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Frequently Asked Questions on the U.S. Defense Budget and the Budget Control Act

The following is the July 13, 2018 Congressional Research Service report, The Defense Budget and the Budget Control Act: Frequently Asked Questions.

From the Report:

Enacted on August 2, 2011, the Budget Control Act of 2011 as amended (P.L. 112-25, P.L. 112-240, P.L. 113-67, P.L. 114-74, and P.L. 115-123) sets limits on defense and nondefense spending. As part of an agreement to increase the statutory limit on public debt, the BCA aimed to reduce annual federal budget deficits by a total of at least $2.1 trillion from FY2012 through FY2021, with approximately half of the savings to come from defense.

The spending limits (or caps) apply separately to defense and nondefense discretionary budget authority. Budget authority is authority provided by law to a federal agency to obligate money for goods and services. The caps are enforced by a mechanism called sequestration. Sequestration automatically cancels previously enacted appropriations (a form of budget authority) by an amount necessary to reach prespecified levels. The defense spending limits apply to national defense (budget function 050) but not to funding designated for Overseas Contingency Operations (OCO) or emergencies.

Some defense policymakers and officials argue the spending restrictions impede the Department of Defense’s (DOD’s) ability to adequately prepare military personnel and equipment for operations and other national security requirements. Others argue the limits are necessary to curb rising deficits and debt.

After lawmakers did not reach a deficit-reduction deal and triggered steeper reductions to the initial BCA caps, Congress repeatedly amended the legislation to raise the spending limits. Most recently, President Donald Trump on February 9, 2018, signed into law the Bipartisan Budget Act of 2018 (P.L. 115-123). The bill amended the BCA to increase discretionary defense spending caps by the largest amounts to date—by $80 billion to $629 billion in FY2018 and by $85 billion to $647 billion in FY2019. It did not change the spending limits for FY2020 and FY2021.

The annual federal budget deficit decreased from $1.1 trillion (6.8% of Gross Domestic Product) in FY2012 to $665 billion (3.5% of GDP) in FY2017, but is projected to increase to $1.1 trillion (4.9% of GDP) in FY2021. Meanwhile, federal debt held by the public has increased from $11.3 trillion (70.4% of GDP) in FY2012 to $14.7 trillion (76.5% of GDP) in FY2017, and is projected to further increase to $19 trillion (83.1% of GDP) in FY2021.