The term "budget sequestration" was first used to describe a section of the Gramm-Rudman-Hollings Deficit Reduction Act of 1985. The Acts aimed to cut the United States federal budget deficit, which at the time, was the largest in History. The Acts provided for automatic spending cuts if the total appropriations in various categories exceed in a fiscal year the budget spending thresholds.
The bill set up a Congressional debt-reduction committee and included the sequestration as a disincentive to be activated only if Congress did not pass deficit reduction legislation. However, the committee did not come to agreement on any plan, activating the sequestration plan. 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 Gramm-Rudman-Hollings Bill is a procedure in United States law that limits the size of the federal budget.
The Significance of the Gramm-Rudman-Hollings Bill is to balance all the spending constraints on the federal budget.
Fun Fact: Sequestration was later included as part of the Budget Control Act of 2011, which resolved the debt ceiling crisis.