S. 365 Amendments: The Budget Control Act of 2011

S. 365

The Budget Control Act of 2011

Date
August 1, 2011 (112th Congress, 1st Session)

Staff Contact
Communications

Floor Situation

On Monday, August 1, 2011, the House is scheduled to consider an amendment in the nature of a substitute to S. 365, the Budget Control Act of 2011.  The rule for consideration of the legislation provides for one hour of debate, with 30 minutes equally divided and controlled by the chair and ranking minority member of the Committee on Rules, 15 minutes equally divided and controlled by the chair and ranking minority member of the Committee on Ways and Means, and 15 minutes equally divided and controlled by the chair and ranking minority member of the Committee on the Budget.

Bill Summary

The Budget Control Act of 2011 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 from between $2.1 trillion and $2.4 trillion 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 automatic sequestration of mandatory and discretionary spending to achieve cuts equal to a debt limit increase if the deficit committee’s legislation is not enacted or falls short of the amount of the debt limit increase.  According to CBO, the bill would reduce deficits by at least $2.117 trillion over ten years with the possibility of greater reductions based on the enactment of legislation produced by the Joint Committee.  Debt limit increases authorized by the bill could not exceed the amount of deficit reduction achieved either through the enactment of deficit reduction legislation proposed by the Joint Committee or through automatic sequestration.

 

According to CBO, provisions in the bill not related to the Joint Committee’s recommendations or further sequestration accompanying the second debt limit increase would reduce total spending by $917 billion between FY 2012 and FY 2021, relative to CBO’s current baseline, and provide for a $900 billion increase in the statutory debt limit, subject to a congressional disapproval process.  The bill would cut a total of $21 billion in spending in FY 2012.  In addition, the bill would require congressional consideration of a balanced budget amendment (BBA) in the House and Senate by December 31, 2011.  The bill would establish a Joint Select Committee on Deficit Reduction to identify $1.5 trillion in deficit reductions and allow for an additional increase of the debt limit of up to $1.5 trillion (subject to disapproval), if the deficit reduction plan set forth by the joint select committee is enacted and contains cuts equal to the second debt limit increase or if a BBA were sent to the states. Even if a BBA is sent to the states, spending must still be cut.  The bill would also provide mandatory savings through enhanced program integrity and address the Pell Grant shortfall, offset by making reforms to the student loan program.

 

TITLE I—TEN YEAR DISCRETIONARY CAPS WITH SEQUESTER

Enforcing Discretionary Spending Limits:  The Budget Control Act of 2011 would establish discretionary spending limits for fiscal years 2012 through 2021 and provide for automatic reductions in discretionary spending (sequestration) if annual spending limits are breached.  The bill would also prohibit the House and Senate from considering legislation that would increase spending beyond the discretionary limits in the bill, subject to a point of order.  Under the bill, 15 days after Congress adjourns at the end of a session, a sequestration would occur to automatically reduce discretionary spending by any amount over the cap.  The bill would stipulate that each discretionary account would be reduced by an equal percentage necessary to eliminate the breach.  The bill would provide the president with the authority to exempt spending for military personnel from sequestration, resulting in an across-the-board sequestration to the remainder of Department of Defense accounts in an amount necessary to make up for the lack of reductions in the military personnel account.

Under the legislation, if there is a continuing resolution providing funding for only a portion of the year in effect during the 15 day period following the end of a session, then the amount of sequestration would be based on the annualized amount of discretionary funding under the partial bill.  In addition, if an appropriation were approved while the fiscal year was in progress and breached the spending cap, the bill would include both “look-back” and “within-session sequestration” provisions to sequester the amount of the breach from that fiscal year, or from the next fiscal year’s funding. The Budget Control Act of 2011 would require the Congressional Budget Office (CBO) to provide the Office of Management and Budget (OMB) with an estimate of new discretionary budget authority and outlays for the current year and the following budget year provided by that legislation.  Within seven days of receiving the estimate, the OMB would be required to send Congress the estimate provided by CBO, an additional estimate provided by OMB, and an explanation of any difference between the two estimates. 

Adjustments to Discretionary Spending Limits:  The Budget Control Act of 2011 would allow adjustments to discretionary spending limits for “emergency” appropriations, disaster funding, appropriations to reduce waste and abuse in Social Security disability and health care funding, and appropriations for the global war on terrorism.  The bill limits the definition of the term “emergency” spending as unanticipated funding provided for “the prevention or mitigation of, or response to, loss of life or property, or a threat to national security.”  In addition, the bill would provide Members the opportunity during the legislative process to strike an emergency designation and to offset the spending with other cuts.

Discretionary Spending Limit:  The legislation would establish discretionary spending limits, subject to the sequestration process previously described.  The bill would set separate discretionary spending limits for security and non-security spending in FY 2012 and FY 2013.  From FY 2014 to FY 2021, discretionary spending limits would apply globally to all discretionary spending. Under the bill, security spending would include discretionary appropriations associated with agency budgets for the Department of Defense, the Department of Homeland Security, the Department of Veterans Affairs, the National Nuclear Security Administration, the intelligence community management account, and all budget accounts for international affairs.

The bill would also prohibit the House and Senate from considering legislation that would increase spending beyond the discretionary limits in the bill, subject to a point of order.  According to CBO, these discretionary spending limits would reduce discretionary outlays relative to CBO’s current baseline by $756 billion over ten years, including a reduction of $25 billion in FY 2012.  Discretionary budget authority relative to CBO’s current baseline would be reduced by $840 billion over ten years and $44 billion in FY 2012.

Caps on Discretionary Budget Authority

  • $1.043 trillion in FY 2012 ($684 billion designated for discretionary security spending).
  • $1.047 trillion in FY 2013 ($686 billion designated for discretionary security spending).
  • $1.066 trillion in FY 2014.
  • $1.086 trillion in FY 2015.
  • $1.107 trillion in FY 2016.
  • $1.131 trillion in FY 2017.
  • $1.156 trillion in FY 2018.
  • $1.182 trillion in FY 2019.
  • $1.208 trillion in FY 2020.
  • $1.234 trillion in FY 2021.

 

TITLE II - VOTE ON THE BALANCED BUDGET AMENDMENT  

Required Vote on the Balanced Budget Amendment:  The Budget Control Act of 2011 would require that the House and Senate both vote on passage of a joint resolution proposing a balanced budget amendment (BBA) to the Constitution.  Each chamber would be required to vote on the BBA between September 30 and December 31, 2011.  In addition, the bill would provide for expedited consideration of the BBA by the House and Senate.

 

TITLE III—DEBT CEILING DISAPPROVAL PROCESS

First Presidential Debt Ceiling Increase: Upon enactment of the Budget Control Act of 2011, if the president certifies that the national debt is within $100 billion of the statutory limit, the Treasury would be authorized to borrow an additional $900 billion, subject to a disapproval resolution in Congress.  Under the bill, the debt limit would automatically be increased by $400 billion upon submission of a certification from the president, with the rest of the $900 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 of disapproval.  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.   

Expedited procedures for disapproval resolution consideration in the House:

  • The House must convene not later than the second calendar day after the receipt of a Presidential certification.
  • Any committee to which the joint resolution has been referred must report it to the House not later than five calendar days after the receipt of the Presidential certification. If a committee fails to report the joint resolution within the time period, the committee is discharged from further consideration.
  • Requires consideration of the joint resolution in the House not later than six calendar days after receipt of a certification from the President.
  • All points of order against the joint resolution and its consideration are waived.
  • No amendments to the joint resolution are in order.
  • The joint resolution is debatable for two hours prior to a vote on passage.

Expedited procedures for disapproval resolution consideration in the Senate:

  • The Senate must convene not later than the second calendar day after the receipt of a Presidential certification.
  • A motion to proceed to a joint resolution of disapproval of the initial $900 billion increase to the debt limit is in order at any time during the period beginning the day after receipt of a Presidential certification and ending on September 14, 2011.
  • A motion to proceed to a joint resolution of disapproval of the additional amount is in order at any time during the period beginning the day after receipt of a Presidential certification and ending on the 6th day after Congress has received a certification.
  • All points of order against the joint resolution are waived.
  • No amendments to the joint resolution are in order.
  • Consideration of the joint resolution is limited to not more than 10 hours.

Second Presidential 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 within $100 billion of breach 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.  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.

Enforcement of Budget Goal:  Under the bill, 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.  In order to carry out the automatic sequestration, the bill would require OMB to calculate the amount of annual deficit reduction necessary to reduce spending by $1.2 trillion over ten years.  To calculate the amount of annual sequestration reductions, OMB would be required to begin with $1.2 trillion, and then reduce the amount by any savings enacted by the Joint Committee recommendations.  The remainder would be reduced by 18 percent to account for reduced debt services and divided by nine to account for each year of sequestration.  The remaining amount would be sequestered annually to ensure that a total savings of $1.2 trillion was achieved to equal the second debt limit increase.  Direct spending for Medicare would be subject to sequestration, however, reductions to Medicare would be capped at 2 percent.  If the sequestration percentage for Medicare exceeded 2 percent, the difference would be taken from an increase in across the board sequestration.  Under the bill, OMB would be required to allocate half of the annual sequestration under this section from defense accounts (budget function 050) and half from non-defense accounts.

 

TITLE IV—JOINT SELECT COMMITTEE ON DEFICIT REDUCTION

The bill would establish a twelve member Joint Select Committee on Deficit Reduction, charged with a goal of reducing the deficit by $1.5 trillion between 2012 and 2021.  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 and achieve up to $1.5 trillion in deficit reduction.   The joint committee would 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.  Members of the joint committee would have to be appointed within 14 calendar days after enactment.

Under the legislation, the joint committee would be required to vote on a report containing recommendations for reducing the deficit, accompanied by a CBO score and legislative text, by November 23, 2011.  A majority of the members of the joint committee would have to approve the report and accompanying legislative language. The text of the report and accompanying legislative language would be made public promptly after the vote on adoption of those matters. The report and legislation would be presented to the president and Congress by December 2, 2011.

If approved by the Joint Committee, the legislative language accompanying their recommendations must be introduced on the next session or legislative day in the House or Senate, respectively.  The Budget Control Act of 2011 would provide for an expedited process for consideration of the legislation recommended by the joint committee, requiring House committees to report the bill by December 9, 2011.  The vote on passage of the joint committee bill must occur on or before December 23, 2011.  The bill would provide for Senate consideration of the bill without amendment.  If the Joint Committee did not result in legislation which was enacted and reduced the deficit between $1.2 trillion and $1.5 trillion, automatic sequestration described in the previous section would commence, with half of all sequestration being applied to defense accounts. 

 

TITLE V—PELL GRANT AND STUDENT LOAN PROGRAM CHANGES

 

The Budget Control Act of 2011 would provide $17 billion in mandatory funding over the next two years to fund the shortfall for the federal Pell Grant program.  These increases would be offset by eliminating the ability of graduate and professional students to take out subsidized Stafford loans and by eliminating the authority to provide incentives for on-time repayment of student loans.  According to CBO, these offsets would reduce mandatory spending by $22 billion, thus the net impact of Title V would be a $5 billion reduction in direct spending.

Cost

According to CBO, The Budget Control Act of 2011 would reduce total outlays by $21 billion in FY 2012 and by a total of $2.11 trillion over the FY 2012 through FY 2021 period, relative to CBO’s March 2011 adjusted baseline.