FAQ: S.365, the Budget Control Act of 2011

 

On August 2, 2011 the President signed into law S. 365, the Budget Control Act of 2011.  S.365 authorizes the President to increase the debt limit by at least $2.1 trillion and up to $2.4 trillion in three steps, with $917 billion cuts over 10 years to be implemented immediately through discretionary spending caps. A bicameral, bipartisan group of 12 lawmakers will be charged with identifying additional deficit cuts worth $1.2 trillion - $1.5 trillion. The joint select committee must report precise deficit-reduction proposals by November 23 and Congress must vote on the group’s package by December 23. Should the committee fail to come to an agreement on a deficit-reduction package, automatic across-the-board spending cuts worth about $1.2 trillion will kick in starting in 2013 – with 50 percent coming from defense and 50 percent coming from domestic programs – in order to raise the debt ceiling by an equivalent amount. Below are some Frequently Asked Questions:

What are the main features of S. 365?

·         Cut: Cuts government spending more than it increases the debt limit;

·         Cap: Implements spending caps to restrain future spending;

·         Balance: Advances the cause of a Balanced Budget Amendment to the Constitution.

What does the legislation do?

·         Establishes caps on discretionary spending through 2021;

·         Requires that the House of Representatives and the Senate vote on a joint resolution proposing a balanced budget amendment to the Constitution;

·         Establishes a procedure to increase the debt limit and for procedures that would allow the limit to be raised in two additional steps, for a cumulative increase of between $2.1 and $2.4 trillion.

·         Creates a 12-Member Congressional Joint Select Committee on Deficit Reduction (six Senators and six Representatives)  to propose further deficit reduction, with a stated goal of achieving at least $1.5 trillion in budgetary savings over 10 years;

·         Establishes automatic procedures for reducing spending by as much as $1.2 trillion if legislation originating with the new Joint Select committee does not achieve such savings.

How much does the bill increase the debt ceiling?
The bill stipulates that the debt ceiling will rise by $917 billion this year and at least $1.2 trillion next year, unless two-thirds of Congress disapproves of it.

Does S.365 increase taxes?
NO.  By requiring the baseline to be current law, it effectively makes it impossible for the Congressional Joint Select Committee on Deficit Reductionto increase taxes.

How does the bill advance the cause of the Balance Budget Amendment (BBA)?
The bill advances the cause of the BBA by requiring the House and the Senate to vote on the measure after October 1, 2011 but before the end of the year.  The bill authorizes the President to request a second debt limit increase of between $1.2 trillion – $1.5 trillion if the Congressional Joint Select Committee on Deficit Reduction proposal is enacted OR if a BBA is sent to the states.

How does the Congressional Joint Select Committee on Deficit Reduction work?
The joint committee is required to provide recommendations (including legislative language) that will significantly improve both the short- and long-term fiscal imbalance of the Federal Government.

The joint committee must also consider any recommendations from House and Senate committees with respect to changes in law necessary to meet the goal of the joint committee. Those committees may report their recommendations to the joint committee by October 14, 2011.

By November 23, 2011, the joint committee is required to vote on a report which contains the findings, conclusions, recommendations of the joint committee and legislative language in support of the committee’s recommendations. 

A majority of the members of the joint committee must approve the report and accompanying legislative language. The text of the report and accompanying legislative language must be made public.  To become law, the plan must pass the House and Senate and be signed by the President.

How are members appointed to the Congressional Joint Select Committee on Deficit Reduction?
The joint committee is to be comprised of 12 members appointed by the majority and minority leaders of the Senate, and the Speaker and minority leader of the House, who each must appoint three members. The Speaker and the majority leader of the Senate must each appoint one member to serve as Co-Chair from among the members of the joint committee.

What happens if the Congressional Joint Select Committee on Deficit Reduction fails to achieve at least $1.2 trillion in spending cuts?
Failure to reach at least $1.2 trillion in cuts would trigger automatic across-the-board cuts, otherwise known as a “sequestration”. The sequestration process is designed to guarantee that Congress acts on the Congressional Joint Select Committee on Deficit Reduction’s proposed legislation to cut spending.  

The cuts would apply to fiscal year 2013-2021 and apply to both mandatory and discretionary programs.  The final agreement specifies that total reductions would be equally split between defense and non-defense programs.  The sequestration would not apply to all spending, such as Social Security or civilian and military retirement benefits.

What programs are exempted from across-the-board cuts?
Several programs would be exempted from sequestration:

·         Social Security

·         Medicaid

·         Veterans Assistance

·         Military Pay

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Congressional Budget Office (CBO) Report