The Budget Control Act of 2011 (BCA) was a law passed by Congress and President Obama during tense negotiations over the “debt ceiling.” The intent of the law was to provide fiscal discipline and reduce the long-term debt. One of the most important things the BCA did was to create discretionary spending caps to reduce the amount of money Congress can expend. When Congress can’t meet these caps, a mechanism called the “sequester” automatically reduces discretionary spending in an across-the-board fashion. While far from perfect policy, the BCA and sequester are important tools to rein in Washington’s out-of-control spending.
Here are 10 reasons why:
1. Spending is falling: Spending is on track to fall below $3.45 trillion by the end of FY13. This is the first time, since the end of the Korean War, federal expenditures have fallen two years in a row.
2. The deficit is shrinking: The deficit is expected to continue to drop through 2015 and is already down from a high of 10.2 percent of gross domestic product (GDP) in 2009 to 4 percent this year.
3. The sequester was NOT the crisis its critics predicted: Transportation Secretary Ray LaHood feared chaos at airports due to Federal Aviation Administration cuts, but post-sequester, the agency’s budget is still larger than it was in 2008. Education Secretary Arne Duncan said that the sequester would result in mass layoffs of teachers, which has proven false.
4. The sequester does NOT put our national security at risk: The reduction in defense spending under the BCA is roughly 10 percent, which brings spending to about the same level it was under President George W. Bush in 2006.
5. Spending restraint can get our debt under control: According to the Congressional Budget Office, if we could hold federal spending steady at $3.5 trillion we should be able to balance the budget by 2016.
6. The sequester helped to put the brakes on Washington’s out of control spending: In 2009, total federal spending reached over a quarter of GDP; in 2013 that fell to 21.5 percent. “Discretionary”(i.e., annually appropriated non-entitlement )spending, which sequestration primarily affects has shrunk by 10 percent since 2011 – and the sky hasn’t fallen.
7. The sequester is helping to eliminate wasteful spending: When forced to reexamine their budgets, many agencies found savings after all. The Department of Defense (DOD) found $1 billion in savings from reduced transportation costs and saved another $9.6 billion in reprogramming requests, delayed contracts, and reduced costs in another 200 programs. And there’s still overcapacity that costs taxpayers billions.
8. In the long run, the sequester can help the economy: The CBO states that “if the spending reductions under current law were reversed, that policy would lead to greater federal debt, which would eventually reduce the nation’s output and income below what would occur under current law.”
9. The sequester may be helping the stock market: Though many predicted stocks would tumble when the sequester took effect, the stock market has hit record highs this year. Though this is the result of a combination of factors, one major factor is that markets recognize that the U.S. is dealing with our outsized debt problem, making us an attractive investment.
10. The sequester does what Washington can’t: The BCA’s sequester was intended to be a line in the sand that Congress would never dream of crossing. However, all other attempts to get spending under control failed. For decades, Washington has repeatedly given in to its worst instincts to increase spending and grown the size of government. Without the sequester the overspending would never stop.
It’s important to remember though, that the sequester is only the first step toward getting our fiscal house in order. Larger bills loom on the horizon in the form of mandatory entitlement spending that threatens to bury our nation in debt. That’s why it’s so essential that we make the tough choices now, before the debt becomes unmanageable. There’s still a lot of work to do, but we must start by urging Washington to “Keep the Caps!”
To learn more about this important issue and take action, visit KeeptheCaps.com.