On Monday, August 1, 2011, the House approved the Budget Control Act of 2011 (S. 365), by a vote of 269-161. Among other things, the bill would create and enforce discretionary spending caps to cut and restrain spending over the next ten years, provide a mechanism for increasing the debt limit in two steps (subject to congressional disapproval and more than dollar-for-dollar spending cuts), establish a Joint Committee to produce deficit reduction legislation, and provide for sequestration of mandatory and discretionary spending to achieve cuts equal to a debt limit increase if the committee’s legislation is not enacted or falls short of the amount of the debt limit increase. The following is a summary of the debt limit increase provisions in the bill.
The First Debt Limit Increase: The Budget Control Act of 2011 establishes a procedure to increase the debt limit by $400 billion initially and procedures that would allow the limit to be raised further in two additional steps, for a cumulative increase of between $2.1 trillion and $2.4 trillion. Upon enactment of the bill, when the president certifies that the national debt is within $100 billion of the statutory limit (which occurred on August 2), the Treasury would be authorized to borrow an additional $900 billion, subject to a disapproval resolution in Congress. Congress would have 50 days after certification to pass a disapproval resolution. Under the bill, the debt limit would automatically be increased by $400 billion upon submission of a certification from the president, with the remaining $500 billion subject to the outcome of the disapproval resolution. The legislation would authorize Congress to consider a resolution of disapproval of the debt limit increase and provide expedited procedures for consideration of the joint resolution. If a resolution of disapproval is not agreed to, or is vetoed by the president and the veto is not overridden, the debt limit would increase by $500 billion, for a total debt limit increase of $900 billion. If a resolution of disapproval against the increase is approved and becomes law, $400 billion (the amount of the initial debt ceiling increase) would be subject to pro rata sequestration with exceptions for Medicare, defense, veterans, and Social Security.
Second Debt Limit Increase: If, after the debt limit has been increased by $900 billion, the president submits a certification to Congress that the debt limit is again within $100 billion of breaching the limit and additional borrowing is required to meet existing commitments, the Secretary of Treasury would be granted the authority to borrow an additional $1.2 trillion, subject to a congressional resolution of disapproval. The amount of the second debt limit increase could be raised to $1.5 trillion if a balanced budget amendment (BBA) were sent to the states for ratification or the legislation produced by the Joint Select Committee on Deficit Reduction (described in the following section) was enacted and produced deficit reduction of $1.5 trillion or more. Even if a BBA is sent to the states, spending must still be cut by at least $1.2 trillion. If the president is able to increase the debt limit by $1.2 trillion (contingent upon the congressional disapproval process), and deficit reductions proposed by the Joint Committee have not been enacted, or enacted deficit reductions fall short of $1.2 trillion, then an additional spending sequester is triggered to ensure that the second debt limit increase is offset dollar-for-dollar with spending cuts. Unless legislation proposed by the Joint Committee is enacted and reduces deficits by at least $1.2 trillion over ten years, a sequestration process would take effect on January 15, 2012, in order to reduce discretionary and mandatory spending by $1.2 trillion.