Testimony on Discretionary Appropriations Under the Budget Control Act
Theresa Gullo, CBO’s Assistant Director for Budget Analysis, testifies before the Committee on the Budget, United States Senate, about discretionary funding following enactment of the Budget Control Act of 2011.
This testimony makes the following key points about discretionary appropriations before and after enactment of the Budget Control Act of 2011:
From 1999 to 2018, discretionary spending increased by 53 percent in real terms (that is, adjusted to remove the effects of inflation)—from $843 billion (in 2019 dollars) to $1,290 billion. Defense outlays rose by 56 percent, while nondefense outlays grew by 50 percent.
Discretionary spending differed dramatically during the first and second halves of that period. It rose in real terms over the first half, peaking in 2010. Since the BCA took effect in 2011, however, such spending has fallen. From 2011 to 2018, total real discretionary spending fell by almost 17 percent; defense outlays fell by 21 percent, and nondefense outlays, by 12 percent. Much of that decline was caused by a sharp reduction in war funding and by the fading effects of spending attributable to the American Recovery and Reinvestment Act of 2009 (P.L. 111-5).
Despite those overall declines in spending, discretionary appropriations have been greater than the annual cap amounts specified in the BCA (including the automatic reduction in the caps that law later required) since the law took effect. Excluding the amounts sequestered in 2013, discretionary appropriations over the 2012–2019 period have to date been larger than those annual cap amounts by a total of $1.4 trillion (or about 17 percent).
About 30 percent of that amount, $427 billion, stemmed from legislative changes made to the caps themselves. After two small reductions were made to the caps in 2013, three laws each increased discretionary caps for two years at a time. Most of that increase, $296 billion, was the result of the 2018 legislation, which altered the limits for 2018 and 2019.
The remaining 70 percent, $984 billion, was the result of adjustments to the caps that were permitted by the BCA and triggered by appropriations for specified purposes. Those adjustments generally apply to funding for four types of activities, but two of them—war-related activities (referred to as overseas contingency operations, or OCO) and activities designated as emergency requirements—have accounted for most of the adjustments and for the largest amounts ($723 billion and $180 billion, respectively, since 2012).
No changes have been enacted to the caps for 2020 and 2021, the last two years covered by the BCA. Without legislation to increase the caps, funding constrained by the caps in 2020 is set to drop by $126 billion (or 10 percent), the Congressional Budget Office estimates.
In deciding whether to implement those scheduled sharp reductions or raise the caps, the Congress will face a number of issues, including whether to offset any of the spending increases that would result from raising the caps and how it might do so, whether any changes in defense and nondefense caps should be equal, and how any resulting additional spending might change the picture for debt and deficits.