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INTRODUCTION

BUDGET BASELINE TOTALS

ECONOMIC ASSUMPTIONS

REQUIRED OUTLAY REDUCTIONS

AUTOMATIC SPENDING INCREASES

SPECIAL RULES

• Guaranteed Student Loan Program
• Foster Care and Adoption Assistance Programs
• Medicare
• Veterans Medical Care and Other Health Programs
• Child Support Enforcement Program
• Unemployment Compensation Programs
• Commodity Credit Corporation
• Federal Pay

SEQUESTRATION REDUCTIONS

APPENDIX: SEQUESTRATION REDUCTIONS BY AGENCY AND BUDGET ACCOUNT
 

TABLES
1.	CBO ESTIMATES OF BUDGET BASELINE TOTALS FOR 1988
2.	CBO ESTIMATES OF DEFICIT REDUCTIONS ACHIEVED FOR 1988
3.	CBO ECONOMIC ASSUMPTIONS FOR 1988
4.	REAL ECONOMIC GROWTH RATES FROM PREVIOUS QUARTER
5.	CBO SEQUESTRATION CALCULATIONS FOR 1988
6.	AUTOMATIC SPENDING INCREASES FOR 1988 SUBJECT TO SEQUESTRATION
7.	DEFENSE PROGRAM SEQUESTRATIONS FOR 1988
8.	NONDEFENSE PROGRAM SEQUESTRATIONS FOR 1988 BY FUNCTION
9.	CREDIT PROGRAM SEQUESTRATIONS FOR 1988 BY FUNCTION

 
 

INTRODUCTION

The Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 (Public Law 100-119) provides a new set of deficit targets to be met over the next six years and reinstitutes an automatic sequestration procedure for achieving deficit reductions. The act also provides a $10 billion margin-of-error amount for 1988 through 1992, but none for 1993. The new deficit targets specified by the act are:

The sequestration of budgetary resources would be triggered automatically under the following conditions:

• For 1988 only, if the amount of net deficit reduction achieved through laws enacted and regulations promulgated between January 1, 1987, and November 20, 1987, is less than $23 billion. The act sets a $23 billion deficit reduction target for 1988 so that the deficit target of $144 billion and the $10 billion margin-of-error amount do not affect sequestration.
  
  
• For 1989 only, if the estimated deficit on October 10, 1988, exceeds $146 billion ($136 billion deficit target plus the $10 billion margin) and the amount of net deficit reduction achieved through laws enacted and regulations promulgated between January 1, 1988, and October 10,1988, is less than $36 billion.
  
  
• For 1990 through 1992, if the estimated deficit at the beginning of each fiscal year exceeds the deficit target by more than $10 billion.
  
  
• For 1993 only, if there is any deficit estimated on October 15,1992.

Sequestration involves the permanent cancellation of new budget authority and other authority to obligate and expend funds, except for special and trust funds where the sequestered amounts of spending authority remain in the funds. The sequestration of budgetary resources is designed to achieve outlay reductions sufficient to reach the deficit targets, except for 1988 and 1989 when the outlay reductions that can be achieved through sequestration are limited to $23 billion and $36 billion, respectively.

Under the Reaffirmation Act, the Director of the Office of Management and Budget (OMB) is to determine each year whether or not sequestration is necessary and the magnitude of sequestration. The role of the Congressional Budget Office (CBO) is advisory to OMB and the Congress. Each year, the two agencies are required to prepare independently two sets of sequestration reports. The CBO reports are transmitted to the Director of OMB and to the Congress, and they provide a benchmark against which the Congress and others may assess the OMB reports. The OMB reports are made to the President and to the Congress, and they provide the basis for sequestration orders to be issued by the President. The timetable for the agency reports and sequestration orders is shown in the box.

The initial CBO and OMB sequestration reports are to be based on laws enacted and regulations promulgated as final by a common "snapshot date" (October 10 for the 1988 reports). The revised reports, however, must be based on laws enacted and regulations promulgated by the latest possible date before they are issued. Therefore, because the snapshot date may be different in the two final agency reports, some legislation and regulations reflected in one report may not be reflected in the other.

Unlike the original Balanced Budget Act of 1985, the amended law does not provide a role for the Comptroller General in the preparation and issuance of sequestration reports. His role under the amended Balanced Budget Act is threefold: preparing a report each year to the Congress and the President that certifies whether the final sequestration order issued by the President complies with the requirements of the Balanced Budget Act, as amended; assessing the compliance and accuracy of the OMB sequestration reports; and making recommendations for improving sequestration procedures. The Comptroller's first report for fiscal year 1988 is due December 15,1987; in later years, it is due on November 15.

This document is the initial CBO report for 1988. The report:

• Estimates budget baseline levels as of January 1, 1987, and October 10, 1987, the amount of net deficit change that has occurred between the two dates, and the outlay reductions required for 1988;
  
  
• Provides CBO economic assumptions used for the two baseline estimates, including the estimated rate of real economic growth for fiscal year 1988 by quarter; and
  
  
• Calculates the amounts and percentages by which various budgetary resources must be sequestered in order to achieve the required outlay reductions.

This document is available in its entirety in PDF.