Sequestration: A Refresher

by Rebecca Farley on December 5, 2012

In August 2011, Congress passed the Budget Control Act. This legislation had four primary components:

  1. Raised the statutory debt ceiling. This is the limit on how much the U.S. Treasury is allowed to borrow.
  2. Imposed caps on annual discretionary spending over the next ten years.
  3. Created the Joint Select Committee on Deficit Reduction, also known as the Supercommittee. The bipartisan committee was tasked with identifying $1.2 trillion in deficit reduction, to be achieved through spending cuts or revenue increases.
  4. Scheduled automatic, across-the-board spending cuts to begin in 2013 should the Supercommittee fail to reach an agreement. These cuts are known in legal terms as “sequestration” and would be apportioned over the next ten years. Half of the cuts were to fall on defense and security spending, while the other half were to be spread across non-defense discretionary spending, or NDD. Medicaid, SSI, and food stamps were exempted from sequestration. However, most other social support programs that are funded annually by Congress would be at risk for deep cuts. Sequestration was included in the law as a mechanism to encourage the supercommittee to come to a compromise.

The 16 members of the Supercommittee began negotiations in the fall of 2011, but they were unable to reach an agreement. The committee’s announcement shortly before last Thanksgiving that they would not be able to present a deficit reduction plan to Congress triggered the sequestration process.

Almost no Members of Congress want to see sequestration go into effect. In fact, it is precisely because sequestration is so unpalatable to Congress that it was included as the “stick” in the Budget Control Act to encourage a compromise. Yet, efforts to dismantle sequestration earlier in the year became tangled in election year politics. Now that November 6 has passed, Congress is hard at work evaluating options for replacing sequestration with a more targeted approach.

Nonetheless, compromise remains elusive. The debate over sequestration is wrapped up in negotiations over several other major fiscal policies that demand Congress’ attention before the end of the year. Click here to read our analysis of what has been popularly dubbed the “fiscal cliff” and learn how it will affect behavioral health.


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