06-05-2025

Sequestration Order for Fiscal Year 2026 Pursuant to Section 251A of the Balanced Budget and Emergency Deficit Control Act, as Amended

Presidential OrderView the Original .pdf
View the Original .pdf

The 1-Minute Brief

What: The President has ordered automatic, across-the-board spending cuts to a specific set of federal programs for Fiscal Year 2026. This action, known as sequestration, is legally required because prior legislation was projected to increase the federal deficit.

Money: The specific dollar amount is determined by the Office of Management and Budget (OMB) and is designed to offset previous deficit increases. The cuts are calculated as a uniform percentage for non-exempt programs, with Medicare cuts capped at 2%. In a similar report for FY2025, the cuts were 5.7% for most non-exempt programs and 2.0% for Medicare.

Your Impact: If you receive benefits from or provide services for certain federal programs, you could see a small reduction in payments. The most significant impact is on Medicare, where payments to doctors and hospitals will be reduced by 2%.

Status: This is a final Presidential Order executing existing law. The cuts are scheduled to take effect on October 1, 2025.

What's Actually in the Bill

This Presidential Order is not new legislation but the execution of a standing law: the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. The order makes automatic spending cuts that were triggered under a "Pay-As-You-Go" (PAYGO) system. This system requires that new laws affecting mandatory spending or revenues do not increase the projected deficit. If they do, and Congress does not act to waive the requirement, the President is legally required to order these cuts.

Core Provisions:

  • The order directs the Office of Management and Budget (OMB) to implement spending reductions for Fiscal Year 2026, starting October 1, 2025.
  • These cuts apply only to "direct spending," also known as mandatory spending, which is not funded through annual appropriations bills.
  • The cuts are applied as a uniform percentage across all non-exempt programs.
  • Crucially, many large mandatory spending programs are exempt from these cuts, including Social Security, Medicaid, veterans' benefits, and SNAP (food stamps).
  • Medicare payments are subject to the cuts, but the reduction is legally capped at a maximum of 2% for this type of sequester. Other programs affected include certain farm price supports and student loan administration.

Stated Purpose (from the Sponsors):

The underlying law, the Statutory PAYGO Act of 2010, was enacted to enforce budget neutrality. Its stated purpose is to ensure that new legislation that reduces revenues or increases direct spending is offset by other changes so that it does not add to the national deficit. The automatic sequestration order serves as the enforcement mechanism, intended to be a backstop to encourage fiscally responsible legislation.

Key Facts:

Affected Sectors: Healthcare, Agriculture, and Education (specifically federal student loans).
Timeline: The cuts mandated by this order will take effect on October 1, 2025, the first day of Fiscal Year 2026.
Scope: The order applies nationally to specific non-exempt federal mandatory spending programs.

The Backstory: How We Got Here

Timeline of Events:

The Gramm-Rudman-Hollings Era (1985-1990):

Amid growing federal deficits in the early 1980s, Congress passed the Balanced Budget and Emergency Deficit Control Act of 1985, commonly known as Gramm-Rudman-Hollings. This law set declining deficit targets and established "sequestration" as an automatic, across-the-board cutting mechanism if those targets were missed. However, in the 1986 case Bowsher v. Synar, the Supreme Court struck down the original trigger mechanism as an unconstitutional violation of the separation of powers, as it gave an officer of the legislative branch (the Comptroller General) executive authority. Congress passed a revised version in 1987, but the approach of fixed deficit targets ultimately failed to prevent rising deficits.

The PAYGO Era (1990-2010):

The Budget Enforcement Act of 1990 replaced the deficit target system with the "Pay-As-You-Go" (PAYGO) rule. This new approach required that any new law increasing mandatory spending or cutting taxes had to be offset by other spending cuts or tax increases, so it was "deficit neutral." This enforcement mechanism expired in 2002. In 2010, with deficits again a major concern, a Democratic-controlled Congress and President Obama enacted the Statutory PAYGO Act, re-establishing a similar enforcement process that remains in effect today.

The Sequestration Revival (2011-Present):

Sequestration returned to prominence with the Budget Control Act of 2011 (BCA), which created a "supercommittee" to find at least $1.2 trillion in deficit reduction. When the committee failed, it triggered a decade of automatic sequestration cuts to both defense and non-defense discretionary spending. The order for FY2026 is a product of the separate PAYGO law, which applies to mandatory spending. Congress has frequently passed legislation to waive PAYGO cuts, but when it fails to do so, an order like this one becomes mandatory.

Why Now? The Political Calculus:

  • This sequestration order is not the result of a new political decision but rather the legally mandated consequence of prior ones. The Office of Management and Budget maintains a "scorecard" that tracks the deficit impact of laws passed by Congress.
  • When the scorecard shows a net increase in the deficit at the end of a session, a sequestration is automatically required for the following fiscal year.
  • This order was triggered because one or more laws that increased direct spending or cut revenues were enacted without corresponding offsets. The American Rescue Plan Act of 2021, for example, added significantly to the PAYGO scorecard.
  • The political calculation was made when Congress chose not to pass a separate bill to waive these specific cuts, making their implementation a legal necessity for the President.

Your Real-World Impact

The Direct Answer: This directly affects specific groups, namely seniors on Medicare, doctors and hospitals who treat them, farmers receiving certain subsidies, and some federal student loan borrowers.

What Could Change for You:

Potential Benefits:

  • Proponents of the law argue that enforcing fiscal discipline through sequestration contributes to long-term deficit reduction, which can lead to a healthier economy, potentially lower interest rates, and reduced fiscal burdens on future generations. These benefits are indirect and not immediately felt by individuals.

Possible Disruptions or Costs:

Short-term (For Fiscal Year 2026):

  • Medicare: If you are a Medicare provider (doctor, hospital), your reimbursement payments from the government will be cut by 2%. While this is a cut to providers, not directly to beneficiaries' eligibility, some policy experts express concern it could affect access to care over time.
  • Agriculture: Farmers receiving certain types of federal price support payments will see those payments reduced.
  • Student Loans: Fees associated with originating federal student loans may increase slightly.

Long-term:

  • If PAYGO sequestration is not waived in subsequent years, these affected programs would face continuous, year-after-year reductions in funding, which could lead to more significant structural changes.

Who's Most Affected:

Primary Groups: Healthcare providers accepting Medicare, Medicare Advantage plans, seniors on Medicare, farmers, and federal student loan borrowers.
Secondary Groups: Rural economies that depend heavily on agricultural subsidies.
Regional Impact: States with large agricultural sectors or a higher-than-average population of seniors on Medicare may experience more concentrated effects.

Bottom Line: For most Americans, the impact will be negligible; however, for those reliant on or working with Medicare, it means a direct reduction in federal payments.

Where the Parties Stand

The political debate is not about this specific order, which is a non-discretionary enforcement of the law. Instead, the parties' positions apply to the underlying principle of PAYGO and the use of sequestration as an enforcement tool.

Republican Position: "Enforcing Fiscal Discipline"

Core Stance: Republicans generally support mechanisms designed to control federal spending and reduce the deficit.

Their Arguments:

  • ✓ They often praise sequestration as a necessary tool to force spending restraint when Congress fails to make targeted cuts.
  • ⚠️ Some Republicans have concerns when cuts affect constituencies important to them, such as defense or agriculture, and may support targeted waivers.
  • ✗ They typically oppose new spending that triggers PAYGO in the first place, arguing that Congress should pass offsetting cuts instead of allowing future automatic reductions.

Legislative Strategy: The general strategy is to advocate for spending cuts upfront to avoid triggering sequestration. When it is triggered, they often frame it as a consequence of the other party's fiscally irresponsible policies.

Democratic Position: "Protecting Essential Programs"

Core Stance: Democrats often view sequestration as a blunt and arbitrary tool that harms necessary federal programs.

Their Arguments:

  • ✓ They support the programs often affected by cuts, such as Medicare, and advocate for protecting them.
  • ⚠️ While they passed the Statutory PAYGO Act of 2010, they have frequently voted to waive the resulting cuts, arguing that the social benefit of new programs outweighs the need for this type of automatic enforcement.
  • ✗ They strongly oppose what they see as indiscriminate cuts that do not distinguish between wasteful spending and critical investments.

Legislative Strategy: Democrats typically work to pass legislation that waives or delays PAYGO sequestration before it can take effect, arguing that targeted and thoughtful budgeting is preferable to automatic, across-the-board cuts.

Constitutional Check

The Verdict: ✓ Constitutional

Basis of Authority:

The order is based on Congress's constitutional "Power of the Purse" (Article I, Section 9, Clause 7), which grants it the authority to control government spending.

Relevant Portion of the Constitution: "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law..."

Constitutional Implications:

Separation of Powers: The modern sequestration process was specifically designed to be constitutional. Congress passes the law establishing the rules (the Balanced Budget and Emergency Deficit Control Act), and the President, as head of the executive branch, executes that law.
Precedent: The key Supreme Court precedent is Bowsher v. Synar (1986). In that case, the Court ruled the original sequestration process unconstitutional because it gave executive power (ordering cuts) to a legislative officer. The current law corrects this flaw by assigning the implementation of the cuts to the executive branch (the OMB and the President), thereby respecting the separation of powers.
Federalism: The order deals exclusively with federal spending and does not implicate powers reserved for the states.

Potential Legal Challenges:

Legal challenges to this order are highly unlikely to succeed. The process has been in use for many years and is based on a statutory framework that was intentionally structured to comply with Supreme Court precedent on the separation of powers.

Your Action Options

TO SUPPORT THIS BILL

(To support allowing this sequestration order to proceed as a means of deficit reduction)

5-Minute Actions:

  • Call Your Rep/Senators: Capitol Switchboard: (202) 224-3121. "I'm a constituent from [Your City/Town] and I urge [Rep./Sen. Name] to oppose any efforts to waive or repeal the legally required PAYGO sequestration. It is important to enforce our fiscal rules."

30-Minute Deep Dive:

  • Write a Detailed Email: Contact your representatives and members of the House and Senate Budget Committees to explain your support for enforcing statutory budget controls.
  • Join an Organization: Groups like the Committee for a Responsible Federal Budget often advocate for enforcing fiscal rules, though they may also critique the specific mechanism of sequestration.

TO OPPOSE THIS BILL

(To oppose this sequestration order and advocate for its repeal or waiver)

5-Minute Actions:

  • Call Your Rep/Senators: Capitol Switchboard: (202) 224-3121. "I'm a constituent from [Your City/Town] and I urge [Rep./Sen. Name] to vote YES on any legislation to prevent the upcoming sequestration cuts to Medicare and other essential programs."

30-Minute Deep Dive:

  • Write a Letter to the Editor: Submit a letter to your local newspaper explaining how cuts to Medicare or other programs will affect your community.
  • Join an Organization: Many organizations representing affected groups oppose sequestration, including the American Medical Association (AMA), the American Hospital Association (AHA), and various agricultural and student advocacy groups.