More than any other economic danger looming on America's immediate horizon, including a possible break-up of the eurozone, sequestration poses the greatest single threat to American recovery in the near term. This arcane process came into force when the congressionally-mandated "super-committee, "officially known as the Joint Committee on Deficit Reduction, failed in its mission. As a result, the sequester calls for reductions in government spending totaling $1.2 trillion over the next nine years, of which $984 billion, or $109 billion annually, will be realized from across-the-board budget reductions. The disaster that is sequestration
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USA-GLOBE (MPA) - One year ago, August 2, 2012, President Barack Obama signed the Budget Control Act of 2011. This law 2011 (Pub.L. 112-25, S. 365) is a federal statute in the United States. The Act brought conclusion to the 2011 United States debt-ceiling crisis, which had threatened to lead the United States into sovereign default on or about August 3, 2011.
The law involves the introduction of several complex mechanisms, such as creation of the Congressional Joint Select Committee on Deficit Reduction (sometimes called the "super committee") and options for a balanced budget amendment.
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Debt limit:
- The debt limit was increased by $400 billion immediately.[2]
- The President could request a further increase of $500 billion, which is subject to a congressional motion of disapproval which the President may veto, in which case a two-thirds majority in Congress would be needed to override the veto.[3] This has been called the 'McConnell mechanism' after the Senate Minority Leader Mitch McConnell, who first suggested it as part of another scheme.[4]
- The President could request a final increase of $1.2–1.5 trillion, subject to the same disapproval procedure. The exact amount depends on the amount of cuts in the "super committee" plan if it passes Congress, and whether a Balanced budget amendment has been passed.[3]
- Spending was reduced more than the increase in the debt limit. No tax increases or other forms of increases in revenue above current law were included in the bill.[5]
- The bill directly specified $917 billion of cuts over 10 years in exchange the initial debt limit increase of $900 billion.[5] This is the first installment ("tranche") of cuts. $21 billion of this will be applied in the FY2012 budget.[4]
- Additionally, the agreement established the Joint Select Committee on Deficit Reduction, sometimes called the "super committee",[1] to produce deficit reduction legislation by November 23, 2011, that would be immune from amendments or filibuster (similar to the Base Realignment and Closure).[4][6] The goal of the legislation was to cut at least $1.5 trillion over the coming 10 years and be passed by December 23, 2011.[6] Projected revenue from the committee's legislation could not exceed the revenue budgeting baseline produced by current law. (Current law has the Bush tax cuts expiring at the end of 2012.) The committee would have 12 members, 6 from each party.[5]
- The agreement specified an incentive for Congress to act. If Congress would fail to produce a deficit reduction bill with at least $1.2 trillion in cuts, then Congress could grant a $1.2 trillion increase in the debt ceiling but this would trigger across-the-board cuts ("sequestration") of spending equally split between security and non-security programs.[4][3] The across-the-board cuts would apply to mandatory and discretionary spending in the years 2013 to 2021 and be in an amount equal to the difference between $1.2 trillion and the amount of deficit reduction enacted from the joint committee. The sequestration mechanism is the same as the Balanced Budget Act of 1997. There are exemptions—across the board cuts would apply to Medicare providers, but not to Social Security, Medicaid, Medicare beneficiaries, civil and military employee pay, or veterans.[4][5] Security programs include the U.S. Department of Defense, U.S. Department of Homeland Security, U.S. Department of Veterans Affairs, the National Nuclear Security Administration, some management functions of the intelligence community, and international affairs from the U.S. State Department.[7]
- Congress was required to vote on a balanced budget amendment between October 1, 2011, and the end of 2011,[3] but is not required to pass it and send it to the states in order for the debt limit increases to occur. (This is unlike the previously proposed Cut, Cap and Balance Act, which was not enacted, which would have required Congress to actually pass such an amendment).[4]
- Pell Grant funding was increased, but other financial aid was cut. Graduate and professional students were no longer eligible for interest subsidized loans.[8] Repayment incentives will also be done away with after July 1, 2012.[9]
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The Super Committee was selected to come to a solution by November 23, 2011.
The committee recommendation was to have been subject to a simple vote by the full legislative bodies without amendment; this extraordinary provision was included to limit partisan gridlock. On November 21, the committee concluded its work, issuing a statement that began with the following: "After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee’s deadline." More.
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