Budgetary Effects of the Fiscal-Cliff Deal

The fiscal cliff law (PL 112-240) has changed how discretionary spending caps and automatic spending cuts will be enforced. The new law replaces the first two months of the scheduled sequester with other, longer-term deficit reduction. To replace the savings from the two cancelled months of the sequester, Congress lowered discretionary spending caps by $12 billion over fiscal 2013 and 2014 and raised $12 billion in revenue over a decade by changing Roth retirement account rules.

Provision Before deal After deal
Lowers fiscal 2013 discretionary caps by $4 billion Defense: $546 billion
Nondefense: $501 billion
Total: $1.047 trillion
Security: $684 billion
Nonsecurity: $359 billion
Total: $1.043 trillion
Lowers fiscal 2014 discretionary caps by $8 billion Defense: $556 billion
Nondefense: $510 billion
Total: $1.066 trillion
Defense: $552 billion
Nondefense: $506 billion
Total: $1.058 trillion
Delays start date of fiscal 2013 sequester by 2 months January 2, 2013 March 1, 2013
Reduces amount of fiscal 2013 sequester by $24 billion $109 billion $85 billion
Delays enforcement date for fiscal 2013 discretionary caps January 18, 2013 March 27, 2013
Changes definition and composition of fiscal 2013 discretionary caps used in enforcement Defense spending would be reduced by $11 billion below current CR levels Security spending would be reduced by $7 billion below current CR levels
Liberalizes conversion of tax deferred retirement accounts to Roth savings accounts Conversions restricted Conversions expanded, raising $12 billion in revenue by 2022

NOTE: The defense category is defined as national defense budget function 050, which includes Department of Defense military activities, nuclear weapons activities of the Department of Energy and National Nuclear Security Administration, and portions of the FBI, Coast Guard and other agencies. The security category includes the departments of Defense, Homeland Security and Veterans Affairs, the National Nuclear Security Administration, the intelligence community management account, and all accounts in the International Affairs budget function (150).

SOURCES: American Taxpayer Relief Act of 2012; Office of Management and Budget; Congressional Budget Office; Senate Budget Committee; Center on Budget and Policy Priorities