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How Eliminating the Automatic Spending Reductions Specified by the Budget Control Act Would Affect the U.S. Economy in 2014 1 (July 25, 2013)

handle is hein.congrec/cbo11214 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 July 25, 2013 Honorable Chris Van Hollen Ranking Member Committee on the Budget U.S. House of Representatives Washington, DC 20515 Re: How Eliminating the Automatic Spending Reductions Specified by the Budget Control Act Would Affect the U.S. Economy in 2014 Dear Congressman: This letter responds to your request for an analysis of how a cancellation of the automatic spending reductions specified by the Budget Control Act of 2011 (Public Law 112-25) would affect the U.S. economy. Pursuant to that act, federal spending in 2013 has been subject to across-the-board cuts, also referred to as sequestration. (Certain programs-including Social Security, for example-are exempt from those reductions.) For the 2014-2021 period, the act requires automatic reductions, through sequestration, of nonexempt mandatory spending and reductions in the caps on discretionary budget authority. As you requested, the Congressional Budget Office (CBO) analyzed a proposal under which the automatic spending reductions in effect for 2013 would be canceled at the beginning of August and none of the reductions scheduled for 2014 would be implemented; for 2013, mandatory payments made after early August would be at the rates in effect prior to sequestration, and agencies would have an additional year to obligate the restored discretionary funding.'I In total, by CBO's estimates, canceling the automatic spending reductions effective August 1 would increase outlays relative to those under current law by $14 billion in fiscal year 2013 and by $90 billion in fiscal year 2014.2 1Most discretionary appropriations are provided for one fiscal year, so the authority to obligate any of those funds generally lapses on October 1 (the start of a new fiscal year). The proposal that CBO analyzed assumes that the authority to obligate the restored 2013 funding would be extended through all of fiscal year 2014. 2Outlays would increase by another $62 billion in subsequent years relative to what would be spent under current law. As is the case with most discretionary appropriations, not all of the additional funds that would be made available to agencies under the proposed policy would be spent. Also, if the proposal was enacted in September instead of early August, some outlays would www.cbo.gov

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