The 1987 Balanced Budget Reaffirmation Act. Several lawsuits contesting the constitutionality of the 1985 Balanced Budget Act were filed immediately upon its enactment. In February 1986, a special three-judge panel of the U.S. District Court declared that the procedure for triggering sequestration under the act was unconstitutional on the ground that it vested executive power in an officer removable by Congress (sequestration would have been triggered pursuant to a report prepared by the comptroller general, head of the General Accounting Office). The Supreme Court heard arguments in the case, Bowsher v. Synar (478 U.S. 714), and issued its ruling on July 7, 1986, affirming the ruling of the District Court by a vote of 7 to 2.

Invalidation by the courts of the automatic triggering mechanism for sequestration, and the size of the estimated deficit excess for FY1988—more than $50 billion above the applicable deficit target, according to the Congressional Budget Office (CBO), prompted calls for revision of the 1985 Balanced Budget Act. In September 1987, President Reagan signed into law the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987.6 The main purposes of the 1987 act were to restore the automatic triggering feature of sequestration in a constitutionally acceptable manner, which it did by vesting that authority in the director of the Office of Management and Budget (OMB), and to extend the time frame for achieving a balanced budget by two years, until FY1993.