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Sequestration will result in 12% discretionary drop

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If sequestration happens as currently called for by the Budget Control Act, it will result in a real drop of 12.1 percent in discretionary spending compared to the current fiscal year, says the Congressional Research Service in a new report.

Sequestration, due to be implemented in January 2013, will result in across-the-board cuts mostly to discretionary spending programs, not including a few exempt categories such as Veterans Affairs Department spending. Mandatory programs are mostly exempt from sequestration, with the exception of Medicare, which is set for a $6 billion automatic cut in fiscal 2013, according to Congressional Budget Office data quotes in the CRS report (.pdf).  

Sequestration will occur unless Congress reverses portions of the Budget Control Act, which became law in August 2011. Under the act, Congress was meant to have approved $1.5 trillion worth of spending cuts over a decade by January 2012. Since it did not, sequestration of fiscal 2013 funds and additional budget caps thereafter through fiscal 2021 worth a cumulative $1.2 trillion are the consequence. However, some in Congress have called for a revision to the act.

Within the period covered by the Budget Control Act, fiscal 2013 would be the year in which the largest year-over-year discretionary spending percentage drop occurs, the CRS report (obtained by Secrecy News) adds.

The overall effect of the act could be to reduce discretionary spending to the lowest share of gross domestic product "since data were first collected in 1962," the report adds--assuming that exempt categories such as overseas contingency spending (funding meant for wars) and emergency funding stay at current levels.

There have been previous eras of sustained declines in federal discretionary spending as share of GDP, the report notes, but in both cases--fiscals 1969-1974 and fiscals 1987-2000, they were mainly the result of a fall in defense spending (due to the end of the Vietnam War and the Cold War, respectively).

Mandatory spending--Social Security, Medicaid and other programs--would grow in real terms under the Budget Control Act, resulting in overall federal spending as a percentage of GDP to "be above its post-World War II average share" by the end of fiscal 2012, the CRS report says.

For more:
- download the CRS report, R42506 (.pdf)

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