Sequestration

You've probably heard the verb form: "to sequester." If you get placed on a high-profile trial, the court might sequester you, i.e. set you up in a hotel for the duration of the trial, so you don't get any news reports and you can maintain your objectivity. Basically, the word means to separate something...to put it off to the side, on its own.

So then...what's "sequestration"? In finance, it can mean separating assets to the side for debt repayment. That situation applies to the broad meaning of the word. However, it became most famous for a specific application related to the U.S. federal budget.

During a standoff over the budget in 2011, sequestration was used as self-leverage to force Congress and the president to come to some kind of agreement. Basically, they passed a bill that set a ticking clock. If they couldn't come up with a deal by the beginning of 2013, automatic spending cuts would go into effect. These reductions were designed so that both political parties would feel the pain of the budget cuts.

Fundamentally, sequestration represented a modern-day, fiscal form of a situation popular in medieval Europe. Rival lords would exchange children as hostages as incentive to...make nice. If war broke out, they would execute each other's kids. Only, in the modern-day equivalent, the children in question were particular budget items the political parties wanted protected.

As it turned out, the parties killed the hostages. Sequestration eventually took place.

There was a two-month delay put in place, delaying decision day until March 2013. But even with the extra couple months, no deal could be reached. So the sequestration went into effect...the pre-arranged automatic spending cuts weren't avoided. Sorry, kids.