How the Across-the-Board Cuts in the Budget Control Act Will Work

How the Across-the-Board Cuts in the Budget Control Act Will Work

By Richard Kogan; Revised April 27, 2012

The Budget Control Act (BCA) of 2011 imposed caps on discretionary programs that will reduce their funding by more than $1 trillion over the ten years from 2012 through 2021, relative to the Congressional Budget Office (CBO) baseline from 2010.  It also established a Joint Select Committee on Deficit Reduction to propose legislation reducing deficits by another $1.2 trillion over that period, and established a backup “sequestration” procedure to increase the incentive on the Joint Committee to reach a compromise.  Because the Joint Committee failed to achieve its goal, sequestration — a form of automatic cuts that apply largely across the board — is now scheduled to occur starting in January 2013 and to cover the period through 2021.

Part 1 of this report outlines how these across-the-board cuts will work in 2013.  Part 2 describes how they will work from 2014 through 2021. As explained below, the process for 2013 is substantially different from that for the ensuing eight years.

Broadly speaking, for 2013 the across-the-board cuts will mean about an 8.4 percent cut in most affected non-defense discretionary programs, a 7.5 percent cut in affected defense programs, an 8.0 percent cut in affected mandatory programs other than Medicare, and a 2.0 percent cut in Medicare provider payments.  For 2014 through 2021, the Medicare cut will remain at 2 percent while the percentage cuts in other programs will gradually shrink.  These estimates — which are revised from estimates in our December 2, 2011, analysis — take into account new CBO budget projections and the details of the President’s funding requests for 2013.

With one exception, this report is based on estimates from CBO on the dollar cuts from the four program categories outlined above — non-defense discretionary, defense, affected mandatory programs, and Medicare – provided as part of CBO’s March 2012 baseline.  The Appendix discusses why we have revised our previous estimates and the ways in which we use or alter CBO’s estimates. Continue reading “How the Across-the-Board Cuts in the Budget Control Act Will Work”

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