The Budget Enforcement Act (BEA) of 1990, enacted as Title XIII of the Omnibus Budget Reconciliation Act, marked a significant milestone in enforcing deficit reduction measures. It aimed to address the rising fiscal challenges of the time by revising federal budget control procedures and introducing new mechanisms to ensure adherence to deficit reduction goals.
Purpose
The BEA had two primary objectives:
- To enforce deficit reduction achieved by the Omnibus Budget Reconciliation Act of 1990.
- To revise federal budget control procedures to address fiscal challenges.
Budget Control Processes
The BEA introduced two new budget control processes to strengthen fiscal discipline:
1. Caps on Discretionary Spending
- Implemented caps on annually-appropriated discretionary spending, limiting the funds Congress could allocate in annual appropriations bills.
- Breaching these caps would trigger a presidential sequester order, resulting in across-the-board discretionary spending cuts.
2. PAYGO Procedures
- Introduced statutory “pay-as-you-go” (PAYGO) procedures to govern new legislation affecting direct spending and/or revenues.
- Required offsetting new spending increases or tax cuts with spending cuts or tax increases elsewhere.
- Failure to offset such changes would lead to a presidential sequestration order cutting non-exempt direct spending programs.
Deficit Targets
The BEA extended and revised deficit targets from the Gramm-Rudman-Hollings Balanced Budget Act, allowing for adjustments based on economic changes. Sequestration would only be triggered if Congress breached the discretionary spending caps or violated PAYGO.
Legislative History
The BEA was enacted as Title XIII of the Omnibus Budget Reconciliation Act of 1990 and signed into law on November 5, 1990. It represented a bipartisan deficit reduction deal between Congress and President George H.W. Bush.
Impact
The BEA played a significant role in reducing deficits during the 1990s. It was considered more successful than its predecessor, Gramm-Rudman-Hollings, in enforcing deficit reduction agreements. Sequestration occurred only twice under the BEA, resulting in small discretionary spending cuts in 1991. However, Congress began to weaken the BEA’s budget controls when faced with budget surpluses in the late 1990s.
Conclusion
The Budget Enforcement Act of 1990 had a notable impact on deficit reduction and fiscal discipline in the United States. It introduced innovative budget control mechanisms, including caps on discretionary spending and PAYGO procedures, which helped enforce deficit reduction goals. While the BEA was ultimately weakened due to changing fiscal circumstances, its historical significance lies in its role in addressing the fiscal challenges of the 1990s and its contribution to a period of reduced deficits.
Sources:
- U.S. Fiscal Policies and Priorities for Long-Run Sustainability: https://www.elibrary.imf.org/view/book/9781589062955/C6.xml
- Budget Enforcement Act of 1990: https://en.wikipedia.org/wiki/Budget_Enforcement_Act_of_1990
- §015b. (CB) Budget Enforcement Act of 1990: https://budgetcounsel.com/cyclopedia-budgetica/cb-budget-enforcement-act-of-1990-pub-l-101-508/
FAQs
What was the primary purpose of the Budget Enforcement Act (BEA) of 1990?
The BEA aimed to enforce deficit reduction achieved by the Omnibus Budget Reconciliation Act of 1990 and revise federal budget control procedures to address fiscal challenges.
What were the two new budget control processes introduced by the BEA?
The BEA introduced caps on discretionary spending, limiting the amount of funds Congress could allocate in annual appropriations bills, and PAYGO procedures, requiring offsetting new spending increases or tax cuts with spending cuts or tax increases elsewhere.
How did the BEA address deficit targets?
The BEA extended and revised deficit targets from the Gramm-Rudman-Hollings Balanced Budget Act, allowing for adjustments based on economic changes. Sequestration would only be triggered if Congress breached the discretionary spending caps or violated PAYGO.
When was the BEA enacted, and who was the president at the time?
The BEA was enacted as Title XIII of the Omnibus Budget Reconciliation Act of 1990 and signed into law on November 5, 1990, by President George H.W. Bush.
What was the impact of the BEA on deficit reduction?
The BEA played a significant role in reducing deficits during the 1990s and was considered more successful than its predecessor, Gramm-Rudman-Hollings, in enforcing deficit reduction agreements.
How many times was sequestration triggered under the BEA?
Sequestration occurred only twice under the BEA, resulting in small discretionary spending cuts in 1991.
What happened to the BEA’s budget controls in the late 1990s?
Congress began to weaken the BEA’s budget controls when faced with budget surpluses in the late 1990s.
What is the historical significance of the BEA?
The BEA’s historical significance lies in its role in addressing the fiscal challenges of the 1990s, its contribution to a period of reduced deficits, and its innovative budget control mechanisms, such as caps on discretionary spending and PAYGO procedures.