The Budget Control Act of 2011: The Effects
on Spending and the Budget Deficit

Mindy R. Levit
Analyst in Public Finance
Marc Labonte
Coordinator of Division Research and Specialist
April 1, 2013
Congressional Research Service
7-5700
www.crs.gov
R42506
CRS Report for Congress
Pr
epared for Members and Committees of Congress

The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit

Summary
Following a lengthy debate over raising the debt limit, the Budget Control Act of 2011 (BCA;
P.L. 112-25) was signed into law by President Obama on August 2, 2011. In addition to including
a mechanism to increase the debt limit, the BCA contained a variety of measures intended to
reduce the budget deficit through spending reductions. There are two main components to the
spending reductions in the BCA: (1) discretionary spending caps that came into effect in FY2012
and (2) a $1.2 trillion automatic spending reduction process that was initially scheduled to come
into effect on January 2, 2013. Combined, these measures were projected to reduce the deficit by
roughly $2 trillion over the FY2012-FY2021 period. The American Taxpayer Relief Act (ATRA;
P.L. 112-240) reduced and postponed the start of the FY2013 spending reductions, commonly
known as the sequester, until March 1, 2013.
Congress has debated whether to maintain scheduled BCA spending cuts in future years. To
inform that debate, this report discusses the effects of the BCA on spending and the deficit,
assuming that the automatic spending reductions proceed as scheduled from FY2013 to FY2021
and the discretionary spending caps remain in place. The BCA spending cuts mainly apply to
discretionary spending, split almost evenly between defense and non-defense programs. Over 10
years, discretionary spending is cut by $1.6 trillion, whereas mandatory spending is cut by less
than $0.2 trillion, with most of the savings coming from Medicare because most mandatory
spending is exempt from the BCA’s spending cuts. Mandatory spending accounts for 65% of
spending in FY2013, but receives 20% of the sequester cuts.
The BCA, as amended by ATRA, reduced FY2013 discretionary spending subject to the caps to
6.4% below FY2012 levels. In FY2013, real (inflation-adjusted) discretionary spending subject to
the BCA caps is lower than FY2005 levels. Discretionary spending in FY2014 falls 1.8% relative
to FY2013 levels as the automatic spending reduction process comes into full effect. After
FY2014, the discretionary caps would rise by about the rate of inflation in subsequent years. As a
result, discretionary spending subject to the caps does not return to its FY2011 level until FY2018
in nominal terms and will never return to FY2011 levels in real terms through FY2021.
The effects of the BCA on overall discretionary spending will depend on what levels of spending
Congress chooses for categories of discretionary spending not subject to the caps, namely
overseas contingency operations (OCO), disaster spending, and emergency spending. No
emergency spending was enacted in FY2012, but $42 billion was enacted in FY2013. From
FY2011 to FY2013, total discretionary spending declined by an annual average of 5.1%, after
rising by an annual average of 5.6% from FY2001 to FY2010. Discretionary spending averaged
9.4% of GDP from FY1962 to FY2011. From FY2018 on, overall discretionary spending would
be below its lowest share of gross domestic product (GDP) since data were first collected in 1962
(6.1% of GDP), assuming current levels of OCO and disaster spending. Mandatory spending, by
contrast, is projected to continue to grow in nominal terms, real terms, and as a percentage of
GDP over the next 10 years. Because of the projected growth in mandatory spending, total federal
spending would rise to 22.4% of GDP in FY2021, above its post-World War II average.
Although the BCA reduced projected deficits, its savings has been more than netted out by other
subsequent legislation, namely ATRA, that has increased current law deficits since the BCA was
enacted. Altogether, legislative changes since March 2011 have increased the deficit by $1.8
trillion from FY2012 to FY2021. As a result, the federal debt is projected to continue to increase
relative to GDP in future years.
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The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit

Contents
Background on the Budget Control Act of 2011 .............................................................................. 1
Discretionary Spending Caps .................................................................................................... 2
Automatic Spending Reduction Process .................................................................................... 3
Effects of the BCA on Overall Spending Levels ............................................................................. 6
Discretionary Spending in FY2012 and FY2013 ...................................................................... 6
BCA Spending Cuts Relative to a Baseline Projection ............................................................. 7
Spending Trends: Historical and Projected Under the BCA ................................................... 10
Effects of the BCA on the Budget Deficit ..................................................................................... 16

Figures
Figure 1. Comparing the Composition of the FY2013 Budget to the FY2013 Sequester
Cuts ............................................................................................................................................... 5
Figure 2. Discretionary and Mandatory Outlays, FY1962-FY2021 .............................................. 15

Tables
Table 1. Discretionary Spending Caps Under the BCA ................................................................... 3
Table 2. Discretionary Budget Authority, FY2012-FY2013 ............................................................ 7
Table 3. Total Reductions in Budget Authority by Type from the Budget Control Act,
FY2012-FY2021 ........................................................................................................................... 9
Table 4. Discretionary Budget Authority Subject to BCA Caps Assuming “Trigger”
Comes Into Effect, 2011-2021 .................................................................................................... 12
Table 5. Average Annual Real Growth Rate of Discretionary Budget Authority, FY2001-
FY2021 ....................................................................................................................................... 14
Table 6. Legislative Changes Affecting the Current Law Baseline Deficit Since March
2011 ............................................................................................................................................ 17

Contacts
Author Contact Information........................................................................................................... 19
Acknowledgments ......................................................................................................................... 19

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The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit

ollowing a lengthy debate over raising the debt limit, the Budget Control Act of 2011
(BCA; P.L. 112-25) was signed into law by President Obama on August 2, 2011. In
F addition to including a mechanism to increase the debt limit,1 the BCA contained measures
intended to reduce the budget deficit through spending reductions. Combined, these measures
were projected to reduce the deficit by roughly $2 trillion over the FY2012-FY2021 period.2
The spending reductions in the BCA are achieved mainly through two mechanisms: (1) statutory
discretionary spending caps covering 10 years that came into effect in 2012 and (2) a $1.2 trillion
automatic spending reduction process (sometimes referred to as the “trigger”) covering nine years
that was initially scheduled to come into effect on January 2, 2013. The American Taxpayer
Relief Act (ATRA; P.L. 112-240) postponed the start of the FY2013 spending reductions,
commonly known as the sequester, until March 1, 2013, and canceled the first two months of
spending cuts. Some Members of Congress have proposed additional modifications to the
spending reduction process, including S. 16 in the 113th Congress that was considered
immediately prior to the implementation of the FY2013 sequester on March 1, 2013.3
This report discusses the effects of the BCA on spending and the deficit, assuming that the
automatic spending reductions proceed as scheduled from FY2013 to FY2021 and the
discretionary spending caps remain in place. Other CRS reports provide additional analysis of
the BCA.4
Background on the Budget Control Act of 2011
The BCA was enacted in response to congressional concern about unsustainable growth in the
federal debt and deficit. The federal budget has been in deficit (spending exceeding revenue)
since FY2002, but deficits became significantly larger in FY2009. That year, the deficit topped $1
trillion for the first time ever, and it remained above $1 trillion through FY2012 (it is expected to
be below $1 trillion in FY2013).5 The recent growth in deficits is the result of spending reaching
its highest level as a share of GDP since FY1945 and revenues reaching their lowest level as a

1 For information on the debt limit increases in the BCA, see CRS Report RL31967, The Debt Limit: History and
Recent Increases
, by D. Andrew Austin and Mindy R. Levit.
2 Unless otherwise noted, all budget data presented in this report are from Congressional Budget Office, The Budget
and Economic Outlook
, February 2013 (hereinafter referred to as “CBO baseline”) or Congressional Budget Office,
The Budget and Economic Outlook: Update, August 2012.
3 For legislation considered during the 112th Congress, see CRS Report R42675, The Budget Control Act of 2011:
Budgetary Effects of Proposals to Replace the FY2013 Sequester
, by Mindy R. Levit.
4 For an explanation of the BCA’s provisions and procedures, see CRS Report R41965, The Budget Control Act of
2011
, by Bill Heniff Jr., Elizabeth Rybicki, and Shannon M. Mahan. For information on exemptions from
sequestration, see CRS Report R42050, Budget “Sequestration” and Selected Program Exemptions and Special Rules,
coordinated by Karen Spar.
5 The budget deficit is the excess of outlays over revenues in a given year, broadly similar to the amount borrowed from
the public that year. The debt held by the public is the accumulation of all past borrowing from the public. The gross
debt is the sum of (1) debt held by the public and (2) the intragovernmental debt (the debt that one part of the federal
government owes to another part of the government, mainly through government trust funds). For background
information on the debt and deficit, see CRS Report WKS0001_Overview, Federal Debt and Deficit: Key Sources, by
Justin Murray.
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The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit

share of GDP since FY1950. These trends are largely due to the budgetary effects of the recent
recession and policies implemented in response to it, including increased outlays and tax cuts.6
The BCA reduces spending through two primary mechanisms, discretionary spending caps that
began in FY2012 and an automatic spending reduction process that began in FY2013.
Discretionary Spending Caps
The BCA placed statutory caps on most discretionary spending from FY2012 through FY2021.
The caps essentially limit the amount of spending through the annual appropriations process for
the next 10 years, with adjustments permitted for certain purposes. The limits could be adjusted to
accommodate (1) changes in concepts and definitions; (2) appropriations designated as
emergency requirements; (3) appropriations for Overseas Contingency Operations/Global War on
Terrorism (OCO; e.g., for military activities in Afghanistan); (4) appropriations for continuing
disability reviews and redeterminations; (5) appropriations for controlling health care fraud and
abuse; and (6) appropriations for disaster relief. The last five of the listed adjustments effectively
exempt those types of discretionary spending from the statutory caps, meaning that the caps do
not limit total discretionary spending. The BCA limits adjustments for spending on disability
reviews and controlling health care fraud abuse to relatively small amounts and limits
adjustments for disaster relief by a formula based on historical levels.7 By contrast, OCO and
emergency spending is not limited and is defined by Congress and the President.
Cap levels are enforced through a sequestration process (automatic spending cuts that are
automatically triggered if cap levels are breached).8 The adjustable caps are not placed on specific
accounts or even on each of the appropriations bills; instead, they are broad caps on the total
amount of discretionary spending. In FY2012 and FY2013, separate caps exist on security and
non-security spending. Security spending is defined by the BCA as discretionary appropriations
associated with agency budgets for the Departments of Defense, Homeland Security, Veterans
Affairs, the National Nuclear Security Administration, the intelligence community management
account, and all budget accounts in the budget function for international affairs (Function 150).
The largest amounts of spending in the non-security category are tied to the Departments of
Health and Human Services, Education, and Housing and Urban Development. For FY2014 to
FY2021, there are separate caps for defense (Function 050) and non-defense spending. Decisions
about how these caps will affect specific agencies or programs will be made by Congress and the
President through the regular appropriations process. Table 1 displays BCA discretionary cap
levels, before and after the automatic spending reductions discussed in the next section, as
amended by ATRA.

6 For an overview of causes of large deficits and policy options to reduce them, see CRS Report R41778, Reducing the
Budget Deficit: Policy Issues
, by Marc Labonte; and CRS Report R41134, The Impact of Major Legislation on Budget
Deficits: 2001 to 2010
, by Marc Labonte and Margot L. Crandall-Hollick. For an analysis of the FY2013 budget
debate, see CRS Report R42362, The Federal Budget: Issues for FY2013 and Beyond, by Mindy R. Levit.
7 The BCA allows annual disaster spending in amounts up to “the average funding provided for disaster relief over the
previous 10 years, excluding the highest and lowest years” plus the difference between disaster spending in the
preceding fiscal year and the applicable average funding level for that year. Disaster spending is defined in the BCA as
spending classified in specified budget accounts.
8 The sequestration process to enforce statutory spending levels is separate and distinct from the sequester that carries
out the “Automatic Spending Reduction Process” described in the next section.
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The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit

Table 1. Discretionary Spending Caps Under the BCA
(billions of $)

2014 2015 2016 2017 2018 2019 2020 2021
Original Cap Levels
Defense
552 566 577 590 603 616 630 644
Non-Defense
506 520 530 541 553 566 578 590
Total
1,058 1,086 1,107 1,131 1,156 1,182 1,208 1,234
Automating Spending Reductions
Defense
-55 -55 -55 -55 -55 -55 -55 -55
Non-Defense
-37 -37 -36 -36 -35 -34 -33 -32
Total
-92 -91 -91 -91 -90 -89 -88 -87
Revised Cap Levels
Defense
497 511 522 535 548 561 575 589
Non-Defense
469 483 494 505 518 532 545 558
Total
966 995 1,016 1,040 1,066 1,093 1,120 1,147
Source: Congressional Budget Office, The Budget and Economic Outlook, February 2013, Table 1-5.
Notes: See Table 2 for discretionary spending levels in 2012 and 2013. Totals may not sum due to rounding.
2014 totals have been adjusted based on modifications made in ATRA.
Automatic Spending Reduction Process
Title IV of the Budget Control Act established a Joint Select Committee on Deficit Reduction
(hereinafter Joint Committee), composed of an equal number of Senators and Representatives,
and instructed it to develop a proposal that would reduce the deficit by at least $1.5 trillion over
FY2012 to FY2021. To ensure deficit reduction occurred if a Joint Committee bill was not
enacted, Section 302 of the Budget Control Act of 2011 established an automatic process to
reduce spending. On November 21, 2011, the co-chairs of the Joint Committee announced that
they were unable to reach a deficit-reduction agreement before the committee’s deadline. As a
result, a $1.2 trillion automatic spending reduction process was triggered, scheduled to begin in
January 2013.
The subsequent enactment of ATRA postponed the start of the FY2013 spending reductions until
March 1, 2013. ATRA also reduced the FY2013 spending reductions implemented via this
process by $24 billion, to roughly $85 billion equally divided between defense and non-defense.
Several other minor modifications were also made to the process by which these spending cuts
would be calculated. Although ATRA reduced the total spending cuts achieved by the automatic
process, the cost of these provisions was offset by other spending reductions and revenue
increases. On the spending side, the BCA’s discretionary spending caps were reduced by $4
billion in FY2013 and $8 billion in FY2014, which offset roughly half of the cost.9

9 In addition, ATRA also contained a provision which raises revenue during the budget window by permitting certain
retirement accounts to be transferred to designated Roth accounts without distribution. For more information, see CRS
Report R42884, The “Fiscal Cliff” and the American Taxpayer Relief Act of 2012, coordinated by Mindy R. Levit;
CRS Report R42949, The American Taxpayer Relief Act of 2012: Modifications to the Budget Enforcement Procedures
(continued...)
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Of the $1.2 trillion in deficit reduction, the BCA specifies that 18% of the total ($216 billion) be
credited to debt service savings that would result from the spending reduction.10 Therefore, the
amount of the reduction in budget authority would equal the remaining 82% of the required
deficit reduction total. The amount of the automatic spending reduction under the BCA is spread
evenly over the nine years from FY2013 to FY2021 and split evenly between defense (defined as
budget function 050) and non-defense spending categories and applied proportionally to
discretionary and mandatory programs within each of these categories. The automatic spending
reduction would amount to a reduction in budget authority of $109.3 billion each year for nine
years, with $54.7 billion of the reduction to be applied to defense and $54.7 billion applied to
non-defense programs—subsequently reduced by ATRA to $42.7 billion each in FY2013.
Within the defense and non-defense categories, some programs are exempted from an automatic
spending reduction and the cuts to other programs are limited by statute.11 For example, an
automatic spending reduction to Medicare is limited to 2% of total program spending.12 Although
the annual amount of the total automatic spending reduction would not be revised in subsequent
years, the amount applied to any given budget account could be recalculated, if the relative size of
budget accounts changes or the exempt/nonexempt status of an account changes.
In FY2013, the automatic spending reduction is carried out through an across-the-board sequester
(cancellation) of previously authorized budgetary resources. After the first year (FY2013), the
automatic spending reduction is carried out through a sequester for mandatory spending and
through reductions in the overall discretionary caps, rather than a sequester, for discretionary
spending. The sequester is applied proportionately to all non-exempt accounts, while it is left to
future Congresses to determine how to apply the reductions to discretionary accounts within the
caps. For purposes of the automatic reductions, the BCA creates new discretionary cap levels for
defense (defined as budget category 050) and non-defense for the 10-year budget window. The
amount of the automatic reduction is then subtracted from the new defense/non-defense cap
levels. Cuts to discretionary programs as a result of the automatic spending reduction process
would be in addition to the cuts resulting from the BCA discretionary caps.
OMB estimated that the FY2013 sequester will reduce non-exempt defense discretionary
spending by 7.8% relative to the cap levels, non-defense discretionary spending by 5.0% relative
to the cap levels, Medicare by 2% relative to baseline levels (per the statutory limit), and other
mandatory spending by 5.1% relative to the baseline levels.13 To gauge how these reductions
compare with overall spending, Figure 1 compares the projected percentage of budgetary

(...continued)
in the Budget Control Act, by Bill Heniff Jr.
10 The actual amount of debt service savings will depend on future interest rates and the timing of the deficit reduction;
18% was set by the BCA. As described in CBO’s analysis of the net budgetary savings resulting from an automatic
$1.2 trillion reduction in the event a Joint Committee bill is not enacted, debt service savings amount to 16% of the
total between FY2013 and FY2021. See Congressional Budget Office, Estimated Impact of Automatic Budget
Enforcement Procedures Specified in the Budget Control Act
, September 12, 2011.
11 These exemptions and special sequester rules are found in 2 USC 905 and 2 USC 906, Section 255 and 256 of the
Balanced Budget and Emergency Deficit Control Act of 1985, as amended.
12 Some Medicare spending is exempt from automatic spending reductions, including Medicare Part D low-income and
catastrophic subsidies and qualified individual (QI) premiums. For more information see 2 USC 906(d)(7).
13 Office of Management and Budget, Report to the Congress on the Joint Committee Sequestration for FY2013, March
1, 2013.
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The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit

resources tied to each major programmatic area to the percentage of sequester cuts that that
spending category absorbs in FY2013.14
Figure 1. Comparing the Composition of the FY2013 Budget to the
FY2013 Sequester Cuts

Source: CRS calculations based on CBO and OMB data.
Notes: Mandatory spending is measured on a gross basis (i.e., offsetting receipts are not netted out). All data
are based on estimates.
Of total gross budgetary resources for FY2013, shown in the pie chart on the left side of Figure
1
, 53% are statutorily exempt from the sequester (47% mandatory, 2% non-defense discretionary,
and 4% defense discretionary). The other 47% of budgetary resources are subject to the sequester.
Overall, only $73 billion, or 2%, of budgetary resources in FY2013 are mandatory programs that
are subject to the full sequester, mostly falling into the non-defense category. The non-exempt
portion of Medicare, which accounts for 16% of total gross budgetary resources in FY2013, is
capped at a maximum reduction of 2% by the BCA. Non-exempt discretionary spending
composes 29% of total budgetary resources in FY2013 (16% in defense and 13% in non-defense).
The pie chart on the right side of Figure 1 shows the percentage share of the spending cuts in
FY2013 for each category under the sequester. Most exempt spending accounts are within the
mandatory category, so the automatic spending reductions would fall most heavily, in percentage
terms, on discretionary programs. In FY2013, discretionary spending is projected to account for
35% of budgetary resources, but receives 80% of the automatic spending reductions. Defense
discretionary spending is particularly affected because the defense spending category would

14 These calculations are based on estimates made before full-year appropriations for FY2013 had been enacted.
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receive 50% of all automatic cuts but accounts for 20% of total gross budgetary resources. By
contrast, mandatory programs account for 65% of budgetary resources in FY2013, but would bear
20% of the spending reduction (13% on Medicare and 7% on other mandatory programs).
The automatic spending reduction process is not meant to ensure that a specific deficit or
spending level is realized in the future or that deficit saving accomplished by the automatic
spending reduction is not undone by future legislation. The amount of automatic spending
reduction does not change if future budget deficits turn out to be larger or smaller than projected
at the time the automatic spending reduction is determined. Future budget deficits could turn out
to be larger or smaller than projected because of subsequent legislative changes or because of
forecasting errors, which have historically been large.15
Effects of the BCA on Overall Spending Levels
This section evaluates the effect of the Budget Control Act’s discretionary caps and automatic
spending reduction process (as amended by ATRA) on spending. It analyzes the effects of the
BCA on spending in terms of its effects on outlays or budget authority, depending on the context.
The BCA sets new levels of budget authority, which eventually leads to changes in outlays. The
difference between budget authority and outlays is discussed in the following text box.
Outlays and Budget Authority
Outlays are disbursed federal funds. Budget authority is what federal agencies are legally permitted to spend, and it is
granted by Congress through appropriation acts in the case of discretionary spending or through other acts in the
case of mandatory spending. Budget authority gives federal officials the ability to spend. Until the federal government
disburses funds to make payments, no outlays occur. Therefore, there is generally a lag between when Congress
grants budget authority and outlays occur.
Discretionary Spending in FY2012 and FY2013
To date, appropriations for two fiscal years, 2012 and 2013, have been provided under the BCA
framework (as amended by ATRA). Table 2 illustrates how discretionary budget authority has
been provided within categories subject to the caps and categories that are not limited by the caps.
Discretionary budget authority subject to the caps has equaled $1,043 billion, the level provided
by the caps, in both years. Total discretionary budget authority has exceeded the caps in both
years because, as the BCA permitted, there has been discretionary BA provided ($138 billion in
2012 and $154 billion in 2013) in categories not subject to the caps. In 2013, a sequester was
applied to the adjusted cap level as a result of the BCA’s automatic spending cuts, reducing
discretionary BA by $68 billion, from $1,196 billion to $1,127 billion. Of the $68 billion of
spending reductions from sequestration, $59 billion reduces spending subject to the caps and

15 For more information on the accuracy of projections, see Congressional Budget Office, CBO’s Economic
Forecasting Record: 2010 Update
, July 2010, available at http://www.cbo.gov/ftpdocs/115xx/doc11553/
ForecastingAccuracy.pdf. CRS Report R41134, The Impact of Major Legislation on Budget Deficits: 2001 to 2010, by
Marc Labonte and Margot L. Crandall-Hollick also examines the reasons why the budget balance changed over time
between FY2001, when surpluses were projected by CBO throughout the decade, and FY2010, when the budget deficit
was large.
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$9 billion reduces OCO, emergency, and disaster spending.16 As a result, total discretionary BA
was $1,181 billion in 2012 and is $1,127 billion in 2013.
Table 2. Discretionary Budget Authority, FY2012-FY2013
(billions of $)


FY2012 FY2013
BCA Caps

1,043
1,043
+ Adjustments for:
OCO
127
99
+
Emergency
0
42

+ Disaster Relief
11
12

+ Program Integrity
*
*

= Total Adjustments
138
153
= Adjusted BCA
1,181
1,196
Caps
- Automatic Spending Reductions
n/a
68
= Total Discretionary BA
1,181
1,127
Source: Congressional Budget Office, Sequestration Update Report, Aug. 2012, Table 1; Congressional Budget
Office, Final Sequestration Report, March 2013, Table 1.
Notes: * = less than $1 billion. Numbers may not add due to rounding. Figures incorporate changes made by
ATRA. This table does not include additional discretionary spending that is offset by mandatory spending savings.
BCA Spending Cuts Relative to a Baseline Projection
For FY2012 to FY2021, discretionary and mandatory spending under the BCA as amended by
ATRA is projected to be reduced relative to baseline levels.17 Relative to a baseline using FY2011
appropriated levels adjusted for inflation,18 CBO projects that the combination of the BCA’s caps
and automatic spending reduction process would reduce discretionary outlays by $95 billion in
FY2013 and $1,605 billion over 10 years, as shown in Table 3.19 Although a defense/non-defense
breakdown is not available for 2013, the dollar amount of reductions to defense discretionary
spending are modestly larger than the reductions to non-defense discretionary spending from
2014 to 2021 because of the formula used in the BCA to determine the allocation of the automatic
spending reductions.

16 Congressional Budget Office, Letter to Honorable Paul Ryan, March 4, 2013, Table 1.
17 The baseline concept is explained in the following text box. For more information on how the spending cuts are
determined, see CRS Report R42013, The Budget Control Act of 2011: How Do the Discretionary Caps and Automatic
Spending Cuts Affect the Budget and the Economy?
, by Marc Labonte and Mindy R. Levit. All of the reductions in
spending discussed here would also lead to reductions in net interest because the federal debt would be lower than in
the baseline. The effects on net interest are discussed in the section entitled “Effects of the BCA on the Budget Deficit.”
18 This baseline is used because it was the official CBO baseline for discretionary spending until the enactment of the
BCA. The amount of savings garnered by the Budget Control Act depends on the baseline to which it is being
compared. For example, if it were being compared with a baseline based on 2010 levels of discretionary spending, the
savings would be higher than if it were compared with 2011 levels. The spending cuts would also be larger if compared
with a baseline where discretionary spending was held constant relative to GDP.
19 Douglas W. Elmendorf, Director, Congressional Budget Office, “Overview: Discretionary Outlays, Security and
Non-Security,” testimony before U.S. Congress, Joint Committee on Deficit Reduction, October 26, 2011.
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What Is a Baseline?
Baselines provide a benchmark for comparing how proposed budget policy changes would affect existing policies.
Notably, a baseline al ows the effect of a policy change to be compared with a benchmark of spending, revenue,
or the deficit in the year that the change occurs, as opposed to comparing the change to, say, spending levels in
prior years. The measured savings or costs from policy changes wil depend on how the baseline is constructed.
Conventional scoring procedures would measure a legislative proposal relative to CBO’s official baseline, which
is a current law baseline. In the current law baseline, CBO assumes that certain policies—notably, tax
provisions—set to expire under current law will do so as scheduled.
However, changes in policy can also be measured relative to other proposals and baselines. For example, a
baseline could assume that certain current policies will be extended; this is sometimes referred to as a current
policy
baseline.
Whether the BCA leads to lower overall discretionary spending than it intended depends on the
level of spending outside the caps and which baseline spending level is used for comparison.
Spending on disaster relief in 2012 and 2013 was at levels permitted by the BCA and spending on
OCO was below 2011 levels. Thus, it could be argued that these categories outside the caps were
not used to offset cuts to discretionary spending subject to the caps. By contrast, emergency
spending in 2013, enacted in the Disaster Relief Appropriations Act of 2013 (the “Superstorm
Sandy” supplemental; P.L. 113-2), can be viewed as allowing overall discretionary spending to be
$42 billion higher in 2013 than it otherwise would have been. Stated differently, instead of
offsetting the supplemental by reducing other discretionary spending under the cap, the
supplemental was designated by Congress as emergency to provide spending in addition to the
cap amount, in effect through deficit financing. For 2013, the $42 billion in enacted emergency
spending is netted out of the reductions in discretionary spending in Table 3; if emergency
spending is not netted out, discretionary reductions are $137 billion (the $95 billion reduction
plus $42 billion in emergency spending) that year.
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Table 3. Total Reductions in Budget Authority by Type from the Budget Control Act, FY2012-FY2021
(billions of $; + increase in spending/- decrease in spending)
FY2012-
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017 FY2018 FY2019 FY2020 FY2021 FY2021
Discretionary
-30 -95 -170 -167 -174 -180 -186 -193 -201 -209 -1,605
Defense

-8 n/a -89 -88 -92 -95 -98 -103
-107
-111 n/a
Non-Defense

-22 n/a -81 -79 -82 -85 -88 -90 -94 -98 n/a












Mandatory
+3 -11 -15 -20 -21 -21 -22 -23 -24 -26 -182
Student
Loans
+3 +6 +3 -2 -2 -2 -2 -2 -2 -3 -5
Automatic
Process n/a -17 -18 -18 -19 -19 -20 -21 -22 -23 -177
- Medicare
n/a -11 -9 -9 -10 -11 -12 -12 -13 -14 -101
- Other Mandatory
n/a -6 -9 -9 -9 -8 -8 -9 -8 -9 -75












Memorandum:











Total Cuts by Round
Discretionary Caps/
-27 -21 -75 -77 -85 -91 -98 -106 -115 -125 -822
Student
Loans/Emergency
Spending
Automatic
Process n/a -85 -109 -109 -109 -109 -109 -109 -109 -109 -957
Source: CRS calculations based on Congressional Budget Office, Budget and Economic Outlook: Fiscal Years 2012 to 2022, January 2013; Office of Management and Budget,
Report to Congress on the Joint Committee Sequestration for Fiscal Year 2013, March 1, 2013; Congressional Budget Office, Testimony Before the Joint Select Committee on Deficit
Reduction
, U.S. Congress, October 26, 2011, Tables B-1 and B-2; Congressional Budget Office, Letter to Honorable Paul Ryan, Mar. 4, 2013, Table 1.
Notes: The table incorporates changes made to the BCA by the American Taxpayer Relief Act (P.L. 112-240). To date, a defense/non-defense breakdown is not available
for 2013. The reductions in discretionary spending illustrated in this table are the combined effects of the statutory limits on discretionary spending (i.e., discretionary caps)
and the automatic spending reduction process (those two sources of spending cuts are broken out in the memorandum). The savings from the cuts to discretionary
spending are measured relative to discretionary funding levels for 2011, adjusted for inflation. The reductions in mandatory spending are a result of the BCA’s student loan
provisions and automatic spending reduction process; the latter did not begin until 2013. The table reduces discretionary spending cuts by $42 billion in 2013 to account for
spending classified as emergency as a result of the Disaster Relief Appropriations Act (P.L. 113-2); for other years, emergency spending is assumed to be zero. The
allocation of the cuts between discretionary and mandatory are based on current projections and could change over time based on actual spending levels. Totals may not
sum due to rounding.
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The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit

As seen in Table 3, mandatory spending is projected to be cut by $11 billion in FY2013 and $182
billion over the FY2013-FY2021 period under the automatic spending reduction process. Most of
the mandatory spending cuts in dollar terms are to Medicare. The amount of the cuts to
mandatory spending is lower than those to discretionary spending because much of mandatory
spending is exempt from the BCA’s automatic cuts and mandatory spending is not subject to caps
similar to those implemented for discretionary spending. Separate from the automatic process, the
BCA also cuts mandatory spending on student loan programs by $5 billion over 10 years.20
The automatic spending cuts, which do not begin until 2013, would reduce total spending by $85
billion in 2013 and $957 billion over nine years under current law. The combination of the
original BCA discretionary caps, student loan provisions, and emergency spending enacted to
date would reduce spending by $822 billion over 10 years, of which only $5 billion are reductions
to mandatory spending.
Spending Trends: Historical and Projected Under the BCA
To understand how the BCA affects spending over time, this section compares the levels and
percentage changes in spending under the BCA to historical data. Spending levels over time can
be compared using a number of different measures, however (see the text box below).
Measuring Spending Over Time
There are three main ways to measure changes in spending over time. Often, actual (nominal) dollar levels are used
because that measure is most familiar. Over short periods of time when inflation is low, this measure can be useful; it
has a number of drawbacks when making comparisons over long periods, however. The purpose of a comparison is
to gauge the relative impact of spending over time, thereby making real or inflation-adjusted figures a more
appropriate comparison. Real figures, which adjust for the increase in prices, account for the decline in the purchasing
power of $1 over time. For example, based on the consumer price index, $1 in 1944 could buy the same amount of
goods and services as $12.75 in 2011. To buy a constant amount of goods and services over that period, the federal
budget would have to increase by more than a factor of 12. Further, the relative impact of spending on households
and the economy is eroded over time by economic growth, which provides households more income to spend on
public and private goods. For example, at the height of World War II (1944), total federal spending was about $91
billion, compared with $3.5 trillion in 2012. But as a percentage of GDP, total federal spending was 44% of GDP in
1944, compared with 23% of GDP in 2012. This report compares spending levels using all three measures—nominal,
real (inflation-adjusted), and as a percentage of GDP.
To date, recent policies to reduce the deficit have primarily focused on reducing discretionary
spending (spending that is provided and controlled through the appropriations process). This
trend pre-dates the BCA. In terms of budget authority, overall discretionary spending declined
from $1.264 trillion in FY2010 to $1.221 trillion in FY2011 and to $1.198 trillion in FY2012.21
These declines are in terms of nominal dollars; the decline would be larger if the figures were
adjusted for inflation. In 2011, the decline was mostly the result of a reduction in non-defense

20 Congressional Budget Office, Budget and Economic Outlook, January 2012, p. 13.
21 Budget authority reported in Table 2 comes from CBO’s Sequestration Report, which measures discretionary
spending differently from the definition used to calculate budgetary aggregates. In the context of this section, data from
budgetary aggregates are more appropriate. Discretionary outlays declined from $1.347 trillion in 2010 and $1.346
trillion in 2011 to $1.285 trillion in 2012. Office of Management and Budget, Budget for FY2013, Historical Tables,
Tables 5.6 and 8.1; Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2012 to 2022,
Table 3-5.
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discretionary spending, and in 2012 the decline was mostly caused by a reduction in spending on
overseas contingency operations (OCO).
Table 4 shows the projected levels of discretionary budget authority and annual percentage
changes, in real and nominal terms, subject to the BCA caps under the automatic spending
reduction process (“trigger”). The levels in the table exclude funding for categories of spending
(such as OCO, emergency, and disaster) for which cap adjustments are permitted.22 Because those
categories of spending are effectively exempt from the caps, it is possible that the trend of growth
in overall discretionary spending (spending subject to the cap plus exempt spending) could turn
out to be higher than growth in discretionary spending subject to the BCA caps in future years,
even if there is strict compliance with the caps. Alternatively, future Congresses could decide to
appropriate an overall level of discretionary spending below the BCA caps, in which case the
growth in actual spending would be lower than the growth in the caps.

22 See Table 2 for levels of discretionary spending in exempt categories in FY2012 and FY2013.
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Table 4. Discretionary Budget Authority Subject to BCA Caps Assuming “Trigger” Comes Into Effect, 2011-2021
(billions of $; percentage change from prior year)

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021
Nominal
Defense
552 554 n/a 497 511 522 535 548 561 575 589
%
Change
-0.3% 0.4% n/a n/a 2.0% 2.2% 2.5% 2.4% 2.4% 2.5% 2.4%
Non-Defense 508 506 n/a 477 483 493 505 517 531 545 557
%
Change
-6.0% -0.3% n/a n/a 2.2% 2.2% 2.3% 2.5% 2.7% 2.5% 2.3%
Total
1,059 1,060 992 974 994 1,016 1,040 1,066 1,093 1,120 1,146
%
Change -3.1% 0.1% -6.4% -1.8% 2.1% 2.2% 2.4% 2.5% 2.5% 2.5% 2.4%
Real (Inflation-Adjusted)
Defense
489 482 n/a 419 423 423 425 426 428 429 431
%
Change
-2.3% -1.4% n/a n/a 0.0% 0.1% 0.4% 0.3% 0.3% 0.4% 0.4%
Non-Defense 450 441 n/a 402 399 400 401 402 405 407 407
%
Change
-7.8% -2.1% n/a n/a 0.3% 0.2% 0.2% 0.4% 0.6% 0.5% 0.2%
Total
939 923 843 821 822 823 826 828 832 836 838
%
Change -5.0% -1.7% -7.9% -3.4% 0.2% 0.1% 0.3% 0.3% 0.5% 0.4% 0.3%
Source: CRS calculations based on Office of Management and Budget, Budget for Fiscal Year 2013, Historical Tables, Table 5.6 and 10.1; OMB Report on Disaster Relief Funding
to the Committees on Appropriations and the Budget of the U.S. House of Representatives and the Senate
, September 1, 2011, Table 1; Congressional Budget Office, Budget and
Economic Outlook: Fiscal Years 2012 to 2022
, various dates.
Notes: The table incorporates changes made to the BCA by the American Taxpayer Relief Act (P.L. 112-240). The reductions in discretionary spending illustrated in this
table are the combined effects of the statutory limits on discretionary spending (i.e., discretionary caps) and the automatic spending reduction process. Totals may not sum
due to rounding. For FY2011, numbers are actual discretionary BA less disaster spending and OCO. For FY2012 to FY2021, numbers are BCA cap levels, and do not
include adjustments to the caps al owed under BCA for categories of spending not subject to the caps (disaster spending, OCO, and emergency spending). For 2012 and
2013, an estimate of additional discretionary spending offset by mandatory savings is added to the cap levels. Real figures are adjusted by the GDP price index using 2005
dollars. CBO categorizes data according to definitions that are different from those used in the BCA; therefore, totals in this table differ slightly from totals prescribed in
the BCA. To date, a defense/non-defense breakdown is not available for 2013.

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In both nominal and real terms, the largest year-over-year percentage declines in spending over
the FY2011 to FY2021 period are projected to take place in FY2013, largely as a result of the
commencement of the BCA’s automatic spending reductions. That year, discretionary budget
authority subject to the caps falls by 6.4% in nominal terms and 7.9% in real terms compared
with FY2012 levels.23 As can be seen in Table 4, the cut that year is significantly larger than the
cuts that occurred in FY2011. If spending exempt from the caps is included, overall discretionary
spending in FY2013 falls by 4.8% because total spending in categories exempt from the caps
decline by a smaller percentage.
Although there are no long-term historical data on spending subject to the caps available for
direct comparison, since FY1977, overall discretionary budget authority fell in only eight other
years in nominal terms, by less than 5% in each of those years except FY2010.24 FY1992-FY1996
was the only period in which it fell more than one year in a row. Unless offset by growth in
exempt categories, the FY2013 decline would be larger than in any other year except FY2010.25
The decline in spending subject to the caps in FY2013 follows a nominal decline in FY2011 and a
nominal increase in FY2012 that was less than the rate of inflation (resulting in a decline in real
terms).26 In FY2013, real discretionary spending subject to the BCA caps would be at its lowest
levels since FY2004.
In FY2014, spending falls again in nominal and real terms, largely because ATRA reduced the
automatic spending cuts for FY2013 only, so that those cuts take their full effect beginning in
FY2014 under current law. From FY2015 to FY2021, discretionary spending subject to the caps
increases annually at a rate that is slightly higher than the projected rate of inflation. Since the
BCA caps nominal spending, whether real spending increases or decreases from FY2014 to
FY2021 will be highly sensitive to the inflation rate. For example, if inflation turns out to be
slightly higher than projected, spending would decline in real terms from FY2014 to FY2021
instead of the increase shown in Table 4.
As a result of the BCA, spending subject to the caps does not return to its FY2011 level until
FY2018 in nominal terms and will not return to FY2011 levels in real terms at any point in the
10-year budget window. Defense and non-defense discretionary spending subject to the caps will
also not return to FY2011 levels in real terms during the budget window. Because the population
is growing over the next 10 years, real or nominal declines would be greater on a per capita basis
than the overall rates shown in Table 4.
To compare projections of discretionary spending under the BCA to historical trends, adjustments
need to be made for types of discretionary spending not subject to the BCA caps, such as
emergency spending, disaster spending, and OCO. Table 5 makes this adjustment by excluding

23 The percentage decline in overall discretionary budget authority will depend on the change in budget authority for
exempt categories, such as OCO, disaster, and emergency spending. The percentage reduction in 2013 budget authority
will be spread over future years; outlays in 2013 subject to the caps are projected to decline by 7.1%.
24 From 1977 to 2011, overall discretionary outlays only fell in two years in nominal terms, however.
25 The FY2010 spending declines largely reflect the previous year increase in discretionary BA caused by the American
Reinvestment and Recovery Act (ARRA), popularly referred to as the “stimulus act.” Non-defense budget authority
was $1.2 trillion in 2008, $1.5 trillion in 2009, and $1.3 trillion in 2010.
26 As noted above, overall discretionary budget authority fell in 2012, but mainly because of a decline in OCO
spending, which is not subject to the caps.
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funding for OCO and disaster spending for FY2001 to FY2011. Emergency spending was not
removed from spending totals.
Table 5 compares growth in discretionary spending (adjusted to remove OCO and disaster
spending) in the past decade to the next decade, during which spending is projected to decline. In
real (inflation-adjusted) terms, discretionary spending subject to the caps grew at an annual rate
of 4.1% for the FY2001-FY2010 period, with the growth fairly evenly split between defense and
non-defense discretionary. For the FY2011-FY2021 period, cuts to discretionary spending prior to
the BCA combined with the BCA caps and trigger cause spending to decline by an average of
1.4% annually, with the decline fairly evenly split between defense and non-defense discretionary
spending.27 The difference between the first and third columns of Table 5 demonstrates the
potential for overall discretionary spending growth to exceed the growth rate desired under the
caps. In the 2001-2010 period, spending primarily related to Hurricane Katrina and operations in
Iraq and Afghanistan caused OCO and disaster spending growth to exceed the growth rate of
other discretionary spending.28 From 2011 to 2013, the trend has reversed, with total real
discretionary spending declining by an annual average of 5.1%. Discretionary spending subject to
the caps and outside of the caps (mainly OCO) both declined.
Table 5. Average Annual Real Growth Rate of Discretionary Budget Authority,
FY2001-FY2021
(percentage change, adjusted for inflation)

Overall
Subject to Caps
2001-2010
2011-2013
2001-2010
2011-2021

(actual)
(actual)
(actual)
(projected)
Defense 6.6%
n/a
3.9%
-1.3%
Non-Defense 4.5%
n/a
4.3%
-1.5%
Total
5.6% -5.1% 4.1% -1.4%
Source: CRS calculations based on CBO and OMB data.
Notes: The projections of discretionary spending illustrated in this table assume that the statutory limits on
discretionary spending (i.e., discretionary caps) and the automatic spending reduction process come into effect as
scheduled. For historical data, numbers subject to caps are total discretionary BA less disaster spending and
OCO. Data adjusted for inflation using GDP price deflator.
Figure 2 shows levels of total discretionary and mandatory spending as a percentage of GDP
between FY1962 and FY2021. The levels between FY2012 and FY2021 are projected and
assume that the discretionary caps and automatic spending cuts go into effect as scheduled under
current law. As noted above, to compare historical data to projections, adjustments must be made
for categories of discretionary spending exempt from the BCA caps. In the figure, two CBO
scenarios are illustrated. The first assumes that OCO budget authority is maintained at current
levels (adjusted for inflation); the second scenario assumes a drawdown in troop levels in
Afghanistan and other countries from 115,000 in FY2012 to 45,000 by FY2015. Under the latter

27 Although defense discretionary spending receives a larger dollar reduction than non-defense discretionary under the
BCA’s automatic process, non-defense discretionary falls more in percentage terms over the 2011-2021 period because
it declines more in 2011 and because defense is larger than non-defense discretionary in dollar terms.
28 From 2001 to 2010, OCO BA averaged $111 billion and disaster BA averaged $13 billion.
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scenario, OCO spending would be less than 0.5% of GDP lower in FY2021 relative to what it
would be under baseline levels. Both projections set emergency budget authority at zero and
disaster spending at levels permitted under the BCA. 29
Figure 2. Discretionary and Mandatory Outlays, FY1962-FY2021
(Outlays as a percentage of GDP)

Source: Office of Management and Budget, Budget for FY2013, Historical Tables, Table 8.4; Congressional Budget
Office, The Budget and Economic Outlook: Fiscal Years 2013 to 2023, February 2013, Tables 1-1, 1-7, and F-3; CRS
calculations.
Notes: The projection of discretionary spending illustrated in this table assumes that the statutory limits on
discretionary spending (i.e., discretionary caps) and the automatic spending reduction process come into effect as
scheduled. Federal spending data are categorized as discretionary and mandatory only back to FY1962.
Discretionary spending over the FY1962-FY2011 period averaged 9.4% of GDP.30 As Figure 2
shows, it rose relative to GDP from 2001 to 2011, but remained below the levels prevalent from
FY1962 to FY1987.31 In 2018, discretionary spending under the baseline would reach its lowest
share of GDP since data were first available, at 6.0% of GDP, and would continue to decline
thereafter. By FY2021, discretionary spending is projected to reach 5.7% of GDP or nearly 4
percentage points below the historical average. Under the alternative scenario, where OCO
spending is lower, discretionary spending would reach its lowest share of GDP in this time frame
in FY2017, and it is projected to decline to 5.3% by FY2021. CBO’s baseline projection assumes
that defense discretionary spending will reach its lowest share of GDP in this time frame by

29 For earlier years, data were not available to remove OCO and disaster spending from discretionary totals, as was
done in Table 5.
30 Federal spending data are categorized as discretionary and mandatory only back to FY1962.
31 Defense discretionary spending rose throughout the 2001-2011 period as a percentage of GDP. Non-defense
discretionary spending showed no upward trend until 2009.
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FY2020 and non-defense discretionary spending will reach its lowest share of GDP in this time
frame by FY2017.
What historical precedent is there for a sustained decline in discretionary spending as a share of
GDP? There were two periods of sustained decline in discretionary spending as a percentage of
GDP since 1962, occurring in FY1969-FY1974 and FY1987-FY2000, respectively. In both cases,
the decline was driven mainly by a decline in defense spending as a percentage of GDP, in the
former case because of a wind-down of operations in Vietnam and in the latter case by the “peace
dividend” associated with the end of the Cold War. Non-defense discretionary spending fell as a
percentage of GDP only in the second half of the latter period. In both cases, the decline in
spending began from a higher starting point than today.
Mandatory spending under the BCA, by contrast, is projected to continue to grow in nominal
terms, real terms, and relative to GDP over the next 10 years. For example, it is projected to
increase from $2.0 trillion (13.1% of GDP) in FY2012 to $3.3 trillion (14.1% of GDP) in
FY2021. This growth is primarily due to the projection that elderly entitlement spending (notably,
Social Security and Medicare) will grow more quickly than GDP over the next 10 years. The
BCA has a minimal effect on this trend—it reduces mandatory spending under the automatic
spending reduction process by one-tenth of 1% of GDP annually. Social Security is exempt from
the BCA’s automatic process, and most Medicare payments are reduced by no more than 2%
relative to baseline levels. As can be seen in Figure 2, since FY2009, mandatory spending has
been higher than it was previously in this time frame, and it remains higher throughout the
projection. The cuts to Medicare under the BCA relative to current policy are not projected to
prevent Medicare spending from growing in real terms and relative to GDP over the 10-year
budget window.
Total spending is composed of discretionary spending, mandatory spending, and net interest on
the federal debt. From FY2019 to FY2021, the growth in mandatory spending and net interest is
greater than the decline in discretionary spending, resulting in a projected rise in total spending as
a percentage of GDP. In FY2021, total spending is projected to equal 22.4% of GDP.32 This is
well above the historical average; from FY1947 to FY2011, total outlays averaged 19.7%. Total
outlays have been below 22% of GDP for most of the post-World War II period, from FY1947 to
FY1980, FY1987 to FY1990, and FY1993 to FY2008.
Effects of the BCA on the Budget Deficit
As discussed earlier, the BCA is set to reduce the deficit by roughly $2 trillion between FY2012
and FY2021 if the provisions contained in the law are not subsequently modified. These figures
include both the direct effect of lower spending on deficits, and the interest savings stemming
from the lower deficits resulting from lower spending. However, since the law has been enacted,
various legislative provisions have resulted in increases in the deficit, relative to current law,
which “offset” the deficit reduction enacted in the BCA. Table 6 below illustrates the changes to
the current law baseline as a result of legislation enacted since March 2011 (the last baseline
produced before the enactment of the BCA).

32 OCO spending is about 1% of GDP in this projection. If OCO spending were zero, spending in 2021 would still
exceed the historical average.
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Table 6. Legislative Changes Affecting the Current Law Baseline Deficit Since March 2011
(billions of $)
Effect on Deficit (Increase
FY2012-
(+)/Decrease (-))
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2021
Budget Control Act











Discretionary Spending Caps and
-22 -41 -56 -69 -76 -83 -91 -99 -106 -115 -758
Other Provisions
Automatic
Spending
Reductions
0 -66 -93 -101 -104 -106 -106 -105 -105 -105 -891
Net Interest Savings from the BCA
*
-1
-3
-7
-15
-25
-37
-50
-62
-76
-276
Non-BCA
Spending
Changes

48 49 -2 -25 -24 -19 -15 -33 -34 -39 -91
Revenue
Changes

89 313 340 269 266 338 370 401 427 466 3,279
Other Net Interest
a 2 7 9 21 41 69 90 112 140 491
Total Increase in the Deficit as a
137 364 345 253 263 360 424 458 505 567 3,679
Result of Legislative Action Since
August 2011 Excluding the BCA
Total Increase in the Deficit as a
115 256 193 76 68 146 190 204 232 271 1,754
Result of Legislative Action Since
August 2011 Including the BCA
Source: CRS calculations based on CBO data from The Budget and Economic Outlook: An Update, August 2011, Table A-1; The Budget and Economic Outlook: Fiscal
Years 2012 to 2022, January 2012, Table A-1 and A-2; Updated Budget Projections: Fiscal Years 2012 to 2022, March 2012, Table 3; An Update to the Budget and
Economic Outlook: Fiscal Years 2012 to 2022, August 2012, Table A-1; and The Budget and Economic Outlook: Fiscal Years 2013 to 2023, February 2013, Table A-1.
Notes: Totals may not sum due to rounding. A portion of the non-BCA spending changes result from baseline rules that extrapolate discretionary funding from the
current year to future years. For example, supplemental funding levels enacted in FY2013 for Hurricane Sandy will be extended into future years until subsequent
appropriations are enacted to supplant current outyear baseline levels (e.g., FY2014 appropriations). Non-BCA spending reductions from FY2014 to FY2021 stem
primarily from a reduction in FY2012-FY2013 OCO levels relative to the baseline, extrapolated in future years.
a. Indicates a figure between -$500 million and $500 million.
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The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit

The legislation that increased the deficit the most relative to current law was ATRA. ATRA made
various changes to the tax code and several spending programs, including modification of the
provisions of the BCA as it related to the FY2013 sequester as discussed earlier.33 As a result of
ATRA, CBO projected the deficit would increase by more than $3 trillion between FY2013 and
FY2021. (The total increase in the deficit from the legislation was estimated at $4 trillion over the
FY2013-FY2022 period. 34 Compared with a current policy baseline that assumes expiring
provisions will be extended, however, ATRA reduced the deficit.)35 Other legislation had much
smaller effects on both spending and revenue levels.
Since March 2011, relative to CBO’s current law baseline, the cumulative effect of legislative
action on the budget deficit over the FY2012-FY2021 period (or the period during which the
provisions of the BCA are in place) is to increase the deficit by $1.754 trillion. If the deficit
reduction provisions of the BCA are not included, the legislative action during this period is set to
increase the budget deficit by $3.679 trillion.
As this discussion illustrates, individual policy changes cannot be taken in isolation. A goal of the
BCA was to match its deficit reduction provisions to the BCA’s multi-step increase in the debt
limit, although the savings is over a different timeframe than the debt limit increase and the
deficit reduction achieved in the BCA in isolation would not prevent the need for future debt limit
increases. In any case, matching deficit reduction with debt limit increases is an intermediate
goal, but not an ultimate goal of fiscal policy. Two other potential goals of deficit reduction could
be to balance the budget or place the deficit on a sustainable path. Under the CBO baseline,
neither of these goals is met.
Under the most recent CBO baseline, the budget deficit falls from 7.0% of GDP in FY2012 to
5.3% of GDP in FY2013 to a low of 2.4% of GDP in FY2015. After that, it begins to rise once
again, reaching 3.8% of GDP by FY2023. Over the same period, the debt held by the public is
projected to rise from 72.5% of GDP to 76.0% of GDP in FY2023, thought it actually falls in
certain years during this period.36 Beyond the 10-year budget window, projected budget deficits
become much larger relative to GDP, primarily due to the assumption that health care costs will
continue to grow faster than GDP.37 Economists believe that the budget will eventually need to be
placed on a sustainable path because debt cannot rise faster than income (GDP) indefinitely.38
Moreover, these deficit and debt projections assume that current law will remain in place. If
Congress and the President enact subsequent legislation to decrease revenue levels or increase
spending, these projections could change. Besides new initiatives, Congress and the President

33 In Table 6, changes made by ATRA to the BCA are included as part of the “Non-BCA Spending Changes” and
“Revenue Changes” categories.
34 CBO, Estimate of the Budget Effects of H.R. 8, the American Taxpayer Relief Act of 2012, as passed by the Senate on
January 1, 2013
, January 1, 2013.
35 See, for example, Office of Management and Budget, OMBlog, American Taxpayer Relief Act Reduces Deficits by
$737 Billion
, January 1, 2013, available at http://www.whitehouse.gov/blog/2013/01/01/american-taxpayer-relief-act-
reduces-deficits-737-billion.
36 CBO, The Budget and Economic Outlook: Fiscal Years 2013 to 2023, February 2013, Table 1-1.
37 For more information, see CRS Report RL32747, The Economic Implications of the Long-Term Federal Budget
Outlook
, by Marc Labonte.
38 For more information, see CRS Report R40770, The Sustainability of the Federal Budget Deficit: Market Confidence
and Economic Effects
, by Marc Labonte.
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have routinely increased the deficit by temporarily extending expiring provisions in recent years,
including preventing scheduled reductions in Medicare payment rates for physicians (“doc fix”)
and the extension of expiring tax provisions (“tax extenders”). If these two policies are extended,
CBO projects that the deficit will increase by nearly an additional $1 trillion over the FY2013-
FY2021 period, with additional deficit increases beyond FY2021.

Author Contact Information

Mindy R. Levit
Marc Labonte


Analyst in Public Finance
Coordinator of Division Research and
mlevit@crs.loc.gov, 7-7792
Specialist
mlabonte@crs.loc.gov, 7-0640

Acknowledgments
The authors wish to thank Amber Wilhelm for her assistance with the graphics in this report.

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