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).

BREAKING DOWN '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.

  1. Sequestration

    A term adopted by Congress to describe a fiscal policy process ...
  2. Price Ceiling

    The maximum price a seller is allowed to charge for a product ...
  3. Rent Ceiling

    A maximum price a landlord is allowed to charge for rent. Rent ...
  4. Sovereign Default

    A failure on the repayment of a county's government debts. Countries ...
  5. Budget Deficit

    A budget deficit occurs when expenditures exceed revenue. The ...
  6. Trillion Dollar Coin

    A gimmick or good idea? The trillion dollar coin is a theoretical ...
Related Articles
  1. Personal Finance

    Should Congress Raise The Debt Ceiling?

    Some members of Congress say the debt ceiling must be raised while others insist it's time Uncle Sam learned how to get by without any more borrowing. We'll look at the issues at stake.
  2. Personal Finance

    Fiscal Responsibility and the Federal Debt Ceiling

    Is the United States headed for another partial government shutdown on October 1?
  3. Investing

    Ceiling Falls On Exploration And Production Sector

    Exploration and production companies' use of esoteric accounting charges caused a sharp decline in commodity prices.
  4. Insights

    The National Debt Explained

    We know it's growing, but we don't know exactly how. An in-depth look why the U.S. Government's debt continues to balloon and what it all means for you.
  5. Insights

    How Countries Deal With Debt

    For many emerging economies, issuing sovereign debt is the only way to raise funds, but things can go sour quickly.
  6. Investing

    A Look At National Debt And Government Bonds

    Learn the functions of the U.S. Treasury, and find out how and why it issues debt.
  7. Personal Finance

    Electrifying Apartment Bills: How To Reduce Them

    As a renter, there are still factors that can influence your heating and air conditioning bill.
  8. Insights

    Trump 'Short-Pays' Military, Other Fed Workers

    Retirement fund-payments are legally part of your paycheck, even if you work for the federal government.
  9. Insights

    How Debt Limits A Country's Options

    While debt is fundamentally necessary to the operation of a national government, it can also be limiting and dangerous.
  10. Personal Finance

    Best 5 Money-Saving Tips to Get out of Debt

    Understand the different types of debt and the reasons why people get into debt. Learn about five tips to follow to get out of debt.
  1. Which United States Presidents have run the largest budget deficits?

    Take a look at which presidents were in office for the largest budget deficits in U.S. history and how the responsibility ... Read Answer >>
  2. Should investors worry about the budget deficit?

    Understand the difference between government deficits and government debt, and learn why these figures can be significant ... Read Answer >>
  3. Reading the effect of fiscal deficits on an economy

    Take a deeper look into the real impacts of government budget deficits on the economy, and why government financing reduces ... Read Answer >>
  4. Who sets fiscal policy, the president or congress?

    Discover how fiscal policy is set in the United States, including how all three branches of government can affect a given ... Read Answer >>
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center