Sequester Looms Over Budget Debate

Sarah Vanderbilt | May 23, 2012, 11:34 a.m.

Spending limits enacted in August 2011 as part of a debt limit deal capped new discretionary budget authority for ten years and also called for an automatic spending “sequester” to further reduce spending. Because the largest mandatory programs are either exempt from the sequester or, in the case of Medicare, limited to a two percent reduction, the burden will mostly fall on the already constrained discretionary budget.

With the sequester set to take effect in January, lawmakers are talking about delaying these additional cuts or replacing them with savings they find more palatable. Many Republicans are especially averse to the roughly $55 billion that will be stripped out of the defense budget for each of the next nine years if Congress doesn't act to modify or repeal the sequester.

Republicans in the House have passed a budget that repeals a portion of the automatic cuts for fiscal 2013, but Senate Democrats have no interest in considering the House bill, which also makes deep cuts to mandatory programs such as food stamps, Medicaid and social services grants.

If Congress does take action to delay or the sequester or replace it with other savings, it will almost certainly do so after the election as part of a larger package to raise the debt limit and extend at least some of the Bush-era tax cuts — or as part of a deal that puts all of those decisions off for a few more months by way of short-term fixes.

About the Data

The starting point for the historical data shown in the graph is the budget historical tables, specifically table 5.6, which shows discretionary budget authority (appropriations) with the same defense/non-defense breakdown that governs the discretionary caps and sequester. We then adjusted the historical figures to remove war spending, which is not subject to the discretionary spending caps, using figures from this CRS report, which includes a breakdown by department. The war spending figure for 2011 comes from the administration’s fiscal 2013 OCO request.

The historical figures were further adjusted to remove disaster relief appropriations (also not subject to caps) using figures from this Office of Management and Budget report. Figures before 2001 are not adjusted for disaster relief, but those numbers (an average of $11 billion a year, often much lower) have little impact on the shape of this graph.

The caps themselves are set out in the text of the August 2011 debt limit law. For 2014 through 2021, the original caps for defense and non-defense accounts are simply stated. CBO estimated the discretionary effects of the sequester for those years in this sequestration report from January, and the effects of the 2013 sequester were estimated in this report by the Center on Budget and Policy Priorities.

The law uses a different definition of “security” for the fiscal 2012 cap; it includes some homeland security, state department and veterans affairs accounts along with defense programs. To make the 2012 defense data point comparable with the caps and sequester figures for later years, we show 2012 appropriations for budget function 050 only, excluding war spending. Thanks to Richard Kogan at CBPP for his help with these adjustments.