November 24, 2017
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Budget Sequestration ("Sequester")

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What is Sequestration and How Does it Work?

  • In the absence of an FY 2014 bipartisan budget deal, the law requires OMB to impose, following Congress' adjournment, across-the-board cuts of $55 billion in defense spending and $37 billion in non-defense spending compared to the "pre-sequester" levels. Click here to see the pre- and post-sequester spending levels.

  • In addition, a 2 percent cut will be applied to Medicare and a uniform percentage reduction computed by the Office of Management and Budget (OMB) will be applied to other non-exempt mandatory (entitlement) programs to bring total non-defense cuts up to $55 billion.

  • (Click here for an explanation of when the 2014 sequester takes effect.)

  • If Congress passes appropriations bills that exceed the reduced discretionary caps, automatic across-the-board cuts ("sequestration") will be applied by OMB after Congress adjourns to enforce the caps. However, some of the government's largest programs are exempt from sequestration including Social Security, Medicaid, all veterans programs and some -- not all -- low income programs including food stamps (SNAP). Medicare, though not fully exempt, is limited to a 2 percent cut in payments to providers.

Low-income and special needs programs that remain subject to sequester include:

- IDEA special education funding
- Head Start
- Seniors Meals on Wheels
- WIC (nutrition for low-income pregnant women, infants and young children)
- Emergency unemployment compensation
- Low-income housing assistance (vouchers, section 8 project-based, public housing)
- Homeless assistance (including vouchers for low-income Americans)
- Vocational rehabilitation
- Social Services Block Grant
- Hurricane Sandy relief
- Student Loan origination fees

Click here for a summary of all exempt programs.

Economic Impact of Sequestration

  • Over the longer term, automatic spending cuts are required by law to be applied in each fiscal year through FY 2021--in total, about $1.2 trillion in budget reductions (comprised of $821 billion in discretionary cuts, $163 billion in mandatory - mostly Medicare - cuts, and $216 in interest savings).

  • The $821 billion in automatic discretionary cuts are in addition to the $900 billion already in place due to 10 years of discretionary spending caps imposed by the Budget Control Act. (The caps imposed by the 2011 law save money in each year through 2021 because they keep discretionary appropriations well below levels necessary to maintain current levels of services and benefits provided by the federal government. For example, the reduced appropriations levels do not allow for adjustments to keep pace with inflation, population growth, and health care costs.)

  • Because the FY 2014 automatic cuts will take effect on October 1, 2013, numerous bills are being floated to soften the impact for various programs and agencies -- although a piecemeal approach could reduce the impetus to reach an overall agreement on replacing the sequester.

  • Many argue that imposing automatic cuts on discretionary spending are an abysmal way to accomplish deficit reduction because it imposes cuts on the portion of the budget -- annual discretionary appropriations -- that are least responsible for the long-term debt crisis and where most of our nation's most vital government functions reside: national defense; homeland security; veterans healthcare; law enforcement; construction of airports, highways, and bridges; disaster relief; food, drug and water inspection; college aid; education for disabled children; low-income food, energy, housing and education assistance; and medical research.

Numbers alone can't tell the story. Click on the links below for Impacts of the
sequester on government operations and services:

How Budget Sequestration Operates - Additional Background:

Click here for further detail on how the sequester in 2014 will operate

Click here for additional details on the operation of the 2013 sequester

Link to OMB Sequestration Reports to the President and Congress

The Fiscal Cliff Agreement's Modifications to the Budget Control Act of 2011 (CRS)

Budget Control Act of 2011 (CRS)

Budget Control Act of 2011: Effects on Spending and the Deficit (CRS)

Budget Control Act: Final Sequester Report for 2012 (CBO)

Budget Control Act: Sequestration Update Report: Augusts 2012 (CBO)

Budget “Sequestration” and Selected Program Exemptions and Special Rules (CRS)

Sequestration: Statutory Budget Controls in Effect Between 1985 and 2002 (CRS)

Sequestration: A Brief Review (CRS)

Sequestration: Origins and Development (CRS)

Sequestration (CRS)

Summary, Automatic (Sequester) Cuts







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