How Sequestration and Mandatory Federal Spending Cuts Work

Sequestration is the federal governments way of applying mandatory spending cuts across most programs and agencies during the budgeting process. Members of Congress use sequestration to reduce spending across the board when the governments annual deficit reaches a point that is unacceptable to them. Congress imposed spending caps on discretionary portions of federal spending through 2021, a move that was designed to save taxpayers about $1.2 trillion over nearly a decade. Sequestration  Definition The Congressional Research Service defines sequestration  this way: In general, sequestration entails the permanent cancellation of budgetary resources by a uniform percentage. Moreover, this uniform percentage reduction is applied to all programs, projects, and activities within a budget account. However, the current sequestration procedures, as in previous iterations of such procedures, provide for exemptions and special rules. That is, certain programs and activities are exempt from sequestration, and certain other programs are governed by special rules regarding the application of a sequester. Whats Affected By Sequestration When Congress uses sequestration, spending cuts happen to to both military and non-military spending, including important social programs such as Medicare. Most of the mandatory spending cuts come from non-military agencies and programs in the departments of Agriculture, Commerce, Education, Energy, Environmental Protection, Health and Human Services, Homeland Security, NASA and Transportation. Whats Not Affected by Sequestration Several programs — most notable those for senior citizens, veterans and the poor — are exempt from sequestration cuts. They include Social Security, Veterans Affairs, Medicaid, food stamps and Supplemental Security Income. Medicare, however, is subject to automatic cuts under sequestration. Its spending cannot be reduced by more than 2 percent, however. Also exempt from sequestration are congressional salaries. So even though federal works are furloughed or laid off to save money, elected officials still get paid. Sequestration  History The idea of imposing automatic spending cuts in the federal budget was first put in place by the Balanced Budget and Emergency Deficit Control Act of 1985. Sequestration is rarely used, however, because of the negative consequences severe spending cuts have on programs and services for citizens. Even when Congress uses sequestration, it does so as a political tool to force voluntarily spending reductions and often doesnt allow the full cuts to take effect. Modern Examples of Sequestration The most recent sequester was used in the Budget Control Act of 2011 to encourage Congress to reduce the annual deficit by $1.2 trillion by the end of 2012. When lawmakers failed to do so, the law triggered automatic budget cuts to the 2013 national security budget. A super Congress made up of a select group of 12 members of both the U.S. House of Representatives and U.S. Senate was chosen in 2011 to identify ways to reduce the national debt by $1.2 trillion over 10 years. The super Congress failed to reach an agreement, however. The sequestration cuts imposed in the 2011 legislation took effect in 2013 and continue through 2021. Opposition to Sequestration Critics of sequestration say spending cuts threaten national security through Defense Department reductions and harm the economy because federal works are often furloughed or laid off. These cuts will make it harder to grow our economy and create jobs by affecting our ability to invest in important priorities like education, research and innovation, public safety, and military readiness, said President Barack Obama, who was in office when the sequestration cuts of 2013 took effect.