How Do New Government Spending Caps Compare to Historical Efforts?

Each of the agreements above also included a number of additional provisions aimed at reducing deficits: the law that included the BEA was also estimated to raise revenues by $189 billion over six years, the BCA created a joint committee tasked with developing a proposal to reduce deficits by $1.5 trillion, and the FRA rescinded unobligated balances from previously enacted COVID relief laws.

Discretionary Spending Over Time

The BEA, BCA, and FRA were each negotiated out of policymakers’ concerns over federal debt, deficit, and spending levels at the time. The 1985, 1987, and 1990 laws grew out of bipartisan concern over rising deficits in the 1980s. The BCA stemmed in part from Republican frustration with rising spending during and after the Great Recession. The FRA was enacted in the wake of historically high emergency spending during the COVID era. Although discretionary spending caps were a common tool in each of these laws, the caps cover a smaller and smaller portion of total government spending, while spending on mandatory programs like Social Security, Medicare, and Medicaid has grown as a share of the overall federal budget.

Discretionary spending has already been shrinking as a share of the U.S. economy—from around 9% of GDP in the 1990s to 6.5% of GDP today. The Congressional Budget Office (CBO) estimated even before the FRA that discretionary spending would shrink further as a percentage of GDP over the next decade, from 6.5% in FY2023 to 6.0% in FY2033.

Cap Sub-Limits

The BEA, BCA, and FRA provided different limitations for specific categories of discretionary spending:

• The BEA and subsequent extensions featured, at different times, one, two, and three categories of caps.[9]
• The BCA established separate defense and non-defense limits on discretionary spending throughout the 10-year period.
• The FRA similarly has two separate limits for defense and non-defense spending.

Length of Caps

• The initial BEA caps were enacted for five years (FY1991-1995), but were extended twice and ended up being in place for 12 years in total (FY1991-2002).
• The BCA caps were enacted for 10 years (FY2012-2021) and remained in place that entire time, though Congress adjusted the caps several times.
• The FRA caps are only in place for two years (FY2024-2025), though additional limits are proposed for FY2026-2029.

Enforcement and Exceptions

All three bipartisan laws with discretionary spending caps have relied at least in part on sequestration to enforce the limits. Sequestration entails across-the-board cuts to “non-exempt” spending when the caps are breached, and these cuts are implemented by the executive branch and the Office of Management Budget (OMB). However, the law limits the categories of spending that can be subject to sequestration (and, in the case of Medicare, the percentage cut that can apply).

Discretionary spending limits have also been set through targets that are enforced with points of order, which any member of Congress can raise. In most cases, a three-fifths majority in the Senate can waive the point of order, and the House can “typically” waive the point of order with “the adoption of special rules.”

• The 1990 BEA also enforced discretionary spending limits during the legislative process (i.e., before a bill’s passage into law) through points of order.
• The first two years of spending caps under the FRA (FY2024 and 2025) are enforced by sequestration. If Congress decides to adhere to four additional years of spending limits (FY2026 through 2029), those would be enforced by points of order.

Each bipartisan law with spending caps also included numerous exceptions that would not count towards the caps:

• The 1990 BEA allowed spending due to changes in inflation, emergencies, and a few smaller categories to be exempt from the caps.
• The 2011 BCA exempted spending due to emergencies and overseas U.S. military spending from the caps.
• The 2023 FRA exempts spending due to emergencies, overseas U.S. military spending, and discretionary spending enacted under previous laws like the Infrastructure Investment and Jobs Act (IIJA) and the Bipartisan Safer Communities Act (BCSA) from the two years of caps.

Cap Savings

• At the time of enactment, the discretionary spending caps in the 1990 BEA were projected to reduce spending by $180 billion over five years—roughly $380 billion in 2023 dollars. That projection does not include savings from the two subsequent extensions to the caps.
• The 2011 BCA caps, at the time of enactment, were projected to reduce spending by $756 billion over 10 years—roughly $975 billion in 2023 dollars.[10]
• The 2023 FRA is projected to reduce spending by $1.3 trillion over 10 years.[11]

Whether or not the FRA produces the savings desired by some policymakers will depend on how long Congress abides by the caps. The magnitude of savings will also be diminished once “side deals” negotiated in the agreement increase non-defense discretionary spending relative to CBO’s score of the FRA and reduce the FRA’s deficit impact.

Ceiling or Floor?

Once President Biden signed the FRA into law, House Republicans released their own FY2024 discretionary spending proposal that would provide for non-defense discretionary funding at levels significantly below the FRA’s caps. While this is permitted under the law, since the FRA sets a ceiling on discretionary spending rather than a floor, House Democrats have accused House Republicans of “mis[leading] the American people” and “not want[ing] to adhere to the bipartisan agreement.”

The Republican proposal sets FY2024 base discretionary budget authority at $1.471 trillion, nearly $120 billion lower than the FRA cap, which was set at $1.590 trillion. It is unclear how much this proposal would reduce deficits compared to the FRA, since House Republicans have also proposed redirecting some of their proposed spending cuts to border security, threats posed by China, and other initiatives. The House Republican proposal will make timely completion of the FY2024 appropriations process—already a challenging task—much more complex.

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[1] The remaining seven years of caps were extensions of BEA caps enacted in 1993 and 1997.

[2] Although discretionary spending caps were not enacted into law until the 1990 BEA, memoranda of understanding between Congress and the Reagan administration from late 1987 describe an intention to amend the Congressional Budget Act to limit discretionary spending in FY1988-89. These memoranda could be considered the first stage of policymakers’ discussion over discretionary spending caps, before the enactment of the 1990 BEA.

[3] Measured using CBO historical budget data for the fiscal year in which the legislation was enacted.

[4] Measured using CBO historical budget data for the fiscal year in which the legislation was enacted.

[5] In the absence of a formal cost estimate, BPC consulted a White House statement from the administration of President George H.W. Bush upon enactment of the Budget Enforcement Act of 1990.

[6] These savings do not reflect the subsequent, reduced spending caps that took effect in January 2012 following the failure by Congress to reach a $1.5 trillion deficit reduction agreement.

[7] CBO’s cost estimate assumes that Congress will abide by discretionary spending caps in FY2024-25 but does not adhere to additional potential spending limits in FY2026-29. If Congress abides by additional limits from FY2026-29, outlays would be an additional $533 billion lower in the FY2024-33 window.

[8] BPC used OMB’s deflator for total outlays. For more, see: “Table 10.1—Gross Domestic Product and Deflators Used in the Historical Tables: 1940–2028” at https://www.whitehouse.gov/omb/budget/historical-tables/.

[9] The BEA featured three broad categories: defense, domestic, and international spending. These categorical limits applied for FY1991-93, with only a broad overall discretionary spending limit applying in FY1994-95. The overall limit was later extended from FY1996-98 under a 1993 law. Under a bipartisan 1997 budget deal, separate defense and non-defense limits were restored for FY1998-99 with a new, third category: crime reduction. Under that 1997 law there were two limits for FY2000: 1) crime reduction, 2) all other discretionary spending; for FY2001-02, there was again just one overall discretionary spending limit.

[10] This does not include additional savings from the reduced caps that took effect in January 2012 upon failure by lawmakers to pass a $1.5 trillion deficit reduction deal.

[11] In its score of the FRA, CBO assumes discretionary spending adheres to the caps in FY2024-25, and then grows at the pace of inflation from FY2026-33. This results in lower spending than CBO’s pre-FRA baseline in all 10 years of the budget window.