Budget Control Act - BCA

AAA

DEFINITION of 'Budget Control Act - BCA'

A federal statue 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 $2.1 trillion over the fiscal year 2012 to fiscal year 2021 period (a 10-year period).

INVESTOPEDIA EXPLAINS 'Budget Control Act - BCA'

In the U.S., a debt ceiling has been in place since 1917. If the debt ceiling were hit, the U.S. could default on interest payments to creditors, the consequences of which could be late, partial or missed payments to federal pensioners, Social Security and Medicare recipients and higher future interest rates at which the U.S. could borrow. 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 fails to propose by the end of 2012 a minimum of $1.2 trillion in cuts that will occur over 10 years, automatic spending cuts will occur in January 2013. These automatic spending cuts are called sequestration. Since the Super Committee failed to make a proposal reducing the deficit, sequestration will occur in January 2013 unless Congress takes legislative action to avoid what is called the Fiscal Cliff.

RELATED TERMS
  1. Budget Deficit

    A status of financial health in which expenditures exceed revenue. ...
  2. Sequestration

    A term adopted by Congress to describe a fiscal policy process ...
  3. Fiscal Cliff

    A combination of expiring tax cuts and across-the-board government ...
  4. 2011 U.S. Debt Ceiling Crisis

    A contentious July 2011 debate regarding the maximum amount of ...
  5. Debt Ceiling

    The maximum amount of monies the United States can borrow. The ...
  6. Sovereign Debt

    Bonds issued by a national government in a foreign currency, ...
Related Articles
  1. Successful Ways That Governments Reduce ...
    Economics

    Successful Ways That Governments Reduce ...

  2. Sovereign Wealth Funds - Friend Or Foe?
    Investing Basics

    Sovereign Wealth Funds - Friend Or Foe?

  3. What The National Debt Means To You
    Economics

    What The National Debt Means To You

  4. A Look At National Debt And Government ...
    Bonds & Fixed Income

    A Look At National Debt And Government ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center