Sequestration is applied to both discretionary and mandatory programs, though some programs (mostly mandatory ones) are exempt. For example, the discretionary and mandatory programs of the Department of Veterans Affairs are exempt, as are Social Security and unemployment benefits and many of the mandatory programs for low-income Americans, such as Medicaid, Child Nutrition Programs, and Federal Pell Grants.
First created in 1985, sequestration was designed to be a blunt instrument — whose arbitrary effects would be so undesirable that they would compel policymakers to reach compromise on budget legislation rather than allow the cuts to go into effect. Since then, sequestration has lost some of its deterrent effect. For example, after the “super committee”1 failed to agree on ways to achieve the $1.2 trillion in deficit savings mandated by the 2011 Budget Control Act, a sequester of FY 2013 discretionary budget authority was imposed. A sequester of non-exempt mandatory programs was also imposed first through FY 2021 and subsequently extended through FY 2025.
The failure of the super committee also led to additional reductions in the discretionary caps through FY 2021. Although these cap reductions are sometimes called “the sequester,” they are not an OMB-implemented sequester. Instead, they simply reduce the top-line spending available for defense and non-defense discretionary programs, but lawmakers retain the ability to decide how to allocate the remaining resources among various accounts programs and activities.
1 The super committee was a special, bipartisan committee made up of members of the House and the Senate that was created by the Budget Control Act of 2011. It was charged with developing a 10-year deficit reduction plan.
More about other budget terms, rules, and processes: