impacts
A
A 394-page White House report was issued in mid-September outlining the billions of dollars in cuts that would be required in January 2013 unless U.S. law is changed prior to January 2, 2013.[35]
Some companies have publicly stated that they would not send out the required notices, based on White House assurances, despite no change to the underlying Federal law. In October 2012,
Defense sequestration
After several months of denying that they could or would plan for the implementation of sequestration cuts, the
Later developments
The start of the sequestration was delayed from January 2, 2013, to March 1, 2013, by the American Taxpayer Relief Act of 2012, which was passed by both houses of Congress on January 1, 2013, as a partial resolution to the fiscal cliff crisis.[41] 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.[42]
In December 2013, the Bipartisan Budget Act of 2013 increased the sequestration caps for fiscal years 2014 and 2015 by $45 billion and $18 billion, respectively,[43] in return for extending the imposition of the cuts to mandatory spending into 2022 and 2023, and miscellaneous savings elsewhere in the budget.[44]
See also
- Budget sequestration
- Budget Enforcement Act of 1990
- Gramm–Rudman–Hollings Balanced Budget Act
- United States fiscal cliff
- United States public debt
Notes
- ^ The sequestration mechanism would be the same as what was used before in the Balanced Budget Act of 1997.
References
- ^ a b c "Debt-Ceiling Deal: President Obama Signs Bill as Next Fight Looms". ABC News. August 2, 2011.
- ^ a b c Yeh, Richard; Hamilton, Alec (August 3, 2011). "Explainer: The Debt Deal – What Happens Next and What's on the Chopping Block?". WNYC. Archived from the original on August 7, 2011.
- ^ a b c d "Budget Control Act (BCA) to impact federal spending". American Soybean Association. Southeast Farm Press. August 8, 2011.
- ^ a b c d e f g Mascaro, Lisa; Hennessey, Kathleen (July 31, 2011). "U.S. leaders strike debt deal to avoid default". Los Angeles Times.
- ^ a b c d Nazworth, Napp (August 3, 2011). "Keeping Score: Debt Limit Winners and Losers". The Christian Post.
- ^ Daily News.
- ^ Congressional Budget Office staff (October 26, 2011). "CBO Testimony Discretionary Spending". Congressional Budget Office. pp. 15, 16. Retrieved August 15, 2012.
- ^ Farrell Jr., Lawrence P. (September 2011). "Budget Control Act of 2011 Forces Real Cuts to Defense, and Difficult Choices". National Defense. Archived from the original on March 19, 2012. Retrieved August 18, 2011.
- ^ Blom, Barry (March 2012). "An Analysis of the President's 2013 Budget". Congressional Budget Office. Page 13, footnote 17. Retrieved August 2, 2012.
...because the Joint Select Committee on Deficit Reduction did not report legislation to reduce the deficit, the caps were reset to cover defense and nondefense programs...
- ^ Koba, Mark (October 22, 2012). "What Is the 'Fiscal Cliff'?". CNBC.com. Retrieved November 12, 2012.
- ^ Levy, Gabrielle (August 1, 2011). "Debt-limit deal increases funding for Pell Grants". The Sacramento Bee. Medill News Service.[permanent dead link]
- University Daily Kansan. Archived from the originalon March 25, 2012.
- ^ a b c d Applebaum, Binyamin (August 2, 2011). "Spending Cuts Seen as Step, Not as Cure". The New York Times.
- ^ a b c "Obama Signs Debt-Ceiling Plan Hours Before Deadline". Fox News Channel. August 2, 2011.
- ^ Woodward, Bob. The Price of Politics, Simon & Schuster, 2012. Page 215
- ^ Woodward, Bob. The Price of Politics, Simon & Schuster, 2012. Page 326
- ^ "Boehner's Debt Ceiling Agreement Presentation". The New York Times. July 31, 2011.
- ^ a b Thrush, Glenn; Brown, Carrie Budoff; Raju, Manu; Bresnahan, John (August 2, 2011). "Joe Biden, Mitch McConnell and the making of a debt deal". Politico.
- ^ a b "The real drama was in private as debt deal hatched". Boston Herald. Associated Press. August 3, 2011.
- ^ Bohan, Caren Bohan; Sullivan, Andy; Ferraro, Thomas (August 3, 2011). "Special report: How Washington took the U.S. to the brink". Reuters. Archived from the original on August 14, 2013. Retrieved June 30, 2017.
- ^ Roll call vote 690, via Clerk.House.gov
- ^ Roll call vote 123, via Senate.gov
- ^ Thorp, Frank (August 2, 2011). "Senate passes debt deal, 74–26". MSNBC. Archived from the original on November 23, 2011.
- ^ Roll call vote 858, via Clerk.House.gov
- ^ Steinhauer, Jennifer; Pear, Robert (November 19, 2011). "As Deadline Nears, Deficit Panel Is Still at Deep Impasse". The New York Times. p. A1. Retrieved November 19, 2011.
- ^ Southall, Ashley (December 14, 2011). "Balanced Budget Amendments Fall Short in the Senate". The New York Times. Retrieved December 15, 2011.
- ^ "Statement from Co-Chairs of the Joint Select Committee on Deficit Reduction". deficitreduction.gov. November 21, 2011. Archived from the original on January 14, 2012. Retrieved November 21, 2011.
- ^ Walsh, Deirdre; Cohan, Tom (January 18, 2012). "House 'disapproves' debt ceiling hike". CNN. Retrieved January 19, 2012.
- ^ Lunsford, Patrick (August 3, 2011). "Government Spending is Our Only Friend; We Need to Make New Ones". Forbes.
- ^ Irons, John S. (August 1, 2011). "What's missing from the debt ceiling debate? Jobs". Economic Policy Institute.
- ^ a b "S&P downgrades U.S. debt". CBS News. August 5, 2011.
- ^ Bellows, John (August 6, 2011). "Just the Facts: S&P's $2 Trillion Mistake". United States Department of the Treasury. Retrieved August 7, 2011.
- ^ Calabresi, Massimo (August 6, 2011). "Standard & Poor's Embarrassing U.S. Debt Downgrade". Time.
- ^ "Dramatic cuts in military spending are beginning to take a toll on defense jobs". Wall Street Journal. August 2, 2012. Retrieved October 21, 2012.
- ^ Jonathan, Weisman (September 14, 2012). "White House Details Potential Effects If Automatic Budget Cuts Go Through". New York Times. Retrieved October 21, 2012.
- ^ Fryer-Biggs, Zachary. "Lockheed: No Sequestration Layoff Notices This Year." Defense News, 1 October 2012.
- National Law Review.
- ^ "DoD Not Making Plans for Sequester Cuts."
- ^ "Defense Department Prepares Plans for Sequestration."
- ^ Tomlinson, Lucas (April 17, 2016). "Budget cuts leaving Marine Corps aircraft grounded | Fox News". Fox News. Retrieved June 4, 2016.
- ^ Weisman, Jonathan (January 1, 2013). "Senate Passes Legislation to Allow Taxes on Affluent to Rise". The New York Times.
- ^ Friedman, Joel; Kogan, Richard; Parrott, Sharon (September 18, 2013). "Clearing Up Misunderstandings: Sequestration Would Not Be Tougher on Defense Than Non-Defense Programs in 2014". Center on Budget and Policy Priorities. Retrieved October 15, 2013.
- ^ Desjardins, Lisa (December 10, 2013). "The budget deal in plain English". CNN. Retrieved December 11, 2013.
- ^ "Bipartisan Budget Act of 2013". Congressional Budget Office. December 11, 2013. Retrieved December 19, 2013.
External links
- S. 365
- Pub. L.112–25 (text) (PDF)
- Bill as seen by Congress, via GPO.gov
- Bill at crocodoc site, via FoxBusiness.com
- The Budget Control Act: Frequently Asked Questions Congressional Research Service
- The Budget Control Act of 2011 Congressional Research Service
- The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit When the Automatic Spending Cuts Are Implemented Congressional Research Service