Personal Finance. Your Practice. Popular Courses. Economy Fiscal Policy. What Is Sequestration? Key Takeaways Sequestration is a U. The BCA sets targets for deficit reduction and caps on the increase in federal spending in each year from to If spending exceeds these caps, the government is supposed to limit planned increases in spending by a percentage determined as laid out by the law.
In practice, most federal spending is exempt or otherwise not subject to limit by sequestration as Congress continually raises its own spending caps and legally exempts new categories of spending. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.
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Importantly, the entire additional cut will take place on the defense side of the budget. What Happens to Discretionary Spend i ng After ? Current law calls for the sequester caps to continue through After , discretionary spending is not subject to any cap. Statutory PAYGO sequestration has never occurred — when automatic reductions would have been triggered, Congress has always waived or delayed them from taking effect.
When the Committee failed, backup procedures in the law created an enforcement mechanism of automatic cuts. On the discretionary side, starting in , the BCA put into place extremely tight spending caps through , with separate caps for defense and non-defense. Instead, Congress passed legislation raising the caps four times: most recently in August, when the Bipartisan Budget Act BBA of raised the discretionary caps for and and suspended the debt limit for two years.
The discretionary caps are enforceable through across-the-board cuts — also referred to as sequestration — if Congress enacts appropriations that exceed the caps. For a table that compares the BCA austerity-level discretionary caps and the caps as modified by the Bipartisan Budget Acts of , , , and see the Appendix.
On the mandatory side, the BCA required across-the-board cuts to non-exempt funding. Congress has extended the mandatory sequester several times. The required spending cuts in the BCA were intended to come half from defense programs and half from non-defense programs. The defense category is the federal budget's national defense function, which includes the Department of Defense, nuclear-weapons related activities at the Department of Energy, and the national security activities of several other agencies such as the Coast Guard and Federal Bureau of Investigation.
Non-defense is everything else. Final Sequestration Report for Fiscal Year January 13, Sequestration Update Report: August August 13,
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