Budget Control Act (BCA)

Definition of Budget Control Act (BCA)

The Budget Control Act is a federal statute passed by Congress and endorsed into law by President Barack Obama on Aug. 2, 2011. The Budget Control Act (BCA) of 2011 was enacted in response to the 2011 Debt Ceiling Crisis. The purpose of the BCA was to increase the United States' debt ceiling, consequently keeping away from the risk of sovereign default that was set to happen approximately Aug. 3, 2011. What's more, the BCA contained procedures for lessening the deficit by at least $2.1 trillion over the fiscal year 2012 to fiscal year 2021.

Understanding Budget Control Act (BCA)

In the U.S., a federal debt ceiling has been in place starting around 1917. Assuming that the debt ceiling were hit, the U.S. would as of now not have the option to issue debt and could default on interest payments to creditors, the outcomes of which could be late, partial or missed payments to federal retired people, Social Security and Medicare beneficiaries and higher future interest rates at which the U.S. could borrow.

2011 Crisis

The 2011 U.S. Debt Ceiling Crisis brought the country close to default risk before the BCA was enacted to raise the debt ceiling and cut the deficit immediately. The BCA permitted an immediate increase of $400 billion to the debt ceiling, bringing the fiscal year 2013 spending cap to $1.047 trillion. The BCA likewise required a Super Committee to foster measures to cut $1.5 trillion in spending more than 10 years. That's what the BCA stipulated assuming the Super Committee failed to propose toward the finish of 2012 at least $1.2 trillion in cuts that will happen north of 10 years, automatic spending cuts will happen in January 2013. These automatic spending cuts are called sequestration.

Since the Super Committee failed to make a proposal lessening the deficit, sequestration happened in January 2013 to stay away from what is called the Fiscal Cliff.

Because of the sequester, budget cuts will go on through 2021, cutting discretionary spending by $109.3 billion total. Albeit the spending cuts are thought of "in all cases," certain programs like Temporary Assistance for Needy Families (TANF) and the Supplemental Nutritional Assistance Program (SNAP) are exempt from the sequester.

For the budget years 2016 through 2021 sequestration has not been required, the Office of Management and Budget reported. That doesn't mean, notwithstanding, that government spending or the national debt are taken care of. The Congressional Budget Office projects a $3.3 trillion federal budget deficit in 2020.