Sequestration involves setting a hard cap on the amount of government spending within broadly defined categories; if Congress enacts annual appropriations legislation that exceeds these caps, an across-the-board spending cut is automatically imposed on these categories, affecting all departments and programs by an equal percentage.
The sequestration was to come into force on January 1, 2013 and was considered part of the fiscal cliff, but the American Taxpayer Relief Act of 2012 delayed it until March 1 of that year.
The process for determining the amount of the automatic cuts was found unconstitutional in the case of Bowsher v. Synar, 478 U.S. 714 (1986) and Congress enacted a reworked version of the law in 1987.
From 1990 until 2002, and again since 2010, Congress has operated under a system called PAYGO, under which any new government spending needs to be offset by savings from (or cuts to) current programs.
Beginning in 1998, in response to the first federal budget surplus since 1969, Congress started enacting, and the President signing, increases in discretionary spending above the statutory limit using creative means such as advance appropriations, delays in making obligations and payments, emergency designations, and specific directives.
[7] The PAYGO system was reestablished as a standing rule of the House of Representatives (which does not have the force of law) on January 4, 2007 by the Democratic-controlled 110th Congress,[8][9][10] but less than one year later, facing widespread demand to ease looming tax burdens caused by the Alternative Minimum Tax, Congress abandoned its pay-go pledge.
At the beginning of the 111th Congress, PAYGO was modified by including an "emergency" exemption, which was provided for the American Recovery and Reinvestment Act of 2009 during the Obama administration.
This total included $1.2 trillion in spending cuts identified specifically in the legislation, with an additional $1.2 trillion in cuts that were to be determined by a bipartisan group of Senators and Representatives known as the "Super Committee" or officially as the United States Congress Joint Select Committee on Deficit Reduction.
In that event, a trigger mechanism in the bill was activated to implement across-the-board reductions in the rate of increase in spending known as "sequestration".
[15] The report – which was issued September 14, 2012, and was close to 400 pages long – provided the warning that "sequestration would be deeply destructive to national security... and core government functions".