What were the discretionary spending limits?

The Budget Control Act of 2011 (BCA, P.L. 112-25) established legal limits on the amount of discretionary spending that could be provided each fiscal year.¹ Similar limits on discretionary spending had previously been in effect between FY1991 and FY2002,² and the BCA reinstituted limits for FY2012-FY2021.³ Under the BCA, for each fiscal year, two separate spending limits were in effect: one for defense discretionary spending and one for nondefense discretionary spending.⁴ (See the Appendix for the amounts of these separate spending limits for each year.)

To enforce the spending limits, the law required that if discretionary appropriations were enacted that exceeded a statutory limit for a fiscal year, an automatic process would be triggered to eliminate the excess spending. This process, referred to as sequestration, required across-the-board reductions of nonexempt budgetary resources within the applicable category (defense or nondefense).

When the BCA was enacted, Congress and the President ensured that certain types of spending would be effectively exempt from the limits. Specifically, the BCA stipulated that the enactment of certain spending—such as appropriations designated as emergency requirements or for overseas contingency operations—allowed for an upward adjustment of the discretionary limits, meaning that such spending was effectively exempt from the limits.⁵

A second component of the BCA required annual reductions to the initial discretionary spending limits. (These reductions were triggered by the absence of agreement on deficit reduction legislation from the Joint Select Committee on Deficit Reduction.)⁶ The BCA required these reductions to the statutory limits on both defense and nondefense discretionary spending for each year through FY2021. These reductions were often referred to as a sequester, although they were not a sequester per se because they did not make automatic, across-the-board cuts to programs. Instead, they lowered the spending limits, allowing Congress the discretion to develop appropriations legislation within the reduced limits.

During the 10 years in which the spending limits were in effect, Congress and the President typically enacted legislation increasing the spending limits, thereby counteracting some or all of the annual reductions. For more information, see "Did Congress and the President ever amend the discretionary spending limits?"

Why were the discretionary spending limits created?

The BCA was developed in 2011, during a period in which many Members of Congress expressed concern over rising budget deficits. While the federal budget recorded surpluses during the years of FY1998-FY2001, budget deficits returned in FY2002 and slowly increased over the next several years due to reduced revenues and increased spending. Net deficits peaked, however, during the Great Recession from FY2009 to FY2011,⁷ with deficits averaging 9.0% of gross domestic product (GDP), which was higher than any other year since World War II. The deficits during the Great Recession were attributed to negative and low economic growth coupled with increased spending provided by the American Recovery and Reinvestment Act of 2009
(P.L. 111-5).

Concern with deficit levels has sometimes led Congress and the President to enact new budget rules or enforcement mechanisms that mandate specific budgetary policies or fiscal outcomes. In 2011, congressional leaders and President Barack Obama participated in extended budget policy negotiations in conjunction with the government's borrowing authority approaching the statutory debt limit. The legislative result of those negotiations was the BCA, which paired an increase in the debt limit with several new budget enforcement mechanisms, including the discretionary spending limits.

Did Congress and the President ever amend the discretionary spending limits?

After enactment of the BCA, Congress and the President enacted legislation altering the discretionary spending limits for almost every fiscal year in which they were effect (for each year from FY2013 through FY2021).⁸ Some of the most significant of these changes included the following:

• The American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240) postponed the start of the FY2013 sequester from January 2 to March 3 and increased the defense and nondefense caps by $24 billion each (to $518 billion and $484 billion, respectively).
• The Bipartisan Budget Act of 2013 (BBA 2013, P.L. 113-67, also referred to as the Murray-Ryan agreement) increased discretionary spending limits for both defense and nondefense for FY2014, each by about $22 billion (to $520 billion and $492 billion, respectively). In addition, it increased discretionary spending limits for both defense and nondefense for FY2015, each by about $9 billion (to $521 billion and $492 billion, respectively). It also extended the mandatory spending sequester by two years through FY2023. Soon after the enactment of BBA 2013, a bill was enacted to "ensure that the reduced annual cost-of-living adjustment to the retired pay of members and former members of the armed forces under the age of 62 required by the Bipartisan Budget Act of 2013 will not apply to members or former members who first became members prior to January 1, 2014, and for other purposes (P.L. 113-82)." This legislation extended the mandatory spending sequester by one year through FY2024.
• The Bipartisan Budget Act of 2015 (BBA 2015, P.L. 114-74) increased discretionary spending limits for both defense and nondefense for FY2016, each by $25 billion (to $548 billion and $518 billion, respectively). In addition, it increased discretionary spending limits for both defense and nondefense for FY2017, each by $15 billion (to $551 billion and $519 billion, respectively). It also extended the direct spending sequester by one year through FY2025. In addition, it established nonbinding spending targets for Overseas Contingency Operations/Global War on Terrorism levels for FY2016 and FY2017 and amended the limits of adjustments allowed under the discretionary spending limits for Program Integrity Initiatives.
• The Bipartisan Budget Act of 2018 (BBA 2018, P.L. 115-123) increased nondefense and defense discretionary limits in FY2018 and FY2019. In FY2018, BBA 2018 increased the defense limit by $80 billion (to $629 billion) and increased the nondefense limit by $63 billion (to $579 billion). In FY2019, it increased the defense limit by $85 billion (to $647 billion) and increased the nondefense limit by $68 billion (to $597 billion). BBA 2018 also extended the mandatory spending sequester by two years through FY2027.
• The Bipartisan Budget Act of 2019 (BBA 2019, P.L. 116-37) increased discretionary spending limits for FY2020 and FY2021. In FY2020, it increased the discretionary defense cap by $90 billion (to $667 billion) and increased the nondefense cap by $78 billion (to $622 billion). In FY2021, it increased the discretionary defense cap by $81 billion (to $672 billion) and increased the nondefense cap by $72 billion (to $627 billion). BBA 2019 also extended the mandatory spending sequester by two years through FY2029.

Can Congress reestablish the discretionary spending limits?

Congress may reestablish, or otherwise modify, the discretionary spending limits, but such changes would require the enactment of legislation.

How did spending change during the time period in which the discretionary spending limits were in place?

Prior to the establishment of the BCA caps, real spending (i.e., adjusted for inflation) during the Great Recession (from FY2009 to FY2011) reached their highest levels since World War II. Negative and low economic growth coupled with increased spending commitments provided for by the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) contributed to real outlays (spending) averaging 23.7% of GDP in those years.⁹

Real spending declined over the FY2012-FY2019 period relative to FY2009-FY2011 levels largely due to both the modifications made by the BCA (which reduced discretionary spending) and the winding down of stimulus programs (which reduced mandatory and discretionary spending). However, the average of real outlays between FY2012 and FY2019 (20.7% of GDP) remained higher than average outlays from FY1969 through FY2019 (20.3% of GDP).

Outlays increased significantly in FY2020 and FY2021 (to 31.3% of GDP and 30.5% of GDP, respectively) due to the federal response to the COVID-19 pandemic. The Congressional Budget Office (CBO) May 2022 baseline projected a drop in real outlays over the subsequent few years, to 23.8% of GDP in FY2022 and 21.9% of GDP in FY2024. The CBO baseline then projected a slow increase in outlays for the remainder of the 10-year forecast, with outlays reaching 24.3% of GDP in FY2032.¹⁰ Those increases are mostly attributable to continued increases in mandatory spending and increases in net interest payments on the federal debt.

How did the expiration of the discretionary spending limits affect baseline projections for discretionary spending?

As Congress considers budgetary policy, it relies on baseline projections of spending, revenue, and deficits. These baseline projections help Congress understand the implications of existing budget policy and also provide a point of reference for measuring the budgetary effects of proposed legislation. The Congressional Budget Act (P.L. 93-344) requires CBO to provide Congress with such baseline projections, which are included in a document referred to as The Budget and Economic Outlook.¹¹ In calculating the baseline, CBO makes its own technical and economic assumptions but must assume that spending and revenue policies continue or expire based on what is currently slated to occur in statute, with some exceptions.¹²

For the fiscal years in which the discretionary spending limits were in place, CBO's baseline projections for discretionary spending were calculated by (1) assuming levels of discretionary funding consistent with the spending levels permitted under the statutory limits; and (2) for types of spending that are essentially exempt from the limits (such as spending designated as an emergency or overseas contingency operations), assuming a continuation of the amounts provided in the previous fiscal year, adjusted for inflation.¹³

For the years since FY2021, CBO's baseline projections for discretionary spending are calculated using the methodology required by law.¹⁴ Generally, the projections assume that discretionary funding increases with inflation.¹⁵

What other mechanisms can Congress use to set or limit spending levels in appropriations bills?

Budget Resolution

In the absence of the discretionary spending limits, Congress has other tools that it can employ to set levels of discretionary spending or to limit the amount of spending that can be provided in appropriations bills. One option, created before the existence of discretionary spending limits, is a budget resolution. A budget resolution reflects an annual agreement between the House and Senate on budgetary levels for the upcoming fiscal year and at least four additional years. Once agreed to by both chambers in the exact same form, certain levels in the budget resolution may be enforced by points of order.

The budget resolution is required to include a level of total spending for the upcoming fiscal year and then to allocate that spending among committees.¹⁶ Under this process, the House and Senate Appropriations Committees receive a spending allocation (referred to as a 302(a) allocation) that acts as a limit on how much total discretionary spending can be provided in all of the appropriations bills for the fiscal year. The Congressional Budget Act also requires that the House and Senate Appropriations Committees then subdivide their 302(a) allocation among their 12 subcommittees and report these sub-allocations—referred to as 302(b) sub-allocations—to their respective chambers.¹⁷ These sub-allocations act as a procedural limit on the level of funding that can be provided in each individual appropriations bill.

The allocations are then enforceable by points of order, meaning that if legislation is being considered on the House or Senate floor that would violate these levels, a Member may raise a point of order against the consideration of that legislation. Points of order are not self-enforcing, however, meaning that if no Member raises a point of order, a chamber may consider and pass legislation regardless of whether it would violate levels established in the budget resolution. In addition, either chamber may waive the point of order. The process for waiving points of order, and the number of Members required to waive points of order, varies by chamber. Generally, such points of order can be waived in the House by a simple majority of Members and in the Senate by three-fifths of all Senators.¹⁸

Deeming Resolutions

Often, the House and Senate do not reach agreement on a budget resolution. This means that there is no allocation of spending made to the Appropriations Committees. This absence means that there is no procedural limit to the amount that can be included in appropriations measures and no formal basis for the Appropriations Committees to make the required spending sub-allocations. Without such enforceable budgetary levels, the development and consideration of individual appropriations measures may encounter difficulties.

In the absence of agreement on a budget resolution, however, Congress often employs alternative legislative tools to substitute for a budget resolution. These substitutes are typically referred to as "deeming resolutions" because they are deemed to serve in place of a budget resolution for the purposes of establishing enforceable budget levels for the upcoming fiscal year.¹⁹ Employing a deeming resolution, however, does not preclude Congress from subsequently agreeing to a budget resolution.

Such mechanisms are not formally defined and have no specifically prescribed form or content. The mechanisms vary in form and function, but they always (1) include or reference certain budgetary levels (e.g., aggregate spending limits and committee spending allocations) and (2) contain language stipulating that such levels are to be enforceable by points of order as if they had been included in a budget resolution.

In the past, such deeming resolutions have given 302(a) allocations to the Appropriations Committee to act as overall limits on discretionary spending. For example, to establish discretionary spending levels for FY2023, on June 8, 2022, the House passed a deeming resolution, H.Res. 1153. It gave the House Appropriations Committee a 302(a) allocation of $1.6 trillion.²⁰

Other Procedural Enforcement

In the absence of a budget resolution or deeming resolution, Congress might adopt other procedural mechanisms for setting or limiting discretionary spending levels. This may include employing informal mechanisms or other formal procedural devices. For example, for FY2017, the House moved forward with appropriations in the absence of a budget resolution or deeming resolution. First, the House Appropriations Committee adopted "interim 302(b) sub-allocations" for some individual appropriations bills.²¹ While such levels did not act as an enforceable cap on appropriations measures when they were considered on the floor, the House adopted a separate order as a part of H.Res. 5 (114^th Congress) that prohibited floor amendments from increasing spending in a general appropriations bill.²² This effectively created a limit on individual appropriations bills when they were considered by the House.

Appendix. Discretionary Budget Authority Limits Under the BCA as Amended, 2011-2021