On Aug. 1 and Aug. 2, Congress passed and President Barack Obama signed the Budget Control Act of 2011 (BCA).

The deal is historic in that it is expected to produce at least $2.1 trillion in both debt limit increases and budgetary cuts over 10 years.

The deal provides at least one dollar of actual spending cuts for each dollar in debt limit increase.

By including upfront cuts, a Joint Committee, a balanced budget amendment (BBA) vote, the debt disapproval process, and sequestration, spending cuts will continue through the next election and beyond.

Basics of the proposal

• Upon passage, the President can request an immediate $400 billion increase in the debt limit, to be followed by a further $500 billion increase if a resolution of disapproval is not enacted.

• This $900 billion increase comes with over $900 billion in Congressional Budget Office (CBO) scored savings through tough discretionary caps, enforceable with across-the-board spending cuts that Congress would have to affirmatively vote to turn off.

• The bill establishes a Joint Select Committee that is tasked with reducing the deficit by at least $1.5 trillion. The Committee is made up of 12 members of Congress, equally divided with three each of House Republicans, House Democrats, Senate Republicans, and Senate Democrats. By Nov. 23 of this year, the Committee must vote on legislation (simple majority for passage).

• Any legislation reported from the Committee will receive expedited consideration in both Chambers and will be voted on by Dec. 23. If the Committee produces a bill enacted into law that achieves $1.2 trillion or greater in savings, that would trigger the President’s authority to request a debt limit increase of equal amount (subject to disapproval and veto), capped at $1.5 trillion.

• The bill requires Congress to vote on a balanced budget amendment no sooner than Oct. 1, 2011, and no later than Dec. 31, 2011. If one chamber passed an amendment, the other chamber would be required to consider it.

• If a balanced budget amendment is sent to the states, it would trigger the President’s authority to request a debt limit increase of $1.5 trillion, subject to disapproval and veto, regardless of the success or failure of the Committee.

Trigger design

• If the Joint Committee does not produce enacted savings of at least $1.2 trillion and a balanced budget amendment has not been sent to the states, then the President is given the authority to request a $1.2 trillion debt limit increase (subject to disapproval and veto).

• That $1.2 trillion would be recouped by a combination of whatever savings were enacted pursuant to the Joint Committee process, if any, and an across the board spending cut using an expanded version of the original House sequester language. If the Joint Committee process failed to enact any savings at all, then the full $1.2 trillion would be recovered via this expanded sequester process. This sequester process would remain in place even if a BBA were sent to the states.