Budget Control Act of 2011

Summary

The Budget Control Act of 2011 (BCA) was a controversial debt ceiling agreement between Democrats and Republicans that did much more than simply raise the debt ceiling. To help reign in spending, it placed spending caps on defense and non-defense discretionary spending. It increased the debt ceiling, and allows the President to increase the debt ceiling further if Congress does not object. It also created a 12 person super-committee with the goal of finding $1.5 trillion in deficit reduction. Whatever legislation comes out of this commitee can only be voted on and not changed or stalled by Congress. If the super-committee does not achieve at least $1.2 trillion in deficit reduction over the next 10 years, spending caps go into effect that force additional savings amounting to $1.2 trillion.

Spending Caps

The first major component of the legislation is the caps placed on discretionary spending. Discretionary spending is broken up between security and non-security spending. Limits are placed on each of those categories for 2012 and 2013 and limits are placed on total discretionary spending out to 2021.

The legislation calls for $1.5 trillion in deficit reduction through a program described later. If the super-committee fails to achieve the $1.2 trillion in deficit reduction, the legislation forces and even reduction in spending over the next 9 years in an amount needed to achieve that goal. As an example, if the super-committee finds $8 trillion in deficit reduction over ten years, the spending caps are adjusted to achieve the remaining $4 trillion in deficit reduction over the remaining 9 years or $444 billion per year. These limits are shown on the second tab.

Ceiling Increases

The President is given authority to raise the debt ceiling $400 billion with an additional $500 billion available if Congress does not disapprove it. Should the debt ceiling need to be raised again, the President can request another raise of $1.2 trillion or $1.5 trillion if cuts to future spending have already been approved or a balanced budget amendment has been passed. This process is described on the third tab.

The Super-Committee

To address future deficits, the legislation creates a 12 man committee with 3 members from each party and each chamber of Congress. It tasks this super-committee with cutting the deficit by $1.2 trillion over the next ten years. To accomplish this, the super-committee must take advice and plans from Congress, create a single plan, and then pass that plan and a report to Congress. Congress cannot change the plan and cannot amend or filibuster it. It can only vote to pass or reject the plan. The plan and the committee members are described on the fourth tab.

The significant dates outlined within the plan are shown below:

  • Oct 14, 2011 - Deadline for Congress to submit advice to the supercommittee
  • Nov 23, 2011 - Deadline for the super-committee to vote on a plan
  • Dec 2, 2011  - Deadline for the supercommittee to send the plan to Congress and the President
  • Dec 9, 2011  - Deadline for Congress to report full version
  • Dec 23, 2011 - Deadline for both chambers of Congress to pass the legislation
  • Jan 15, 2012 - Deadline for legislation to be passed

 

Balanced Budget Amendment

One of the compromises in the BCA was that a balanced budget amendment must be voted on by both chambers of Congress. The legislation lists rules for how that vote is to be handled.

Pell Grants

The legislation increases the amount of money available for Pell Grants from $3.183 billion in 2012 to $13.183 billion and increases the 2013 amount from $0 to $7 billion. This is an additional $17 billion in commitments to Pell grants over the next two years.

The BCA also eliminates the in-school interest subsidy for graduate and professional students beginning July 1, 2012. The CBO predicts that this will save $18.1 billion from FY 2012-21.

Repayment incentives were also eliminated in the legislation. Previously, people would receive a 0.25 interest rate reduction for debit repayment and the up-front interest rebate incentive equal to 0.5 percent of the loan amount and applied toward the 1 percent loan origination fee. For PLUS loans, the up-front interest rebate was 1.5 percent applied toward the 4 percent origination fee. Borrowers were able to keep the rebate if they made their first 12 payments on time.The CBO predicts a $3.6 billion savings from this over 10 years.

 

Initial Discretionary Caps

The first section of the Budget Control Act enacts caps on discretionary spending. These caps are enforced from budget year 2012 to budget year 2021. For budget years 2012 and 2013, separate caps are placed on security and nonsecurity spending. After that, the two are combined into total discretionary spending. Security spending includes discretionary appropriations associated with agency budgets for the Department of Defense, the Department of Homeland Security, the Department of Veterans Affairs, the National Nuclear Security Administration, the intelligence community management account, and all budget accounts in budget function. Non-security spending is any discretionary spending that does not fall under security spending. The caps are shown below.

Initial Discretionary Spending Caps
Budget Year Security Spending (Bn) Non-Security Spending (Bn) Total Spending (Bn)
2012 $684 $359 $1,043
2013 $686 $361 $1,047
2014 - - $1,066
2015 - - $1,086
2016 - - $1,107
2017 - - $1,131
2018 - - $1,156
2019 - - $1,182
2020 - - $1,208
2021 - - $1,234

 

Punitive Discretionary Caps

The Budget Control Act fo 2011 establishes a committee of 12 representatives and tasks them with finding $1.2 trillion in deficit reduction. If legislation achieving this goal is not passed by January 15, 2011, general, across the board spending cuts are put in place.

To determine the amount of spending cuts required, the goal of $1.2 trillion in cuts is used as a starting point for calculations. Whatever cuts are achieved through the supercommittee legislation is then subtracted from the $1.2 trillion. The difference is reduced by 18 percent to adjust for debt service and the remainder is divided by 9. By doing this, whatever deficit reduction is not achieved by the super-committee is simply allocated evenly among the 9 fiscal budgets remaiining in the 10 year $1.2 trillion goal.

As an example, if the super-committee finds $8 trillion in deficit reduction over ten years, the spending caps are adjusted to achieve the remaining $4 trillion over the remaining 9 years or $444 billion per year.

Whatever reduction in spending that comes from this is to be divided evenly between direct spending accounts and half is to be directed at other functions.

Punitive Discretionary Spending Caps
Budget Year Security Spending (Bn) Non-Security Spending (Bn) Total Spending (Bn)
2013 $546 $501 $1,047
2014 $556 $510 $1,066
2015 $566 $520 $1,086
2016 $577 $530 $1,107
2017 $590 $541 $1,131
2018 $603 $553 $1,156
2019 $616 $566 $1,182
2020 $630 $578 $1,208
2021 $644 $590 $1,234

 

Debt Ceiling Increases

The Budget Control Act of 2011 was a compromise between Democrats and Republicans in that Republicans agreed to raise the debt ceiling and Democrats agreed to spending caps and deficit reduction. However, the increase to the debt ceiling was not a simple increase to a defined level. The legislation outlines a series of steps and dates that the President and Congress can take to increase the debt.

Initial $900 Billion

If the President determines that the debt is within $100 billion of the ceiling by December 31, 2011, he may submit written certification to Congress that further borrowing is needed. If he does this, the ceiling is raised $400 billion immediately.

After this takes place, Congress has 50 days to pass a joint resolution of disapproval. If they fail to do this, the debt ceiling is raised an additional $500 billion.

Additional Increase

If the President again determines that the national debt is within $100 billion of the debt ceiling, he can again submit a written certification to Congress for further borrowing. If Congress has passed a balanced budget amendment or the supoer-committee created within this legislation has already achieved deficit reduction over $1.2 trillion over the next 10 years, then the limit may be increased by $1.5 trillion. If not, it may only be increased by $1.2 trillion. For this request, Congress has 15 days to pass a joint resolution of disapproval to stop the increase.

 

The Joint Select Committee on Deficit Reduction

On of the more controversial aspects of the plan was that it created a 12 person committee which is formally called the Joint Select Commitee on Deficit Reduction, but is more commonly referred to as the super-committee. The goal of the super-committee is to reduce the deficit by at least $1,500,000,000,000 over the period of fiscal years 2012 to 2021 with more general goals of improving the short term and long term fiscal imbalance.

The legislation directs that each committee of the House and Senate has until October 14, 2011 to transmit recommendations to the joint committee  for changes in law to reduce the deficit. The joint committee then has until November 23, 2011, to produced and vote on both a report that contains a detailed statement of the findings, conclusions, and recommendations of the joint committee along with an estimate of the Congressional Budget Office, and proposed legislative language to carry out such recommendations.

The super-committee has until December 2, 2011 to send the report and legislative language to Congress. The report and legislative language must be presented to the President, the Vice President, the Speaker of the House of Representatives, and the majority and minority Leaders of each House of Congress. The report and legislation must be made public whether they are passed by the committee or not.

Once the report and legislative language is approved by the committee, it is introduced into the House and Senate the following day of session. If that legislation is referred to a House Committee, it must be reported to the full House no later than December 9, 2011 with no amendments allowed to be made by the committee. Debate is limited to 20 minutes within the committee. Once the bill is brought to the House flooor, no points of order are allowed and debate is limited to 2 hours. A full House vote is required by December 23, 2011.

Rules for the Senate consideration of the bill are similar. The bill presented by the super-committee must be out of committee by December 9, 2011 and the Senate Majority leader must bring the bill before the full Senate within 2 days. All points of order against the motion to proceed to the joint committee bill are waived. The motion to proceed is not debatable. The motion is not subject to a motion to postpone. A motion to reconsider the vote by which the motion is agreed to or disagreed to shall not be in order. The entire length of time that the bill can be considered is 30 hours with that time divided equally between the two parties. No amendments are allowed. The vote by the Senate must happen by December 23, 2011.

If the House passes the legislation before the Senate, that legislation is then sent the Senate and the House version supplants the Senate version for the purposes of the final vote. The same is true if the Senate passes the bill first unless the bill passed by the joint committee and the Senate is a revenue measure and must therefore originate in the House.

If the Senate fails to introduce or consider a joint committee bill, the joint committee bill of the House shall be entitled to expedited floor procedures. If the Senate passes the joint committee bill and then receives the joint committee bill from the House of Representatives, the House-passed joint committee bill shall not be debatable. The vote on passage of the joint committee bill in the Senate shall be considered to be the vote on passage of the joint committee bill received from the House of Representatives.

All these provisions are revoked if the joint committee fails to vote on the report or proposed legislative language by November 23, 2011, or the joint committee bill does not pass both Houses by December 23, 2011. The super-committee is terminated on January 31, 2012.

Committee Members

The super-committee is composed of 12 members, 3 Democratic Senators, 3 Republican Senators, 3 Republican Congressmen, and 3 Democratic Congressmen. These members were selected within a few weeks of passage of the legislation. The joint committee must begin meeting no less than 45 days after the enactment of this legislation. Given that the law was signed into effect on August 2, 2011, the first meeting must be no later than September 16, 2011.

Senators

Senator John Kerry (D)- Massachussetts Senator Patty Murray (D)- Washington Senator Max Baucus (D) - Montana Senator Jon Kyl (R) - Arizona Senator Pat Toomey (R) - Pennsylvania Senator Rob Portman (R) - Ohio

 

Congressmen

Congressman Xavier Becerra (D) - California Congressman Chris Van Hollen (D) - Maryland Congressman - James Clyburn (D) - South Carolina Congressman Jeb Hensarling (R) - Texas Congressman Dave Camp (R) - Michigan Congressman Fred Upton (R) Michigan

 

Votes on the Budget Control Act