President Barack Obama signed S. 365, the Budget Control Act of 2011, into law on August 2. The bill allows the United States to raise its debt ceiling and avoid default on its debts while establishing requirements for massive spending cuts over the next decade. The House passed the bill by a vote of 269 to 161, the Senate by 74 to 26. Both votes had bipartisan support and bipartisan opposition.
The new law, Public Law 112-25, establishes discretionary spending limits for each of the next ten fiscal years, from FY12 through FY21. Together, these caps are supposed to reduce the federal deficit by $917 billion. All HUD and USDA low income housing programs are on the discretionary side of the federal budget; none are entitlements. The law requires cuts of $21 billion for FY12, which begins October 1, 2011, compared to FY11 across all discretionary spending. Annual savings achieved by the new spending limits ramp up dramatically after FY12, to $42 billion in FY13 and more each year thereafter. The debt deal allows for some adjustments for disaster relief, but these would be limited to average historical disaster funding.
The House Committee on Appropriations is expected to revise its subcommittee allocations to achieve this level of cuts. The House had issued subcommittee allocations based on its own budget resolution (see Memo, 5/27), but most subcommittees, including the one on Transportation, Housing and Urban Development, and Related Agencies (T-HUD), have not yet marked up individual spending bills in anticipation of the debt ceiling deal setting new goals.
The House’s T-HUD subcommittee allocation, referred to as the 302b allocation, was 36% below the President’s FY12 request and 14% below the total FY11 appropriation for the T-HUD subcommittee. The discretionary spending caps in the deficit deal for FY12 are also expected to result in significant cuts compared to FY11 funding levels.
The Senate has not passed a budget resolution nor issued 302b allocations to its 12 appropriations subcommittees. Now, subcommittee allocations based on the debt ceiling’s caps are expected in September. Given the tight timeframe, it is likely a continuing resolution (CR) or a series of CRs will be needed to fund federal programs after the October 1, the start of the next fiscal year FY12, because Congress is not expected to be able to enact all its funding bills before then.
In addition to ten years of spending caps on discretionary programs, the bill establishes the Joint Select Committee on Deficit Reduction, a “super committee” of 12 Members of Congress, equally divided between majority and minority parties in the Senate and House. Co-chairs of the committee will be appointed by the Senate majority leader and the Speaker of the House. All members of this joint committee are to be appointed by August 16.
The goal for this committee is to reduce the federal deficit by an additional $1.5 trillion over the next ten years. The committee must vote on its deficit reduction recommendations by November 23, the day before Thanksgiving. The debt deal establishes protocol for House and Senate consideration of the committee’s recommendations, to which no amendments can be made. Both the House and Senate must vote on the joint committee’s recommendations by December 23, the Friday before Christmas. The joint committee is to consider all ways to reduce the deficit, including raising revenues and cuts to entitlement programs, as well as additional discretionary spending limits.
If the joint committee’s recommendations are enacted or Congress sends a constitutional balanced budget amendment to the states, the President could then seek an additional $1.5 trillion increase in the debt ceiling. The act requires the House and Senate to hold votes on the joint resolution for a balanced budget amendment to the Constitution by December 31.
If the joint committee fails to achieve at least $1.2 trillion in deficit reduction over the next ten years, or does not send a balanced budget amendment to the states by January 15, a sequestration process must be implemented for FY13 to FY21, beginning in January 2013. Sequestration in this case means across-the-board spending cuts.
If the joint committee achieves only some portion of the $1.2 trillion savings, the sequestration process would make up the difference, up to the $1.2 trillion mark.
These across-the-board cuts would have to be equally divided among non-security and security programs, including discretionary and entitlement spending. According to a summary of the act by Speaker of the House John Boehner (R-OH), this deal differs from previous debt deal proposals. “The one difference between this and [the earlier, House-passed bill]: the House bill had a firewall that separated defense from non-defense spending. Now the firewall separates security spending from non-security spending. This would be for FY12 and FY13, and allows Republicans to protect defense funding while cutting other security spending, such as foreign aid,” the summary says.
The act’s sequestration protocols would protect certain programs from across-the-board cuts, including Social Security, Medicaid, Children’s Health Insurance Program, SNAP (food stamps), child nutrition programs, Supplemental Security Income, refundable tax credits such as the Earned Income Tax Credit, veterans’ benefits, and Temporary Assistance for Needy Families.
An August 4 paper from the Center on Budget and Policy Priorities estimates that a non-defense sequestration of $55 billion, which the bill would require between FY13 and FY21, would result in cuts of approximately 9% in non-exempt entitlement and discretionary programs.
Access the House rules summary of Budget Control Act of 2011 at http://nlihc.org/doc/House_Rules_summary_of_budget_control_act.pdf
Access a summary of the House vote: http://clerk.house.gov/evs/2011/roll690.xml
Access a summary of the Senate vote: http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=112&session=1&vote=00123
Access the August 4 CBPP paper at http://www.cbpp.org/files/8-4-11bud.pdf