Sequestration by the Numbers
March 23, 2013
The automatic budget cuts known as “sequestration” took effect on March 1. Under the requirements of the 2011 Budget Control Act (BCA) as amended by January’s American Taxpayer Relief Act (ATRA), both defense and non-defense programs were automatically cut, or sequestered, reducing total funding by $85 billion. While the press and public have focused on the programmatic effects of sequestration, this analysis explains the dollar and percentage calculations required by the sequestration law.
The origin of sequestration lies with the BCA, which established a congressional Joint Select Committee on Deficit Reduction (supercommittee) to propose legislation that would reduce deficits by $1.2 trillion over ten years. It also created a backup sequestration procedure to ensure that this level of deficit reduction would be achieved even if the supercommittee failed to reach agreement, which is what happened. The sequestration mandates cuts to defense and non-defense funding totaling $109.3 billion in each year from 2014 to 2021. For 2013, however, the mandated cuts are $85.3 billion; ATRA reduced the required cuts. The sequestration law requires that the cuts be split 50-50 between defense and non-defense programs.
Summary of Dollar and Percent Cuts in 2013 Funding
Required by the Supercommittee Sequestration on March 1st
(Percentages apply only to programs subject to sequestration)
|National defense programs:||42.7|
|Medicare (capped at 2%)||11.3||2.0%|
|Certain other mandatory health funding (capped at 2%)||*||2.0%|
|Other mandatory programs||5.5||5.1%|
|* Indicates less than $50 million. Parts may not add to totals due to rounding. CBPP calculations based on OMB and CBO estimates.|
Box 1: Estimates Used in This Analysis
The total dollar targets for defense and non-defense sequestration are specified in law, as is the “allocation target” discussed in footnote 6.
For 2013, the estimated amount of sequestrable mandatory funding for Medicare, certain other health programs, and student loans as well as the total amount of sequestrable mandatory funding is taken directly from OMB’s March 1 sequestration report.a Likewise, the total amount of sequestrable discretionary funding is taken from that report.
However, OMB did not publish the component pieces of the sequestrable budgetary resources, such as regular funding subject to the BCA caps, war funding, disaster and emergency funding, program integrity funding, and exempt funding (e.g., for military personnel or discretionary veterans’ programs). We therefore use CBO’s estimate of those component pieces, derived from CBO’s scoring of the CR and the Sandy supplemental appropriations bill. The amount of defense unobligated balances and of funding covered by offsetting collections is derived as a residual. The amount by which 2013 funding exceeds the BCA caps is CBO’s estimate; OMB did not publish its estimate.
For years after 2013, all estimates are derived from CBO data.
One final note: OMB’s March 1 report calculated the percent and account-by-account dollar sequestrations based on the appropriations then in effect (the annualized “continuing resolution”). Under the law, OMB does not recalculate the required percentage cuts nor apply the existing percentage cuts to the new account-by-account funding levels that are in the final appropriations bill for 2013 approved by Congress. Rather, the account-by-account dollar cuts calculated on March 1 apply to the funding in the final appropriations bill.
a See OMB Report to the Congress in the Joint Committee Sequestration for Fiscal Year 2013, March 1, 2023, at http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/fy13ombjcsequestrationreport.pdf.
This paper — which refers to the March 1 cuts as the “supercommittee sequestration” — updates our earlier analysis. That analysis also highlighted a second possible sequestration, which we referred to as a “cap sequestration,” that could have arisen on March 27 if the appropriations for discretionary (non-entitlement) programs in 2013 had exceeded the funding caps for those programs set in the BCA (see Appendix 3), as they did at the time. However, Congress has now approved a full-year appropriations bill that conforms to the BCA caps. So the likelihood of a cap sequestration seems to have evaporated.
Part 1 of this report examines how the supercommittee sequestration works for 2013. Part 2 discusses the supercommittee sequestration in 2014 and subsequent years. Appendix 1 gives the details about how ATRA and supplemental appropriations for relief and reconstruction after Hurricane Sandy have changed the amounts and percentages associated with sequestration. Appendix 2 examines the special rules around Medicare and student loans under sequestration. Appendix 3 discusses the cap sequestration in more detail.