CBO Analysis Of Agreed August 1 Final Debt Ceiling Deal

From "CBO ANALYSIS OF AUGUST 1 BUDGET CONTROL ACT" August 1, 2011, Letter to the Honorable John Boehner and the Honorable Harry Reid:

SUMMARY

The Congressional Budget Office (CBO) has estimated the impact on the deficit of the Budget Control Act of 2011, as posted on the Web site of the House Committee on Rules on August 1, 2011. The legislation would:

• Establish caps on discretionary spending through 2021;


• Allow for certain amounts of additional spending for "program integrity" initiatives aimed at reducing the amount of improper benefit payments;


• Make changes to the Pell Grant and student loan programs;


• Require that the House of Representatives and the Senate vote on a joint resolution proposing a balanced budget amendment to the Constitution;


• Establish a procedure to increase the debt limit by $400 billion initially and procedures that would allow the limit to be raised further in two additional steps, for a cumulative increase of between $2.1 trillion and $2.4 trillion;


• Reinstate and modify certain budget process rules;


• Create a Congressional Joint Select Committee on Deficit Reduction to propose further deficit reduction, with a stated goal of achieving at least $1.5 trillion in budgetary savings over 10 years; and


• Establish automatic procedures for reducing spending by as much as $1.2 trillion if legislation originating with the new joint select committee does not achieve such savings.

If appropriations in the next 10 years are equal to the caps on discretionary spending and the maximum amount of funding is provided for the program integrity initiatives, CBO estimates that the legislation—apart from the provisions related to the joint select committee—would reduce budget deficits by $917 billion between 2012 and 2021. In addition, legislation originating with the joint select committee, or the automatic reductions in spending that would occur in the absence of such legislation, would reduce deficits by at least $1.2 trillion over the 10-year period. Therefore, the deficit reduction stemming from this legislation would total at least $2.1 trillion over the 2012–2021 period.

Those amounts are relative to CBO's March 2011 baseline adjusted for subsequent appropriation action. CBO has also calculated the net budgetary impact if discretionary savings are measured relative to its January baseline projections. Relative to that baseline, CBO estimates that the legislation would reduce budget deficits by at least $2.3 trillion between 2012 and 2021.

The complete 11-page CBO analysis is available here.