Sequestration cuts refer to an automatic series of across-the-board spending cuts on the U.S. federal budget. A sequester is triggered when Congress fails to pass an appropriation bill or when established spending caps are exceeded.
Sequestration cuts only affect discretionary programs, which require annual appropriation. They do not affect mandatory programs, such as Medicare and Social Security. According to the Congressional Budget Office, mandatory spending represented 60 percent of federal spending for fiscal year 2013. When sequestration cuts are triggered, the Treasury is charged with sequestering the difference between the spending cap and the amount that was appropriated. The sequester procedure was first established in the Gramm-Rudman-Hollings Deficit Reduction Act of 1985.