Budgetary Effects of the BCA as Amended: The “Parity Principle”

Budgetary Effects of the BCA as Amended: The “Parity Principle”

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Updated February 23, 2018
Budgetary Effects of the BCA as Amended: The “Parity
Principle”
Enactment of the Bipartisan Budget Act of 2018 (BBA
exceptions for activities related to Social Security and
2018; P.L. 115-123) has drawn attention to how recent
Medicare.
spending modifications affect certain portions of the
budget. Specifically, there has been considerable discussion
The CBO cost estimate for the budgetary effects of the
of the “parity principle,” which refers to the equality
automatic enforcement procedures is displayed in Table 1.
between changes made to defense and nondefense budget
The cost estimate reflects parity in the budget impact on
authority under the Budget Control Act (BCA; P.L. 112-25)
defense and nondefense activities across both discretionary
as amended. Though there is no statutory requirement to
and mandatory spending categories. The automatic
uphold the parity principle, different types of budget parity
enforcement procedures were estimated to reduce defense
have followed from the deficit reduction measures imposed
and nondefense budget authority each by $492 billion
by the BCA and subsequent amendments to its deficit
between FY2013 and FY2021. (A further $216 billion in
reduction measures. This In Focus summarizes how the
deficit reduction was to be obtained through reduced debt
parity principle has been applied and has evolved in recent
servicing costs.)
budgetary legislation. For more information on the BCA,
see CRS Report R44874, The Budget Control Act:
Table 1. Budgetary Effects of Automatic Enforcement
Frequently Asked Questions, by Grant A. Driessen and
Procedures in the BCA
Megan S. Lynch.
(FY2013-FY2021 budget authority, in billions of dollars)
The Parity Principle and the BCA

Discretionary
Mandatory
Total
The BCA was enacted in August 2011 in response to
increased deficits in the wake of the Great Recession. The
Defense
-492
0
-492
BCA as enacted implemented deficit reduction through
Nondefense
-322
-170
-492
both direct budgetary restrictions and by forming a
Congressional Joint Select Committee on Deficit Reduction
Total
-813
-171
-984
(or Joint Committee) tasked with providing additional
Source: Congressional Budget Office, Estimated Impact of
deficit reduction. Backup budgetary enforcement measures
Automatic Budget Enforcement Procedures Specified in the Budget
were installed and scheduled to take effect in the event that
Control Act, September 12, 2011.
the Joint Committee did not reach a timely agreement.
Notes: Table excludes budgetary effects of debt servicing costs.
Columns and rows may not sum due to rounding.
The primary method of direct deficit reduction imposed by
the BCA was the installation of caps on discretionary
The Parity Principle and Amendments to
spending from FY2012 through FY2021. The BCA also
the BCA
funded certain programs designed to reduce improper
There have been four major revisions to the deficit
benefit payments and modified certain student loan
reduction measures imposed by the BCA: (1) the American
programs. CBO estimated that these measures would reduce
Taxpayer Relief Act (ATRA; P.L. 112-240); (2) the
FY2012-FY2021 deficits by a combined $917 billion, with
Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67);
$756 billion of that reduction attributable to the
(3) the Bipartisan Budget Act of 2015 (BBA 2015; P.L.
discretionary spending caps, $156 billion due to reductions
114-74); and (4) the Bipartisan Budget Act of 2018 (BBA
in debt servicing costs from the combined direct reduction
2018; P.L. 115-123). (These laws included other budget
measures, and $5 billion in savings from other measures.
modifications unrelated to the deficit reduction measures
imposed by the BCA.)
The Joint Committee was tasked with reaching an
agreement on an additional $1.2 trillion to $1.5 trillion in
ATRA postponed the start of FY2013 discretionary and
deficit reduction over the FY2012-FY2021 period. Absent
mandatory spending reductions, increased the discretionary
an agreement by January 2012, or with an agreement on
defense and nondefense caps (allowing for greater
deficit reduction lower than $1.2 trillion, the BCA created
spending) in that year, and reduced caps in FY2014 and
“automatic enforcement measures” to ensure an additional
FY2015. BBA 2013 increased discretionary caps in
$1.2 trillion in deficit reduction was reached. These
FY2014 and FY2015 and extended the automatic
measures consisted of (1) lower caps on discretionary
reductions to mandatory spending through FY2023. BBA
budget authority, implemented through separate restrictions
2015 increased discretionary caps in FY2016 and FY2017
on defense and nondefense activities, from FY2013 through
and extended the automatic reductions to mandatory
FY2021; and (2) automatic reductions in mandatory
spending through FY2025. BBA 2018 increased
spending from FY2013 through FY2021, with large
discretionary caps in FY2018 and FY2019 and extended
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automatic reductions of mandatory spending through
Upward Adjustments to the BCA as
FY2027.
Amended
While the BCA imposed caps on most types of
CBO’s cost estimates for the budgetary effects of ATRA,
discretionary budget authority, it provided for upward
BBA 2013, and BBA 2015 on the BCA deficit reduction
adjustments to those caps, sometimes called spending
measures are provided in Table 2. In ATRA, the budgetary
“outside the caps,” for budget authority devoted to certain
effects of modifications to the BCA restrictions reflected
activities. Upward adjustments are provided for the
parity identical to that in the BCA itself, as effects on total
following appropriations: (1) designated for Overseas
defense and nondefense discretionary budget authority were
Contingency Operation/Global War on Terrorism
identical.
(OCO/GWOT); (2) designated for emergency requirements;
(3) designated for disaster relief; and (4) designated for
BBA 2013 and BBA 2015 produced budget authority
program integrity activities related to federal disability and
effects with a different type of parity. In those laws, only
health care programs.
the effects on defense and nondefense discretionary budget
authority were equal. Yet since those acts also included
The BCA did not set limits on annual amounts designated
extensions of mandatory spending reductions, which affect
for OCO/GWOT or for emergency requirements. The BCA
nondefense programs more than defense programs, in total
limited appropriations designated for disaster relief to the
the changes to the BCA from each law produced larger total
average of disaster funding from the previous ten years,
spending reductions for nondefense activities (mandatory
adjusted by the difference between the previous year’s
and discretionary) than for defense programs.
disaster appropriation and the ten-year average.
Appropriations for program integrity were capped annually
BBA 2018 reflected a different version of parity than
by the BCA at amounts rising from $0.893 billion in
previous agreements. BBA 2018 established discretionary
FY2012 to $1.805 billion in FY2021. The BCA also
caps with equal increases to defense and nondefense budget
allowed discretionary limits to be adjusted up to once a year
authority relative to the initial BCA caps: however, relative
to accommodate changes in concepts and definitions.
to the caps after the automatic downward reductions (which
were scheduled to take effect before BBA 2018 enactment),
Table 3 shows the budget authority provided for upward
the discretionary cap increases were larger for defense
adjustments to the discretionary caps established by the
programs than nondefense programs. As with BBA 2013
BCA from FY2012 through FY2017. Upward adjustments
and BBA 2015, BBA 2018 also included a mandatory
have predominantly been devoted to defense activities in
spending extension with larger reductions for nondefense
each of the five years that the BCA discretionary caps have
programs than defense programs.
been in place, with most of those funds designated for
OCO/GWOT. Budget authority for BCA upward
Table 2. Budgetary Effects of BCA Amendments to
adjustments has not reflected parity between defense and
Discretionary Caps and Mandatory Spending
nondefense activities in any year from FY2012 through
Reductions
FY2017.
(10-year budget authority, in billions of dollars)
Table 3. Upward Adjustments to BCA Discretionary
BBA
BBA
BBA
ATRA
Total
Caps, FY2012-FY2017

2013
2015
2018
(budget authority, in billions of dollars)
Discretionary
6.0
31.6
40.0
165.0
242.6

Defense
Nondefense
Total
Defense
FY2012
132.9
4.5
137.5
Discretionary
6.0
31.6
40.0
131.0
208.6
Nondefense
FY2013
117.5
35.1
152.6
Mandatory
0.0
-28.0
-25.8
-53.6
-107.4
FY2014
85.8
13.1
98.9
Total
12.0
35.2
54.2
242.4
343.8
FY2015
64.6
22.6
87.1
Source: CBO cost estimates for American Taxpayer Relief Act
FY2016
58.8
24.5
83.3
(ATRA), Bipartisan Budget Act of 2013 (BBA 2013), Bipartisan Budget
Act of 2015 (BBA 2015), and Bipartisan Budget Act of 2018 (BBA
FY2017 (est.)
82.9
35.0
118.0
2018.)
Total
542.6
134.8
677.4
Notes: Figures only reflect budgetary estimates of changes to
Source: CBO, Sequestration Update Report, Various Years.
discretionary caps and mandatory spending reductions imposed by
the BCA. Mandatory effects include reductions to both defense and
Notes: Columns and rows may not sum due to rounding.
nondefense spending, with a much larger effect on nondefense
activities. Each piece of legislation also contained provisions with

effects elsewhere in the federal budget.
Grant A. Driessen, Analyst in Public Finance
IF10657

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Budgetary Effects of the BCA as Amended: The “Parity Principle”

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