President Obama has signed the Budget Control Act of 2011 (S. 365), a two step bipartisan plan to raise the debt limit through 2012 and reduce the deficit.
Budget Control Act Framework
Highlights of the two-part deal include:
- Raises the debt ceiling by $900 billion.
- Imposes $917 billion in spending cuts.
- Cuts are achieved by imposing overall limits (caps) on budget authority (Below).
- Separate discretionary spending limits are provided for security programs (Defense, Homeland Security, Veterans, Intelligence, and State Department, including foreign aid) and non-security programs for 2012 and 2013.
- Specifics about which programs will be cut, and how deeply, will be resolved by the appropriations' process.
Caps on Discretionary Budget Authority
- Creates a special 12-member bipartisan "Joint Select Committee on Deficit Reduction."
- 3 members from each party in each chamber appointed by party leadership; House Speaker John Boehner (R-OH) and Senate Majority Leader Harry Reid (D-NV) will appoint co-directors.
- Tasked with identifying at least an additional $1.2 trillion in deficit reduction (Optimal deficit reduction target set at $1.5 trillion).
- Spending cuts, revenue increases, and entitlements are on the table.
- Congressional committees, including House Ways and Means and Senate Finance, may submit recommendations to the joint committee before October 14, 2011.
- Joint committee may hold its own hearings.
- Recommendations must be introduced by Thanksgiving and a Congressional vote must take place by December 23, 2011.
- If at least $1.2 trillion in further deficit reduction is not enacted by January 15, 2012, $1.2 trillion in automatic cuts, also known as sequestration, will be triggered, with the cuts beginning January 2, 2013 .
- Split evenly between defense and non-defense spending.
- Cuts would exempt most programs intended to serve low-income. Americans and seniors, including Social Security.
- Medicare spending could be reduced by a maximum of 2%, with the cuts being made to payments to providers, rather than benefits to recipients.
- Authorizes the president to raise the debt ceiling by an additional $1.2 trillion to $1.5 trillion depending on the outcome of the joint committee recommendations.
- Congress is required to vote on a balanced budget amendment between October 1, 2011 and the end of the year.