What Is the Budget Control Act (BCA)?

The Budget Control Act is a federal statute passed by Congress and signed into law by President Barack Obama on Aug. 2, 2011. The Budget Control Act (BCA) of 2011 was enacted in response to the 2011 debt ceiling crisis. The purpose of the BCA was to increase the United States' debt ceiling, thereby avoiding the risk of sovereign default that was set to occur on or about Aug. 3, 2011. In addition, the BCA contained procedures for reducing the deficit by a minimum of $1.2 trillion over the fiscal year 2012 to fiscal year 2021.

Understanding the Budget Control Act (BCA)

In the U.S., a federal debt ceiling, or 澳洲幸运5官方开奖结果体彩网:statutory debt limit, has been in place since 19෴17. If the U.S. hits its debt limit, it would no longer be able to issue debt and could default on interest payments to creditors.

The consequences of such an event could be late, partial, or missed payments to federal pensioners, Social Security, and Medicare recipients, as well as higher interest rates for future federal borrowing.

2011 Debt Ceiling Crisis

The 2011 U.S. debt ceiling crisis brought the country close to default risk before the BCA was enacted to immediately raise the debt ceiling and cut the deficit. The BCA allowed an immediate increase of $400 billion to the debt ceiling, bringing the fiscal year 2013 spending cap to $1.047 trillion. The BCA also required a super committee to develop measures to cut $1.5 trillion in spending over 10 years. The BCA stipulated that if the super committee failed to propose by the end of 2012 a minimum of $1.2 trillion in cuts that would occur over 10 years, automatic spending cuts would occur in January 2013. These automatic spending cuts are called 澳洲幸运5官方开奖结果体彩网:sequestration.

Since the Super Committee failed to make a proposal reducing the deficit, sequestration did occur in January 2013 to avoid what is called the 澳洲幸运5官方开奖结果体彩网:fiscal cliff.

As a result of the sequester, budget cuts were to continue through 2021, cutting discretionary spending by $109.3 billion in total.

Later legisꦺlation continued the cuts through 2031, maintaining 2021 percentages🌠.

For budget years 2016 through 2021, sequestration was not needed, the Office of Management and Budget reported. That doesn't mean, however, that government spending or the national debt are under control. The Congressional Budget Office projects a $1.4 trillion federal budget deficit in 2023, and a cumulative deficit of $3.1 trillion through 2032.

The Bottom Line

The Budget Control Act was created to address the 2011 debt ceiling crisis. It expanded the debt ceiling and established a super committee in charge of identifying $1.5 trillion in spending cuts. It also established a mechanism called sequestration that would put into place across-the-board cuts if the committee failed in its mission. Some spending reductions from the Budget Control Act are still in place, with certain reductions not scheduled to phase out until 2032.