DEFINITION of 'Sequestration'

Sequestration  is a term adopted by Congress to describe a fiscal policy process that automatically reduces the federal budget across most departments and agencies. Sequestration, or "the sequester," is a procedure by which across-the-board spending cuts go into effect if Congress fails to agree on a deficit-reducing budget before a specified date. 

BREAKING DOWN 'Sequestration'

Sequestration wasn't invoked in 2017 or through mid-2018. The threat of sequestration was included in the Budget Control Act of 2011, with mandatory budget cuts scheduled to go into effect on Jan. 2, 2013. The budget cuts were deferred until March 1, 2013 as part of the American Taxpayer Relief Act (ATRA), signed into law on Jan. 2, 2013, by President Obama. 

History of Sequestration

The Budget Control Act of 2011 (BCA) increased the United States’ debt ceiling and established a 12 member committee (the Joint Select Committee on Deficit Reduction, or the “super committee”) to reduce the deficit by an additional $1.2 trillion to $1.5 trillion over the next decade. Part of the BCA, also known as the debt ceiling compromise, called for sequestration if the super committee failed to reach an agreement, generating automatic spending cuts for each of nine years (fiscal years 2013-2021), including over $85 billion in cuts for fiscal year 2013. Congress was unable to reach an agreement, and the American Taxpayer Relief Act pushed the budget cuts back until March 1, 2013. With Congress still unable to reach an agreement, sequestration was approved and went into effect on March 4, 2013.
 
The cuts are split between domestic and defense programs; for 2013, the sequester encompasses budget cuts totaling $85.4 billion, including:

  • $42.7 billion for defense
  • $28.7 billion for domestic discretionary
  • $9.9 billion for Medicare
  • $4 billion for other mandatory programs 

As a result of the sequester, budget cuts will continue through 2021, cutting discretionary spending by $109.3 billion total. Although the spending cuts are considered “across the board,” certain programs like Temporary Assistance for Needy Families (TANF) and the Supplemental Nutritional Assistance Program (SNAP)  are exempt from the sequester.

In recent years, Congress has acted to raise the caps on various programs to avoid sequestration. "Specifically, budget authority that is designated as an emergency requirement or provided for overseas contingency operations, such as military activities in Afghanistan, leads to an increase in the caps, as does budget authority provided for some types of disaster relief or for certain program integrity initiatives," according to the Congressional Budget Office.

For more information related to Sequestration, check out Fiscal Cliff and Boehner Bill.

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