Debt Ceiling Legislation Will Have Far-Reaching Effects

On Aug. 2, 2011, President Obama signed into law the Budget Control Act of 2011 (the Act). The Act raised the federal debt ceiling by $2.1 trillion and prevented the U.S. government from defaulting on its financial obligations. Click here to view the Act.

Under the Act, Congress may not consider a bill, joint resolution, amendment, motion or conference report that would cause the discretionary spending limits set by the Act to be exceeded. The Act calls for a two step process. Step 1 calls for discretionary spending caps to save $917 billion over 10 years: $741 billion in discretionary spending savings; $156 billion in debt service payment savings; and $20 billion in mandatory spending savings. Step 2 establishes the appointment of a 12 Lawmaker committee (the Joint Select Committee) to identify an additional $1.5 trillion in savings over 10 years. The Joint Select Committee must find at least $1.2 trillion in savings or else mandatory cuts will be enacted.