Budget Sequestration: (1) Deficit Caps; (2) Spending Caps; (3) PAYGO; and (4) BCA Annual Mandatory Sequester
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What is a Budget Sequester?
Budget Sequestration is a budget enforcement mechanism created in 1985 requiring across-the-board cancellation of (nonexempt) federal spending by presidential order, utilized by:
the 1985 Balanced Budget and Emergency Deficit Control Act (BBEDCA or “Deficit Control Act”) to enforce maximum deficit amounts;
the Budget Enforcement Act of 1990 (BEA) to enforce discretionary spending caps and the Pay-as-You-Go (PAYGO) deficit neutrality requirement for direct spending and revenue legislation;
the Statutory Pay-As-You-Go (S-PAYGO) Act of 2010; and
the Budget Control Act of 2011 to enforce discretionary spending caps and implement automatic annual direct spending reductions (that remain in effect through FY 2031).
Sequestration orders apply to nonexempt discretionary spending categories when used to enforce discretionary spending caps; and applies to nonexempt direct spending programs when enforcing the PAYGO statute or implementing the annual mandatory spending reductions.
Notably, when an “across-the-board” sequester of direct spending programs is required, it is not really “across-the-board.” Automatic cuts in the Medicare program are limited to four percent under a PAYGO sequester order and two percent under the annual Joint Committee sequester orders, and many other direct spending programs are entirely exempted from sequestration including: Social Security, federal retirement, interest payments, most unemployment benefits, veterans’ programs, and low-income programs including Medicaid, food stamps (now called SNAP), children’s health insurance (CHIP), refundable income tax credits, Temporary Assistance for Needy Families (TANF), and Supplemental Security Income (SSI).
Sequester News:
Fri, Aug 15, 2025:
Trump tax law could cause Medicare cuts if Congress doesn’t act, CBO says – AP
CBO’s Estimates of the Pay-As-You-Go Effects of Public Law 119-21 – CBO
Sequestration 2025: An Update – CBO
Tues, June 17, 2025:
CBO letter to Senate Budget Chair Lindsey Graham answering questions about Statutory PAYGO