Budget Control Act of 2011
What Did the Budget Control Act of 2011 Do?
The Budget Control Act of 2011 was legislation passed by the US Congress to incentivize Congress to control federal spending, to enact automatic budget reductions if Congress does not choose specific budget reductions and to force Congress to vote on a balanced budget amendment to the US Constitution.
Controlling Federal Spending
The federal government borrows a significant portion of the money used to pay for government operations.
Congress can keep appropriating funds and agencies can keep spending as long as the government has enough money between revenues and borrowing money. Borrowing to pay for daily expenses is not a sustainable funding model. Eventually, the money dries up, and lenders want to be paid back.
In passing the Act, Congress backed itself into a corner. It could either make the hard choices necessary to reduce spending, or it could allow a bureaucratic process make the choices for them. Neither option is politically attractive. Making difficult decisions means that a significant portion of voters are going to be upset no matter what alternative a politician supports. Letting the Act dictate budget cuts makes Congress look weak and inept.
But Congress also gave itself somewhat of an out. Congress can increase the amount of money the federal government is legally authorized to borrow. This amount is called the debt ceiling.
Raising the debt ceiling is politically problematic as well. In doing this, Congress exacerbates the country’s borrowing problem and abdicates its responsibility to fix it.
Conveniently, the Act provided for a $400,000,000,000 increase to the debt ceiling. This gave Congress some breathing room while they were to tackle the nation's borrowing and spending problem.
The Act created the Joint Select Committee on Deficit Reduction. Some called it the “Super Congress” or the “Supercommittee,” but that name does not appear in the Act. Comprised of a handful of members from both the House of Representatives and Senate, the committee’s goal as stated in the Act was “to reduce the deficit by $1,800,000,000,000 or more over the period of fiscal years 2012 to 2021.” More specifically, they were to make recommendations for the full Congress to consider.
The appointment process for selecting committee members is spelled out in the Act. The following lawmakers served on the committee:
- Sen. Patty Murray, D-Washington (Co-Chair)
- Sen. Max Baucus, D-Montana
- Sen. John Kerry, D-Massachusetts
- Sen. John Kyl, R-Arizona
- Sen. Rob Portman, R-Ohio
- Sen. Pat Toomey, R-Pennsylvania
- Rep. Jeb Hensarling, R-Texas (Co-Chair)
- Rep. Fred Upton, R-Michigan
- Rep. Dave Camp, R-Michigan
- Rep. Xavier Becerra, D-California
- Rep. Jim Clyburn, D-South Carolina
- Rep. Chris Van Hollen, D-Maryland
Ultimately, the committee was never able to reach an agreement on what to recommend to Congress. Both Republicans and Democrats pointed fingers at one another in the media.
Automatic Budget Reductions
As mentioned above, the Act lays out three options for Congress -- choose spending reductions, allow automatic budget reductions to take effect or raise the debt ceiling.
The process of applying automatic budget cuts is called sequestration. The Act authorizes sequestration in fiscal years 2012 through 2021.
If a session of Congress expires with appropriations greater than the allowed under the debt ceiling, the Congressional Budget Office and the Office of Management and Budget estimate how much money needs to be sequestered by the Treasury Department. The Act explains how the estimates are to be reconciled if they are significantly different. After that, OMB makes further calculations to execute sequestration.
The Act grants some programs exemptions from sequestration. These programs include spending for military personnel, disability determination reviews by the Social Security Administration and health care fraud and abuse control by the Department of Health and Human Services.
The wording in these exemptions are slightly different from one another, so experts are not sure precisely how these exemptions are to be applied if sequestration becomes a reality.
Balanced Budget Amendment
The Act required Congress to consider a balanced budget amendment to the Constitution. Congress was directed to vote on the amendment between September 30 and December 31, 2011. The amendment did not make it out of Congress to be voted on by the general public.