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Summary of the Budget Control Act of 2011

Aug 3, 2011


The "Budget Control Act of 2011" (the Act) just enacted includes procedures to raise the debt limit by up to $2.4 trillion, in two installments, with procedures for Congress to disapprove the increases. The Act caps discretionary spending, which, in conjunction with other savings in the bill, saves more than $900 billion over ten years. The Act then allows the debt ceiling to be increased by $900 billion. It links the size of the second debt limit increase to the outcome of a new Joint Select Committee on Deficit Reduction (the Joint Committee) charged with finding at least $1.5 trillion in additional savings. If Congress subsequently approves deficit reduction of more than $1.2 trillion, then the debt ceiling would be increased by the amount of that deficit reduction up to $1.5 trillion. If this additional deficit reduction is not agreed to by December 23, (i.e., if the Joint Committee does not produce recommended savings of at least $1.2 trillion or if the recommendations are rejected by a majority vote in either the House or the Senate), the second debt ceiling increase will be $1.2 trillion. That increase in the debt ceiling will be accompanied by equal across-the-board cuts in both defense and non-defense spending every year for nine years; none of the cuts will be implemented before January 2013. Even though defense spending accounts for only 20 percent of the budget, half of the sequestered spending cuts would come from defense. Most low-income spending programs will be exempt from the cuts. If there is no deficit reduction as a result of the Joint Committee, the across-the-board cuts will total about $109 billion per year starting in January 2013. If the Joint Committee achieves less than $1.2 trillion in deficit reduction, the across-the-board cuts over nine years will total the remaining amount of savings needed to achieve $1.2 trillion in deficit reduction.