Sequester Replacement Reconciliation Act

Cost Estimate
May 9, 2012

As posted on the Web site of the House Committee on Rules (committee print 112-21).

The Congressional Budget Office (CBO) has reviewed the Sequester Replacement Reconciliation Act, as posted on the Web site of the House Committee on Rules (committee print 112-21). The two enclosed tables show estimates of the legislation's effects on direct spending and revenues for two alternative enactment dates. Table 1 provides estimates assuming enactment around October 1, 2012, while Table 2 provides estimates assuming enactment by July 1, 2012, as directed by the Chairman of the House Committee on the Budget.

The legislation posted by the Rules Committee combines and modifies two separate bills approved by the House Committee on the Budget on May 7. On May 8, 2012, CBO transmitted cost estimates for those two bills, as ordered reported by the Budget Committee:

The Rules Committee print modifies the reconciliation provisions by eliminating the Energy and Commerce Committee's version of provisions that would impose limits on medical malpractice litigation in state and federal courts. The version of medical liability legislation included in recommendations by the Judiciary Committee remains in committee print 112-21. The Judiciary version would achieve about $18 billion less in budgetary savings over 10 years than the Energy and Commerce version.

In addition, the Rules Committee print alters the Oversight and Government Reform Committee's original recommendations related to retirement contributions by and for certain employees of the Postal Service. Under committee print 112-21, agency payments on behalf of some employees would continue at the current-law rate instead of falling as recommended by the Oversight and Government Reform Committee. Those changes reduce budgetary savings by less than $250 million over the 2012-2022 period, relative to the estimate of the committee's recommendations. (The legislation also would increase retirement contributions paid by some Postal Service employees, and those provisions remain unchanged in the Rules Committee print.)

Assuming enactment around October 1, 2012, CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting the legislation in committee print 112-21 would yield net deficit reduction of $237.8 billion over the 2012-2022 period. That figure reflects changes in direct spending and revenues from reconciliation provisions that would yield gross estimated budgetary savings of $310.0 billion through 2022, partially offset by a cost of $72.2 billion through 2022 for the sequester replacement provisions in title VII of the legislation. The gross savings for reconciliation are lower than CBO estimated on May 8 for the Budget Committee reconciliation package largely because that legislation included the Energy and Commerce version of medical liability reform, which would yield about $18 billion in greater savings than the Judiciary version (as noted above).

Assuming enactment by July 1, 2012, CBO and JCT estimate that the legislation would yield net deficit reduction of $242.8 billion over the 2012-2022 period. That figure reflects gross reconciliation savings ($315.0 billion through 2022), partially offset by the cost of sequester replacement ($72.2 billion through 2022).

The estimated sequester replacement cost of roughly $72 billion over 10 years stem mostly from canceling the sequestration of existing balances for defense programs and advance appropriations for nondefense programs for 2013. However, that total could increase to as much as $97 billion if additional discretionary appropriations are enacted for 2013.

Further, the legislation would specify a cap on total discretionary budget authority for 2013 that is $19.1 billon lower than the total funding level of $1,047 billion that could be provided under current law. However, because any effect of that adjustment would be subject to future appropriation actions, there would be no impact on direct spending from that change in the cap on 2013 funding.