Budget Control Act of 2011


After much debate and brinkmanship, on August 2, 2011 President Obama signed the “Budget Control Act of 2011”. The Act increases the federal government’s debt limit by $900 billion and provides for $917 billion of spending cuts, which is achieved through the reduction of discretionary government spending over a ten year period (fiscal years 2012-2021, with the government’s fiscal year 2012 beginning on October 1, 2011).

In addition, the Act establishes a Joint Select Committee on Deficit Reduction, which will consist of twelve members of Congress (six members of the Democratic party and six members of the Republican party). The purpose of the Joint Committee is to propose legislation by November 23, 2011 that will reduce the federal budget deficit by $1.5 trillion over fiscal years 2012-2021. If a proposal is made, the House and the Senate must each vote on the proposal “as-is” by December 23, 2011. If the Joint Committee’s proposal is enacted, then the President would be authorized to request a debt limit increase of $1.5 trillion. If, however, the Joint Committee fails to produce a proposal or if its proposal is not enacted, then an additional $1.2 trillion of spending cuts will automatically occur and the debt limit increase is limited to $1.2 trillion. The automatic spending cuts apply to both mandatory and discretionary spending, but certain spending is exempt, such as social security, military and government employee retirement benefits, Medicaid and other welfare programs, and interest payments on debt.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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