This report discusses the effects of the Budget Control Act on the U.S. economy, including discretionary spending caps projected to reduce the deficit by $917 billion over FY2012-FY2021.
The Budget Control Act of 2011 (BCA) was signed into law by President Obama on August 2, 2011 (P.L. 112-25). In addition to increasing the debt limit, the BCA contained a variety of measures intended to reduce the deficit by at least $2.1 trillion over the FY2012-FY2021 period, including statutory caps on discretionary spending and the establishment of a Joint Select Committee on Deficit Reduction to identify further budgetary savings of at least $1.2 trillion over 10 years.
The BCA discretionary spending caps are projected to result in $917 billion in deficit reduction over the FY2012-FY2021 period. Several adjustments to the caps are permitted, including for spending on Overseas Contingency Operations and emergencies. The precise programmatic impact of these reductions in discretionary spending will be determined in the annual appropriations process. Under the Congressional Budget Office's (CBO's) August 2011 baseline, which incorporates the effects of the BCA, the discretionary spending caps result in a decline in spending in nominal dollar terms. Discretionary spending has fallen in nominal terms only three times since FY1962, most recently in FY1996. Discretionary spending under the caps is projected to decline from 9.0% of GDP in FY2011 to 6.2% of gross domestic product (GDP) in FY2021. Since FY1962, the first year for which data are available, discretionary spending has only been that low in one other year (FY1999).