This bill would establish new spending caps for the federal budget by requiring one percent of the budget to be cut each of the next five years (through fiscal year 2021), after which total spending would be limited to 18 percent of U.S. GDP. It wouldn’t mandate spending cuts in any particular area, but it would give Congress the ability to make targeted cuts as long as total spending is reduced by one percent each year.
Starting in fiscal year 2023, total projected spending could not be less than the previous year’s projection, meaning that the federal budget would stop shrinking, but its growth would be constrained by the 18 percent of GDP cap. If the U.S. economy were to enter a recession and shrink, the budget wouldn’t get smaller along with it, instead remaining at or above the level it had been the year prior.
The Office of Management and Budget (OMB) would be required to sequester funding that exceeds these budget caps through automatic cuts. Most existing exemptions from sequestration would be eliminated, other than interest payments on the national debt so as to avoid default.
If the OMB projects that a sequestration will occur, congressional budget committees would be allowed to report a resolution that requires congressional committees to change existing law to make the needed spending cuts.