U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

19–006 

" ! HOUSE OF REPRESENTATIVES 

112TH CONGRESS

2d Session 

REPT. 112–469, 

2012

Part 1 

SEQUESTER REPLACEMENT 

ACT OF 2012 

R E P O R T 

OF THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

TO ACCOMPANY

H.R. 4966 

A BILL TO AMEND THE BALANCED BUDGET AND EMERGENCY 

DEFICIT CONTROL ACT OF 1985 TO REPLACE THE SEQUESTER 

ESTABLISHED BY THE BUDGET CONTROL ACT OF 2011 

together with 

MINORITY AND DISSENTING VIEWS 

MAY 9, 2012.—Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 


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COMMITTEE ON THE BUDGET 

PAUL RYAN, Wisconsin, Chairman 

SCOTT GARRETT, New Jersey 

MICHAEL K. SIMPSON, Idaho 

JOHN CAMPBELL, California 

KEN CALVERT, California 

W. TODD AKIN, Missouri 

TOM COLE, Oklahoma 

TOM PRICE, Georgia 

TOM MCCLINTOCK, California 

JASON CHAFFETZ, Utah 

MARLIN A. STUTZMAN, Indiana 

JAMES LANKFORD, Oklahoma 

DIANE BLACK, Tennessee 

REID J. RIBBLE, Wisconsin 

BILL FLORES, Texas 

MICK MULVANEY, South Carolina 

TIM HUELSKAMP, Kansas 

TODD C. YOUNG, Indiana 

JUSTIN AMASH, Michigan 

TODD ROKITA, Indiana 

FRANK C. GUINTA, New Hampshire 

ROB WOODALL, Georgia 

CHRIS VAN HOLLEN, Maryland, 

Ranking Minority Member 

ALLYSON Y. SCHWARTZ, Pennsylvania 

MARCY KAPTUR, Ohio 

LLOYD DOGGETT, Texas 

EARL BLUMENAUER, Oregon 

BETTY MCCOLLUM, Minnesota 

JOHN A. YARMUTH, Kentucky 

BILL PASCRELL, JR., New Jersey 

MICHAEL M. HONDA, California 

TIM RYAN, Ohio 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

KATHY CASTOR, Florida 

HEATH SHULER, North Carolina 

KAREN BASS, California 

SUZANNE BONAMICI, Oregon 

PROFESSIONAL STAFF

AUSTIN SMYTHE, Staff Director 

THOMAS S. KAHN, Minority Staff Director 


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C O N T E N T S 

Page 

Introduction .............................................................................................................. 3 

The Sequester ................................................................................................... 3 

Why it is Necessary to Replace the Sequester ............................................... 4 

The Path to Prosperity Approach: Reprioritize Savings Through Reconciliation ............................................................................................................... 6 

Sequester Replacement Act of 2012 ................................................................ 6 

Summary of Proposed Changes .............................................................................. 7 

Legislative History .................................................................................................. 8 

Section by Section .................................................................................................... 11 

Hearings ................................................................................................................... 12 

Votes of the Committee ........................................................................................... 13 

Committee Oversight Findings ............................................................................... 16 

Performance Goals and Objectives ......................................................................... 16 

Constitutional Authority Statement ...................................................................... 16 

Committee Cost Estimate ....................................................................................... 17 

Advisory Committee Statement .............................................................................. 18 

Applicability to the Legislative Branch ................................................................. 18 

Federal Mandates Statement ................................................................................. 18 

Advisory on Earmarks ............................................................................................. 18 

Changes in Existing Law Made by the Bill as Reported ...................................... 18 

Views of Committee Members ................................................................................ 20 

Appendix: H.R. 4966, Sequester Replacement Act of 2012 .................................. 37 


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112TH CONGRESS REPT. 112–469, " ! HOUSE OF REPRESENTATIVES 2d Session Part 1 

SEQUESTER REPLACEMENT ACT OF 2012 

MAY 9, 2012.—Committed to the Committee of the Whole House on the State of the 

Union and ordered to be printed 

Mr. RYAN of Wisconsin, from the Committee on the Budget, 

submitted the following 

R E P O R T 

together with 

MINORITY AND DISSENTING VIEWS 

[To accompany H.R. 4966] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Budget, to whom was referred the bill 

(H.R. 4966) to amend the Balanced Budget and Emergency Deficit 

Control Act of 1985 to replace the sequester established by the 

Budget Control Act of 2011, having considered the same, report favorably thereon with an amendment and recommend that the bill 

as amended do pass. 

The amendment is as follows: 

In the amendment made by section 4(b), strike ‘‘251(c)(2)(A)’’ 

each place it appears and insert ‘‘251(c)(2)’’. 


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Introduction 

The Path to Prosperity budget that passed the U.S. House of Representatives on March 29, 2012 set in motion a process to 

reprioritize certain across-the-board spending reductions (enforced 

by a sequester) enacted as part of the Budget Control Act of 2011 

[BCA]. 

The budget resolution called for enactment of two pieces of legis- lation to replace a $98 billion sequester of discretionary programs 

on January 2, 2013. First, it called on six committees to achieve at 

least $78 billion of these savings through reforms to mandatory 

spending programs. Second, it proposed to achieve $19 billion in 

discretionary savings by lowering the discretionary cap from $1.047 

trillion to $1.028 trillion for fiscal year 2013. 

On April 27, 2012 Chairman Ryan introduced H.R. 4966, the Sequester Replacement Act of 2012 [SRA]. In combination with reconciliation legislation that the Budget Committee plans to report, 

this bill will replace the arbitrary and harmful sequester and provide for an orderly process for the enactment of appropriations legislation and long-overdue reforms in mandatory spending. This reconciliation legislation is designed to produce $78 billion 

in deficit reduction. In fact, this reconciliation legislation far exceeds that goal, achieving over $300 billion in mandatory savings 

over a 10-year period. 

This second piece of legislation, the SRA addresses the sequester and implements the budget resolution’s $19 billion in savings from 

discretionary spending. 

The SRA lowers the fiscal year 2013 discretionary cap from $1,047.0 billion down to $1,027.9 billion by providing for a $19.1 

billion reduction in the discretionary spending cap for fiscal year 

2013 on Jan. 2, 2013, reflecting the level of discretionary spending 

called for in the House-passed budget resolution. The SRA provides 

that the bill only takes effect once the reconciliation bill has been 

enacted into law, guaranteeing that no room will be granted under 

the caps unless the savings are made permanent. 

Additionally the SRA clarifies that the Department of Veterans 

Affairs is exempt from any sequester under the BCA. The SRA replaces the fiscal year 2013 discretionary sequester and the defense 

mandatory sequester with the savings from the lower discretionary 

cap and the reconciliation bill. 

The Sequester 

On January 2, 2013, unless the BCA is amended, there will be 

a sequester (across the board cut) from non-exempt programs of 

$54.7 billion from defense programs and $54.7 billion from non-defense programs. Because defense programs are primarily funded 


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1 ‘‘Fiscal Year 2013 Budget of the U.S. Government,’’ Office of Management and Budget, February 2012. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/cutting.pdf 

through annual appropriations, $54.6 billion of the defense sequester will come from discretionary programs, i.e., military personnel, 

operations and maintenance, military construction, procurement, 

and research and development. Approximately $19 million will 

come from defense direct spending programs. The President has 

the authority to exempt military personnel from the sequester, but 

the rest of the defense budget must still generate these savings. If 

the President chooses to exempt military personnel, the rest of 

DOD spending would be reduced by an estimated 13%. 

The sequester will reduce non-defense discretionary programs by 

$43 billion and non-defense direct spending programs by $11.7 billion. The BCA limited the reduction in Medicare spending to 2 percent ($6.3 billion) with other non-defense discretionary and mandatory programs making up the difference. In addition, the law exempts from sequester many means-tested entitlement programs, 

e.g., Medicaid, resulting in the brunt of the non-defense direct 

spending sequester falling on agriculture programs. 

After fiscal year 2013, the BCA achieves the budget authority reductions in a different way. For discretionary spending, the BCA 

lowers the annual caps on discretionary spending by the amounts 

necessary to meet the goal. By the Congressional Budget Office’s 

[CBO] current calculation this results in an average reduction of 

$90.4 billion in the discretionary cap in each year from 2014 to 

2021. Unless these lowered caps are breached in the annual appropriations process, there would be no discretionary sequesters after 

fiscal year 2013. 

For direct spending, the BCA continues to impose sequesters 

each year, which CBO estimates will average $19.0 billion from fiscal years 2014-21. 

The Office of Management and Budget [OMB] will determine the 

exact amounts that will come from discretionary and direct spending at the start of each calendar year based on the relative proportions of discretionary and direct spending in the baseline. To date 

OMB has refused to provide an official estimate of the spending reductions that would occur under current law. 

Why it is Necessary to Replace the Sequester 

Intended as a mechanism to force action, there is bipartisan 

agreement that the sequester going into place would undercut key 

responsibilities of the federal government. 

As the Administration makes clear in its own budget, ‘‘By design, 

the sequester is not good policy and is meant to force Congress to 

take action: it would lead to significant cuts to critical domestic 

programs such as education and research and cuts to defense programs that could undermine our national security. * * * [C]uts of 

this magnitude done in an across the board fashion would be devastating both to defense and non-defense programs.’’ 1 At a committee hearing on replacing the sequester, a witness from OMB 

testified that ‘‘If allowed to occur, the sequester would be highly destructive to national security and domestic priorities, and core govVerDate Mar 15 2010 04:19 May 12, 2012 Jkt 019006 PO 00000 Frm 00008 Fmt 6601 Sfmt 6601 E:\HR\OC\HR469P1.XXX HR469P1

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2Testimony of Danny Werfel, Controller of the Office of Management and Budget, Committee 

on the Budget, U.S. House of Representatives, April 25, 2012. 3Leon Panetta, U.S. Secretary of Defense, ‘‘Letter to Senator John McCain,’’ November 14, 

2011. http://armedservices.house.gov/index.cfm/files/serve?File_id=ae72f319-e34f-4f78-8c88- 

b8e7c9dee61f 4Testimony of Service Chiefs before House Armed Services Committee, February 14, 2012. 

http://armed-services.senate.gov/Transcripts/2012/02%20February/12-02%20-%202-14-12.pdf 

ernment functions. The Administration believes that taking action 

to avoid the sequester in full in a balanced and fiscally responsible 

manner must be the primary focus of Congress’s deliberations in 

the coming months.’’ 2

Of particular concern is the impact sequestration, if allowed to 

occur, would have on our national security. 

The sequestration cuts would be on top of the savings in discretionary defense spending that are already being implemented pursuant to the debt limit agreement last August. 

The House Armed Services Committee has analyzed the impact 

of the sequestration, and found that if left in place, sequestration 

would cut the military to its smallest size since before the Second 

World War—all while we are still a nation at war in Afghanistan, 

facing increased threats from Iran and North Korea, unrest in the 

Middle East, and a rising China. 

Secretary Panetta and the professional military leadership have 

also looked at the impact of sequestration and reached similar conclusions: 

Secretary Panetta stated, ‘‘If the maximum sequestration is triggered, the total cut will rise to about $1 trillion compared with the 

FY 2012 plan. The impacts of these cuts would be devastating for 

the Department * * * Facing such large reductions, we would have 

to reduce the size of the military sharply. Rough estimates suggest 

after ten years of these cuts, we would have the smallest ground 

force since 1940, the smallest number of ships since 1915, and the 

smallest Air Force in its history.’’ 3

General Dempsey, Chairman of the Joint Chiefs of Staff, stated, 

‘‘[S]equestration leaves me three places to go to find the additional 

money: operations, maintenance, and training. That’s the definition 

of a hollow force.’’ 4

The individual branch service chiefs echoed General Dempsey: 

• ‘‘Cuts of this magnitude would be catastrophic to the military 

* * * My assessment is that the nation would incur an unacceptable level of strategic and operational risk.’’—General Ray T. 

Odierno, Chief Of Staff, United States Army 

• ‘‘A severe and irreversible impact on the Navy’s future,’’—Admiral Jonathan W. Greenert, Chief of Naval Operations 

• ‘‘A Marine Corps below the end strength that’s necessary to 

support even one major contingency,’’—General James F. Amos, 

Commandant of the Marine Corps 

• ‘‘Even the most thoroughly deliberated strategy may not be 

able to overcome dire consequences,’’—General Norton A. Schwartz, 

Chief of Staff, United States Air Force 

According to an analysis by the House Appropriations Committee, the sequester will also have a significant impact on non-defense discretionary programs as well, including: 

• Automatically reducing Head Start by $650 million, resulting 

in 75,000 fewer slots for children in the program; 


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5 Jack Lew, ‘‘Security Spending in the Deficit Agreement,’’ August 4, 2011. http:// 

www.whitehouse.gov/blog/2011/08/04/security-spending-deficit-agreement (accessed March 19, 

2012). 

• Automatically reducing the National Institutes of Health (NIH) by $2.4 billion, an amount equal to nearly half of total NIH spending on cancer this year; and • A reduction of approximately 1,870 Border Patrol Agents (a reduction of nearly 9 percent of the total number of agents). 

Leaders of both parties agree that sequester savings should be 

reprioritized. On August 4, 2011, then-director of the Office of Management and Budget (now White House Chief of Staff) Jack Lew 

wrote that the sequester was not intended to be implemented: 

‘‘Make no mistake: the sequester is not meant to be policy. Rather, 

it is meant to be an unpalatable option that all parties want to 

avoid.’’ 5

The Path to Prosperity Approach: 

Reprioritize Savings Through Reconciliation 

The Path to Prosperity budget that passed the U.S. House of Representatives in April of 2012 set in motion a process to reprioritize 

certain across the board spending reductions enacted as part of the 

BCA. It achieves this outcome through enactment of two pieces of 

legislation. The first piece of legislation will be generated through 

the reconciliation process, which is triggered by the budget resolution and gives expedited consideration to bills enacting the spending, revenue, and debt policies contained in the budget resolution. 

To trigger these expedited procedures, The Path to Prosperity included reconciliation instructions calling on six House committees 

to achieve specified amounts of savings in programs within their 

jurisdictions. The Sequester Replacement Reconciliation Act consists of the legislation they have reported to achieve the same level 

of spending reductions enacted in the BCA, but without the haphazard cuts—especially to national security—that an across the 

board approach would entail. 

Those six House Committees have advanced legislation that will: 

1. Stop Fraud, by Ensuring that Individuals are Actually Eligible 

for the Taxpayer Benefits They Receive; 

2. Eliminate Government Slush Funds and Stop Bailouts; 

3. Control Runaway, Unchecked Spending; 

4. Restrain Spending on Government Bureaucracies; and 

5. Reduce Waste and Duplicative Programs. 

The savings from these reforms, which would be enacted through 

the SRRA, will replace the arbitrary discretionary sequester cuts 

and lay the groundwork for further efforts to avert the spendingdriven economic crisis before us. 

The Sequester Replacement Act of 2012 

Chairman Ryan introduced the SRA as called for by section 202 

of the budget resolution in order to prioritize the spending reductions enacted as part of the BCA. These spending reductions are 

replaced but only on the enactment of other reductions which are 

included in the SRRA. By targeting fraud, eliminating slush funds, 

restraining runaway spending, reforming bureaucracies, and endVerDate Mar 15 2010 04:19 May 12, 2012 Jkt 019006 PO 00000 Frm 00010 Fmt 6601 Sfmt 6601 E:\HR\OC\HR469P1.XXX HR469P1

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ing wasteful and duplicative programs, the SRRA provides a responsible way to reprioritize all of the spending reduction enacted 

as part of the BCA. With—and only with—the enactment of this 

targeted, carefully prioritized spending reduction, Congress can 

move to the second part of this task: replacing the across the board 

sequester before it does any damage. 

The SRA would achieve this task by amending the BCA to replace the discretionary sequester for fiscal year 2013 with the 

spending reductions enacted through the Reconciliation Act. To 

safeguard against an end-run around the Reconciliation Act, the 

SRA stipulates that it would only take effect upon enactment of the 

reconciliation bill. 

The SRA takes additional steps to protect the U.S. military and 

veterans and to lock in spending savings for the American taxpayer: 

• It clarifies that Department of Veterans Affairs’ programs are 

not subject to sequester. 

• It lowers the BCA’s discretionary caps to levels set in the Path 

to Prosperity budget. 

• It closes a potential loophole that would otherwise allow Congress to enact large direct spending increases by counting SRRA 

savings as an offset. 

• It eliminates the fiscal year 2013 sequester of mandatory 

spending on national defense. 

With passage of the SRRA and the SRA, the House will have 

taken the responsible step of offsetting the cost (approximately $78 

billion) of replacing the automatic across the board discretionary 

spending cuts that are scheduled to occur on January 2, 2013 

through sequestration. The additional savings achieved through 

reconciliation beyond the $78 billion (over $180 billion in the next 

ten years) would further reduce the deficit. The SRA reduces the 

total level of discretionary spending limits for fiscal year 2013 from 

$1,047 billion to $1,028 billion which will save $19 billion for that 

fiscal year. And this approach provides a blueprint for replacing 

the rest of the sequester with responsible, targeted spending reduction in the years ahead. 

SUMMARY OF PROPOSED CHANGES

This bill is designed to amend the provisions of the BCA to avert 

an impending sequestration, which will be implemented on January 3, 2013. 

The reconciliation bill the Budget Committee will report reduces 

the deficit by more than $300 billion over the next decade, this is 

approximately four times the savings of the portion of the fiscal 

year 2013 sequester that is being eliminated. As a companion to 

the reconciliation bill and in response to the directive in section 

202 of the budget resolution (H. Con. Res. 112), the Sequester Replacement Act of 2012: 

• Provides that the bill only takes effect upon enactment of the 

reconciliation bill, ensuring that there will be no relief from the sequester unless the Reconciliation Act’s savings are enacted. 

• Exempts the Department of Veterans Affairs from any sequesters under the BCA. 


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• Re-sets the fiscal year 2013 discretionary cap at $1,047.0 bil- lion and provides for a $19.1 billion reduction in the discretionary 

spending cap for fiscal year 2013 on Jan. 2, 2013, achieving the 

level of discretionary spending called for in the House-passed budget resolution ($1,027.9 billion). • Makes technical and conforming changes to the operation of 

section 314 of the Congressional Budget Act of 1974 and provides 

for the appropriate treatment of the reconciliation legislation on 

the Statutory Pay-Go-As-You-Go scorecard. • Replaces the fiscal year 2013 discretionary sequester and the 

defense mandatory sequester with the savings from the lower discretionary cap and the reconciliation bill. 

LEGISLATIVE HISTORY

The ‘‘sequestration’’ procedure was first established pursuant to 

the Balanced Budget and Emergency Deficit Control Act of 1985 

[BBEDCA], initially intended to reduce deficits established by annual maximum deficit limits. Sequestration involves automatic 

across-the-board spending reductions required to be ordered by the 

President under certain circumstances. The orders under the terms 

of BBDECA occur within 15 days after the end of a session of Congress. 

The Budget Enforcement Act of 1990 [BEA] significantly revised 

BBEDCA (the BEA is included as Title XIII of Public Law 101-508, 

the Omnibus Budget Reconciliation Act of 1990). It replaced the 

maximum spending limits with annual limits on discretionary 

spending and controls over increases in direct spending or decreases in revenues, termed ‘‘pay-as-you go (PAYGO).’’ Though the 

original BEA was scheduled to expire at the end of fiscal year 1995, 

it was extended by the Omnibus Budget Reconciliation Act of 1993, 

and again by the Balanced Budget Act of 1997 [BBA], in each case 

for five years. 

The discretionary spending limits expired on September 30, 

2002. The PAYGO requirement, which applied to the out-year effects (through fiscal year 2006) of legislation enacted on or before 

September 30, 2002, effectively expired at the same time due to the 

enactment of legislation (Public Law 107-312) setting the balances 

for all years on the Pay-As-You-Go Scorecard to zero. 

The Committee on the Budget of the House reported legislation 

to modify the discretionary spending limits for fiscal year 2002 on 

December 13, 2001 (House Report 107-338, Interim Budget Control 

and Enforcement Act of 2001, to accompany H.R. 3084). Though 

the committee approved the measure by voice vote, the House did 

not consider it. It was instead included in the conference report on 

the Department of Defense and emergency Supplemental Appropriations measure signed into law on January 10, 2002 (Public Law 

107-117). The law revised the discretionary spending limits and 

levels in the budget resolution to increase spending to respond to 

the September 11th terrorist attacks and was passed on a bipartisan basis. 

On March 19, 2004, the Committee on the Budget of the House 

reported the Spending Control Act of 2004 (H.R.3973; House Report 108-442). This measure would have reestablished, though 

2009, the discretionary spending limits. The limits were set for 


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6 Congressional Budget Office letter to the Honorable John Boehner and the Honorable Harry 

Reid regarding CBO Analysis of the Budget Control Act as posted on the House Committee on 

Rules website on August 1, 2011. http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/ 

123xx/doc12357/budgetcontrolactaug1.pdf 

budget authority and outlays—though the legislation reported did 

not specify the five-year limits, which were to be entered later. The 

bill also extended the pay-as-you-go procedure, but applied it only 

for direct spending. This specific bill was not considered on the 

floor of the House. 

On June 25, 2004, the House considered another bill titled the 

Spending Control Act, H.R. 4663, which failed of passage by a recorded vote of 146-268 (Roll Call Number 318—108th Congress). 

This bill was similar to the Spending Control Act of 2004 reported 

by the Committee on the Budget on March 19, 2004, but the discretionary spending limits were reduced from five years to two: Instead of spending limits through fiscal year 2009, they were set 

only for fiscal years 2005 and 2006. The spending-only pay-as-yougo procedures would have remained in force through fiscal year 

2009 as in the March-reported Spending Control Act of 2004. 

The Committee on the Budget of the Senate reported S. 3521, the 

Stop Over Spending Act of 2006. This measure was an omnibus 

budget process bill including a number of different enforcement reforms. Included among these was extension of the discretionary 

spending limits for three years—through fiscal year 2007. It did 

not include pay-as-you-go provisions but did institute maximum 

deficit amounts, similar to the original BBEDCA. These limits were 

set as a percentage of gross domestic product, frozen after fiscal 

year 2012. 

No further significant congressional action was taken on re-establishing statutory controls on spending and revenue until 2010, 

when on February 10 of that year, the Statutory Pay-As-You-Go 

Act of 2010 was signed as part of Public Law 111-139, which raised 

the statutory limit on the public debt. 

While it was similar to the expired pay-as-you-go law, and included references to certain sections of the BBEDCA, it did not 

bring that law back into force. It did amend certain sections of that 

Act such as the sequestrable base. It did not establish new discretionary spending limits for any period of time. 

Enacted on August 2, 2012, the BCA authorized an increase in 

the public debt limit. Added to this increase were statutory controls 

on spending, primarily in the form of making BBEDCA permanent 

and re-establishing the discretionary spending limits from fiscal 

year 2012 through fiscal year 2021. These discretionary spending 

limits for fiscal years 2012 and 2013 were divided into security and 

non-security categories. The remaining years were set as a single 

discretionary general category. These initial spending limits have 

been supplanted, though, since the BCA also included additional 

procedures that had the effect of altering the caps as set out in the 

statute. The Congressional Budget Office estimated that the discretionary spending caps of the BCA would reduce the deficit, including savings from debt service, by $917 billion over the 10 fiscal 

years covering 2012 through 2012.6

The BCA also established a Joint Select Committee on Deficit 

Reduction which was tasked with reporting a bill to reduce the fedVerDate Mar 15 2010 04:19 May 12, 2012 Jkt 019006 PO 00000 Frm 00013 Fmt 6601 Sfmt 6601 E:\HR\OC\HR469P1.XXX HR469P1

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eral deficit by an additional $1.5 trillion over a 10-year period ending in fiscal year 2021. Legislation from the Joint Committee would 

have been considered under procedures limiting amendment and 

debate. Under the terms of the BCA, if legislation from the Joint 

Committee reducing the deficit by at least $1.2 trillion were not enacted, then a procedure would be set in motion to reduce spending 

by adjusting the discretionary caps downward and calculating an 

amount of reductions in direct spending necessary to achieve the 

$1.2 trillion (or a portion thereof were legislation from the Joint 

Committee achieving some deficit reduction was enacted). 

The Joint Committee was unable to report any proposal reducing 

the deficit by any amount and no legislation to that purpose was 

enacted by the required January 15, 2012 deadline. On this date, 

not only did the Joint Committee cease to exist, the automatic 

spending reduction process was triggered. 

The process that began on January 15, 2012 had the following 

ramifications: The statutory discretionary caps were replaced by 

new caps with new definitions of security and nonsecurity—now effectively defense and nondefense, though the previous terms are 

still used. These categories have replaced the discretionary general 

category through 2021. 

The process has two components: sequestration and discretionary 

spending limits reduction. In order to achieve the $1.2 trillion in 

deficit reduction, spending reductions will occur absent a change in 

law. OMB is charged with calculating the amount in spending reduction required to achieve the specified deficit reduction. 

Since the Joint Committee didn’t achieve any deficit reduction, 

the calculation begins with a spending reduction of the full $1.2 

trillion from fiscal year 2013 through fiscal year 2021. According to 

the BCA formula, that number is reduced by 18 percent to account 

for the reduced cost of debt service attributable to the lower level 

of spending. The remaining amount is divided by nine to account 

for each of fiscal years 2013 through 2021. This amount is then divided by two so that it is evenly distributed between reductions in 

defense and nondefense accounts. 

The spending reductions are further divided between direct 

spending and discretionary spending within the defense and nondefense accounts. 

The implementation of the spending reductions is distinct from 

the calculation of the amounts. Once the amount is calculated, the 

BCA requires reductions through 1) sequestration and 2) reductions to the revised discretionary spending limits. 

The sequestration order affects both discretionary and mandatory spending for fiscal year 2013. This means that discretionary 

amounts appropriated for fiscal year 2013 are to be sequestered by 

the calculated amount no matter how much is appropriated—it is 

not sequestered as a function of the discretionary spending limit for 

that fiscal year. In addition, for all fiscal years 2013 through 2021, 

a direct spending sequester of nonexempt accounts is ordered. 

This is distinct from the spending reductions for the discretionary spending limits for fiscal year 2014 through fiscal year 

2021—these reductions occur through revising the spending limits 

downward for each of those fiscal years. 


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DISCRETIONARY SPENDING CAPS 

[Billions of $ budget authority] 

2013 2014 2015 2016 2017 2018 2019 2020 2021 

Pre-Sequester Cap ..................... 1,047 1,066 1,086 1,107 1,131 1,156 1,182 1,208 1,234 

Defense .................................. 546 556 566 577 590 603 616 630 644 

Non-Defense .......................... 501 510 520 530 541 553 566 578 590 

Reductions ................................. ¥98 ¥93 ¥92 ¥91 ¥91 ¥90 ¥89 ¥88 ¥88 

Defense .................................. ¥55 ¥55 ¥55 ¥55 ¥55 ¥55 ¥55 ¥55 ¥55 

Non-Defense .......................... ¥43 ¥38 ¥38 ¥37 ¥36 ¥36 ¥35 ¥33 ¥33 

Post-Sequester Cap ................... 949 973 994 1,016 1,040 1,066 1,093 1,120 1,146 

Defense .................................. 491 501 511 522 535 548 561 575 589 

Non-Defense .......................... 458 472 482 493 505 517 531 545 557 

Source: CBO March 2012 Baseline 

The spending reductions under the BCA process begin on January 2, 2013 and will occur for each year through fiscal year 2021 

as a matter of law unless changed by statute. 

SECTION BY SECTION

SECTION 1. SHORT TITLE

This section provides for the short title of the bill: ‘‘Sequester Replacement Act of 2012.’’ 

SECTION 2. CONTINGENT EFFECTIVE DATE. 

This section requires enactment of the reconciliation bill required 

by section 201 of H. Con. Res. 112 (112th Congress), the concurrent 

resolution on the budget for fiscal year 2013, before the Sequester 

Replacement Act would have any force or effect. 

SECTION 3. PROTECTING VETERANS PROGRAMS FROM SEQUESTER. 

This section repeals section 256(e)(2)(E) of the Balanced Budget 

and Emergency Deficit Control Act of 1985 [BBEDCA]. That subparagraph provides for a special rule related to Veterans Medical 

care and how it would be treated under an across the board cut in 

spending ordered under the Statutory Pay-As-You-Go Act of 2010 

or the Balanced Budget and Emergency Deficit Control Act of 1985. 

However, under current law, all programs administered by the Department of Veterans Affairs are exempt. This section clarifies that 

the latter provision prevails should any ambiguity arise. 

SECTION 4. ACHIEVING $19 BILLION IN DISCRETIONARY SAVINGS. 

Subsection (a) amends paragraph (2) of section 251(c) of the Balanced Budget and Emergency Deficit Control Act of 1985 

(BBEDCA) to replace the discretionary spending limit in that paragraph so that it would consolidate the security and non-security 

categories in current law to one total discretionary category. The 

level of the new spending limit with respect to fiscal year 2013 is 

$1.047 billion in new budget authority. This eliminates the applicability of section 251A(2)(A) of BBEDCA which replaced the previous 

security and non-security categories in section 251(c) on January 

15, 2012. 

Subsection (b) amends section 251A(7)(A) of the Balanced Budget 

and Emergency Deficit Control Act of 1985. This provision would 

require that, on January 2, 2013, the new discretionary category 


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will be adjusted downward by $19,104,000,000 in budget authority. 

It also provides for an additional supplemental sequestration report 

for fiscal year 2013, to be issued on January 15, 2013, to ensure 

that the lower discretionary spending limit would be observed and 

any spending above that limit reduced through across the board 

spending reductions. 

SECTION 5. CONFORMING AMENDMENTS TO SECTION 314 OF THE

CONGRESSIONAL BUDGET AND IMPOUNDMENT CONTROL ACT OF 1974. 

This section amends section 314(a) of the Congressional Budget 

Act of 1974 to return the language to the form prior to the enactment of the Budget Control Act of 2011. The change merely conforms the matter to be adjusted under the terms of that section in 

the same way it had been for many years prior and clarifies what 

the matter is to be adjusted. 

SECTION 6. TREATMENT FOR PAYGO PURPOSES. 

This section specifies that the budgetary effects of this Act and 

any amendment made by it, and the budgetary effects of the Act 

provided for by section 201 of H. Con. Res. 112 (112th Congress), 

shall not be entered on either PAYGO scorecard maintained pursuant to section 4(d) of the Statutory Pay-As-You-Go Act of 2010. 

SECTION 7. ELIMINATION OF THE FISCAL YEAR 2013 SEQUESTRATION

FOR DEFENSE DIRECT SPENDING. 

Under current law, on January 2, 2013, a sequestration order 

will be issued by the President under the Balanced Budget and 

Emergency Deficit Control Act of 1985 to carry out reductions to 

direct spending for the defense function (050) for fiscal year 2013. 

This section renders that order as it pertains to defense direct 

spending ineffective. 

HEARINGS

On April 25, 2012, the Committee on the Budget of the House 

held a hearing on the Budget Control Act of 2011 and how the application of an across-the-board cut in both direct spending and discretionary spending is to occur on January 2, 2013 by Presidential 

order. 

Those testifying were Daniel I. Werfel, Controller, Office of Federal Financial Management at the Office of Management and 

Budget, and Susan A. Poling, Deputy General Counsel at the Government Accountability Office. The Office of Management and 

Budget is the lead agency responsible for implementing any sequester. At the hearing, Mr. Werfel declined to provide specific information in response to Members’ questions relating to what the administration’s specific proposal is to avoid the sequester and how the 

administration would implement the sequester if legislation is not 

enacted by January 2, 2013. The Chairman of the Committee on 

the Budget wrote to Acting OMB Director Zients on April 26, requesting additional information by May 4 on how the administration would execute the sequester required by the Budget Control 

Act. To date, Acting Director Zients has not responded. 


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VOTES OF THE COMMITTEE

Clause 3(b) of House Rule XIII requires each committee report 

to accompany any bill or resolution of a public character to include 

the total number of votes cast for and against each roll call vote, 

on a motion to report and any amendments offered to the measure 

or matter, together with the names of those voting for and against. 

Listed below are the actions taken in the Committee on the 

Budget of the House of Representatives on the Sequester Replacement Act of 2012. 

On May 7, 2012, the committee met in open session, a quorum 

being present. 

Chairman Ryan asked unanimous consent to be authorized, consistent with clause 4 of House Rule XVI, to declare a recess at any 

time during the committee meeting. 

There was no objection to the unanimous consent request. 

Chairman Ryan asked unanimous consent to dispense with the 

first reading of the bill and the bill be considered as read and open 

to amendment at any point. 

There was no objection to the unanimous consent request. 

The committee adopted and ordered reported the Sequester Replacement Act of 2012. 

The committee took the following votes: 

AMENDMENT OFFERED BY CHAIRMAN RYAN

1. This amendment proposed making a technical correction to a 

citation in section 4(b) by striking ‘‘251(c)(2)(A)’’ and inserting 

‘‘251(c)(2)(A)’’. 

The amendment was adopted by voice vote. 

AMENDMENT OFFERED BY MR. VAN HOLLEN

1. This amendment proposed replacing the $1.2 trillion sequester 

with an increase in taxes on domestic oil companies, U.S. businesses with international operations, and individuals with annual 

income greater than $1,000,000. The amendment proposes to reduce spending by eliminating unspecified waste and duplicative 

programs; eliminating direct payments to farmers; reforming the 

Federal Flood Insurance Program; and selling unspecified federal 

property. The amendment also proposes to increase spending on 

education, science, infrastructure, and the Internal Revenue Service to close the ‘‘tax gap.’’ 

The amendment was not agreed to by a roll call vote of 11 ayes 

and 22 noes. 


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ROLLCALL VOTE NO. 1 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

RYAN (WI) (Chairman) X VAN HOLLEN (MD) (Ranking) X 

GARRETT (NJ) X SCHWARTZ (PA) X 

SIMPSON (ID) X KAPTUR (OH) X 

CAMPBELL (CA) X DOGGETT (TX) X 

CALVERT (CA) X BLUMENAUER (OR) X 

AKIN (MO) X McCOLLUM (MN) X 

COLE (OK) X YARMUTH (KY) X 

PRICE (GA) X PASCRELL (NJ) 

McCLINTOCK (CA) X HONDA (CA) 

CHAFFETZ (UT) X RYAN (OH) X 

STUTZMAN (IN) X WASSERMAN SCHULTZ (FL) 

LANKFORD (OK) X MOORE (WI) 

BLACK (TN) X CASTOR (FL) X 

RIBBLE (WI) X SHULER (NC) 

FLORES (TX) X BASS (CA) X 

MULVANEY (SC) X BONAMICI (OR) X 

HUELSKAMP (KS) X 

YOUNG (IN) X 

AMASH (MI) X 

ROKITA (IN) X 

GUINTA (NH) X 

WOODALL (GA) X 

AMENDMENT OFFERED BY MS. MCCOLLUM AND MR. SHULER

2. This amendment proposed turning off the FY 2013 sequester 

for Medicare and increasing revenues by eliminating certain deductions for domestic oil and gas companies. 

The amendment was not agreed to by a roll call vote of 11 ayes 

and 22 noes. 

ROLLCALL VOTE NO. 2 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

RYAN (WI) (Chairman) X VAN HOLLEN (MD) (Ranking) X 

GARRETT (NJ) X SCHWARTZ (PA) X 

SIMPSON (ID) X KAPTUR (OH) X 


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ROLLCALL VOTE NO. 2—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

CAMPBELL (CA) X DOGGETT (TX) X 

CALVERT (CA) X BLUMENAUER (OR) X 

AKIN (MO) X McCOLLUM (MN) X 

COLE (OK) X YARMUTH (KY) X 

PRICE (GA) X PASCRELL (NJ) 

McCLINTOCK (CA) X HONDA (CA) 

CHAFFETZ (UT) X RYAN (OH) X 

STUTZMAN (IN) X WASSERMAN SCHULTZ (FL) X 

LANKFORD (OK) X MOORE (WI) 

BLACK (TN) X CASTOR (FL) X 

RIBBLE (WI) X SHULER (NC) 

FLORES (TX) X BASS (CA) 

MULVANEY (SC) X BONAMICI (OR) X 

HUELSKAMP (KS) X 

YOUNG (IN) X 

AMASH (MI) X 

ROKITA (IN) X 

GUINTA (NH) X 

WOODALL (GA) X 

3. Mr. Garrett made a motion that the committee report the bill 

as amended and that the bill do pass. 

The motion was agreed to by a roll call vote of 21 ayes and 13 

noes. 

ROLLCALL VOTE NO. 3 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

RYAN (WI) (Chairman) X VAN HOLLEN (MD) (Ranking) X 

GARRETT (NJ) X SCHWARTZ (PA) X 

SIMPSON (ID) X KAPTUR (OH) X 

CAMPBELL (CA) X DOGGETT (TX) X 

CALVERT (CA) X BLUMENAUER (OR) X 

AKIN (MO) X McCOLLUM (MN) X 

COLE (OK) X YARMUTH (KY) X 


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ROLLCALL VOTE NO. 3—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

PRICE (GA) X PASCRELL (NJ) 

McCLINTOCK (CA) X HONDA (CA) 

CHAFFETZ (UT) X RYAN (OH) X 

STUTZMAN (IN) X WASSERMAN SCHULTZ (FL) X 

LANKFORD (OK) X MOORE (WI) 

BLACK (TN) X CASTOR (FL) X 

RIBBLE (WI) X SHULER (NC) 

FLORES (TX) X BASS (CA) X 

MULVANEY (SC) X BONAMICI (OR) X 

HUELSKAMP (KS) X 

YOUNG (IN) X 

AMASH (MI) X 

ROKITA (IN) X 

GUINTA (NH) X 

WOODALL (GA) X 

Mr. Garrett made a motion that, pursuant to clause 1 of rule 

XXII, the Chairman be authorized to offer such motions as may be 

necessary in the House to go to conference with the Senate, and 

staff be authorized to make any necessary technical and conforming changes to the bill. 

The motion was agreed to without objection. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee on the Budget’s oversight findings and recommendations are reflected in the body of this report. 

PERFORMANCE GOALS AND OBJECTIVES

With respect to the requirement of clause 3(c)(4) of rule XIII of 

the Rules of the House of Representatives, the performance goals 

and objectives of this legislation are to provide both the President 

and the Congress improved tools to reconsider spending. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 7 of rule XII of the Rules of the House of Representatives, the committee finds the constitutional authority for 

this legislation in Article I, section 9, clause 7. 


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COMMITTEE COST ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the committee report incorporates the cost estimate prepared by the Director of the Congressional Budget Office 

pursuant to sections 402 and 423 of the Congressional Budget Act 

of 1974. 

CONGRESSIONAL BUDGET OFFICE, 

U.S. CONGRESS, 

Washington, DC, May 8, 2012. 

Hon. PAUL RYAN, Chairman, 

Committee on the Budget, U.S. House of Representatives, Washington, DC 20515. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed 

cost estimate for H.R. 4966, the Sequester Replacement Act of 2012. 

If you wish further details on this estimate, we will be pleased to provide them. 

The CBO staff contact is Avi Lerner, who can be reached at 226-2880. 

Sincerely, 

DOUGLAS W. ELMENDORF, 

Director. 

ENCLOSURE. 

cc: Hon. CHRIS VAN HOLLEN, Ranking Member. 

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

MAY 8, 2012

H.R. 4966: SEQUESTER REPLACEMENT ACT OF 2012 

As ordered reported by the House Committee on the Budget on May 7, 2012 

H.R. 4966 would eliminate certain automatic spending reductions scheduled to 

take effect in January 2013, as well as reduce the overall limit on discretionary 

budget authority for fiscal year 2013. Because the provisions of the bill are contingent on enactment of reconciliation legislation as specified in section 201 of H. Con. 

Res. 112, the budget resolution for fiscal year 2013 as passed by the House, CBO 

estimates that enacting H.R. 4966, by itself, would have no impact on the federal 

budget. 

However, if the contingency in H.R. 4966 is met, CBO estimates that enacting the 

bill would increase direct spending by about $72 billion over the 2013-2022 period, 

relative to the current baseline projections that assume automatic spending reductions under the Budget Control Act of 2011 go into effect as currently scheduled. 

That total reflects the cost of avoiding sequestration (cancellation of budgetary resources) from unobligated balances for defense programs and from advance appropriations for 2013 for nondefense programs other than those under the Department 

of Veterans Affairs. At this point in time, no other appropriations have been provided for fiscal year 2013. If additional discretionary appropriations are enacted for 

2013, more resources would be available to be sequestered, and reversing the specified automatic reductions would result in an increase of up to $97 billion in direct 

spending over the 2013-2022 period, CBO estimates (instead of the $72 billion figure 

cited above). 

Those estimates reflect the proposed elimination of the scheduled January 2013 

reductions under the Budget Control Act in spending for discretionary programs and 

in mandatory defense spending. Under H.R. 4966, the scheduled reductions in mandatory nondefense spending would remain in effect. 

H.R. 4966 would also remove the separate limits on defense and nondefense discretionary budget authority for 2013. Furthermore, the act would specify a cap on 

total discretionary budget authority that is $19.1 billion lower than the total funding level of $1,047 billion that could be provided under current law; however, because any effect of that adjustment would be subject to future appropriation actions, 

there would be no impact on direct spending from that change in the cap on 2013 

funding. 

H.R. 4966 contains no intergovernmental or private-sector mandates as defined in 

the Unfunded Mandates Reform Act. 

The CBO staff contact for this estimate is Avi Lerner. The estimate was approved 

by Theresa Gullo, Deputy Assistant Director for Budget Analysis. 


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ADVISORY COMMITTEE STATEMENT

No advisory committee within the meaning of section 5(b) of the 

Federal Advisory Committee Act was created by this legislation. 

APPLICABILITY TO THE LEGISLATIVE BRANCH

The committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act (Public Law 104-1). 

FEDERAL MANDATES STATEMENT

The committee adopted the estimate of Federal mandates prepared by the Director of the Congressional Budget Office pursuant 

to section 423 of the Unfunded Mandates Reform Act (Public Law 

104-4). 

ADVISORY ON EARMARKS

In accordance with clause 9 of rule XXI of the Rules of the House 

of Representatives, H.R. 3521 does not contain any congressional 

earmarks, limited tax benefits, or limited tariff benefits as defined 

in clause 9(e), 9(f), or 9(g) of rule XXI. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, 

existing law in which no change is proposed is shown in roman): 

BALANCED BUDGET AND EMERGENCY DEFICIT 

CONTROL ACT OF 1985 

* * * * * * * 

PART C—EMERGENCY POWERS TO ELIMINATE 

DEFICITS IN EXCESS OF MAXIMUM DEFICIT AMOUNT 

* * * * * * * 

SEC. 251. ENFORCING DISCRETIONARY SPENDING LIMITS. 

(a) * * * 

* * * * * * * 

(c) DISCRETIONARY SPENDING LIMIT.—As used in this part, the 

term ‘‘discretionary spending limit’’ means— 

(1) * * * 

ø(2) with respect to fiscal year 2013— 

ø(A) for the security category, $686,000,000,000 in new 

budget authority; and 

ø(B) for the nonsecurity category, $361,000,000,000 in 

new budget authority;¿ 


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(2) with respect to fiscal year 2013, for the discretionary category, $1,047,000,000,000 in new budget authority; 

* * * * * * * 

as adjusted in strict conformance with subsection (b). 

SEC. 251A. ENFORCEMENT OF BUDGET GOAL. 

Unless a joint committee bill achieving an amount greater than 

$1,200,000,000,000 in deficit reduction as provided in section 

401(b)(3)(B)(i)(II) of the Budget Control Act of 2011 is enacted by 

January 15, 2012, the discretionary spending limits listed in section 251(c) shall be revised, and discretionary appropriations and 

direct spending shall be reduced, as follows: 

(1) * * * 

* * * * * * * 

(7) IMPLEMENTING DISCRETIONARY REDUCTIONS.— ø(A) FISCAL YEAR 2013.—On January 2, 2013, for fiscal 

year 2013, OMB shall calculate and the President shall 

order a sequestration, effective upon issuance and under 

the procedures set forth in section 253(f), to reduce each 

account within the security category or nonsecurity category by a dollar amount calculated by multiplying the 

baseline level of budgetary resources in that account at 

that time by a uniform percentage necessary to achieve— 

ø(i) for the revised security category, an amount 

equal to the defense function discretionary reduction 

calculated pursuant to paragraph (5); and 

ø(ii) for the revised nonsecurity category, an 

amount equal to the nondefense function discretionary 

reduction calculated pursuant to paragraph (6).¿ 

(A) FISCAL YEAR 2013.— (i) FISCAL YEAR 2013 ADJUSTMENT.—On January 2, 

2013, the discretionary category set forth in section 

251(c)(2) shall be decreased by $19,104,000,000 in 

budget authority. 

(ii) SUPPLEMENTAL SEQUESTRATION ORDER.—On 

January 15, 2013, OMB shall issue a supplemental sequestration report for fiscal year 2013 and take the 

form of a final sequestration report as set forth in section 254(f)(2) and using the procedures set forth in section 253(f), to eliminate any discretionary spending 

breach of the spending limit set forth in section 

251(c)(2) as adjusted by clause (i), and the President 

shall order a sequestration, if any, as required by such 

report. 

* * * * * * * 

SEC. 256. GENERAL AND SPECIAL SEQUESTRATION RULES. 

(b) * * * 

* * * * * * * 

(e) COMMUNITY AND MIGRANT HEALTH CENTERS, INDIAN

HEALTH SERVICES AND FACILITIES, AND VETERANS’ MEDICAL

CARE.— 

(1) * * * 


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(2) The accounts referred to in paragraph (1) are as follows: 

(A) * * * 

* * * * * * * 

ø(E) Veterans’ medical care (36–0160–0–1–703).¿ 

* * * * * * * 

CONGRESSIONAL BUDGET ACT OF 1974 

* * * * * * * 

TITLE III—CONGRESSIONAL BUDGET PROCESS 

* * * * * * * 

ADJUSTMENTS

SEC. 314. ø(a) ADJUSTMENTS.—After the reporting of a bill or 

joint resolution or the offering of an amendment thereto or the submission of a conference report thereon, the chairman of the Committee on the Budget of the House of Representatives or the Senate 

may make appropriate budgetary adjustments of new budget authority and the outlays flowing therefrom in the same amount as 

required by section 251(b) of the Balanced Budget and Emergency 

Deficit Control Act of 1985.¿ 

(a) ADJUSTMENTS.— (1) IN GENERAL.—The chair of the Committee on the Budget 

of the House of Representatives or the Senate may make adjustments as set forth in paragraph (2) for a bill or joint resolution, 

amendment thereto or conference report thereon, by the amount 

of new budget authority and outlays flowing therefrom in the 

same amount as required by section 251(b) of the Balanced 

Budget and Emergency Deficit Control Act of 1985. 

(2) MATTERS TO BE ADJUSTED.—The chair of the Committee 

on the Budget of the House of Representatives or the Senate 

may make the adjustments referred to in paragraph (1) to— 

(A) the allocations made pursuant to the appropriate 

concurrent resolution on the budget pursuant to section 

302(a); 

(B) the budgetary aggregates as set forth in the appropriate concurrent resolution on the budget; and 

(C) the discretionary spending limits, if any, set forth 

in the appropriate concurrent resolution on the budget. 

* * * * * * * 

VIEWS OF COMMITTEE MEMBERS

Clause 2(l) of rule XI requires each committee to provide two 

days to Members of the committee to file Minority, additional, supplemental, or dissenting views and to include such views in the report on legislation considered by the committee. The following 

views were submitted: 


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MINORITY VIEWS 

REPUBLICANS REJECT A BALANCED APPROACH TO DEFICIT REDUCTION

Democrats and Republicans agree on the importance of reducing 

the deficit, but we disagree on how to do it. Democrats remain focused on creating more jobs now to support the fragile economy 

while pursuing a plan to reduce the deficit in a balanced way. 

That’s why this Spring, House Democrats offered a budget that 

preserves the Medicare guarantee, helps create more jobs now, 

makes us stronger through investments that build long-term 

growth, abides by the tight spending caps established last summer—which save nearly $1 trillion over ten years—and reduces the 

deficit through shared responsibility. In contrast, the House-passed 

Republican budget resolution for fiscal year 2013 reflects the Majority’s unbalanced approach to deficit reduction: it provides costly 

additional tax breaks for millionaires while finding savings by ending the Medicare guarantee for seniors, slashing investments that 

strengthen our economy, and shredding the social safety net. Because Republicans reject a balanced approach and refuse to ask 

millionaires to contribute one cent to deficit reduction, their budget 

hits everyone and everything else. 

House Republicans are attempting to use the fast-track procedures provided under budget reconciliation to hasten consideration 

of some of their budget resolution’s harmful priorities. Their resolution directed six committees to make recommendations for legislative changes that reduce the deficit by $261.5 billion over the 

2012–2022 period. The results are shown in the table below. 

[Cuts in billions of dollars] 

Committee 

Budget Resolution Target Reconciliation Measure 2

2012–2013 2012–2017 2012–2022 2012–2013 2012–2017 2012–2022 

Agriculture 1 .............................................. 7.710 19.700 33.200 7.779 20.443 35.830 

Energy & Commerce ................................. 3.750 28.430 96.760 3.870 47.970 115.480 

Financial Services 1 3 ................................ 3.490 16.700 29.800 4.386 19.740 36.006 

Judiciary .................................................... 0.100 11.200 39.700 0.108 13.575 48.623 

Oversight & Government Reform ............. 2.200 30.100 78.900 2.269 30.785 83.301 

Ways & Means .......................................... 1.200 23.000 53.000 1.360 24.830 68.258 

Gross Reconciliation Savings ..... 18.450 129.130 331.360 19.764 156.470 382.577 

Remove overlap ...................... ¥0.100 ¥12.800 ¥69.900 ¥0.108 ¥14.429 ¥49.556 

Net Total Reconciliation Savings 18.350 116.330 261.460 19.664 142.913 337.943 

* The rule ‘‘deeming’’ the House-passed budget resolution as the concurrent budget resolution shifted $490 million from Agriculture to Financial Services. The 2012–2013 Agriculture target was originally $8.2 billion, while the Financial Services target was $3.0 billion. The 2012– 

2017 and 2012–2022 amounts, as well as the totals, were not changed. 2 Assuming July 1 enactment, as reported by the Budget Committee on May 7, 2012. 

3 The Financial Services score includes $4.9 billion from floor insurance savings, per scoring direction from the Budget Committee. 

In addition, the Sequester Replacement Act of 2012, which the 

Budget Committee marked up on May 7, formalizes the plan laid 

out in the Republican budget resolution. The bill eliminates most 

of the roughly $100 billion across-the-board sequester of spending— 


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50 percent from defense and 50 percent from non-defense programs—scheduled for 2013. The bill leaves in place only the nondefense sequester of mandatory programs, which will affect programs such as Medicare. In place of the rest of the 2013 sequester, 

the bill uses both the multi-year savings from the permanent mandatory spending cuts included in the reconciliation package, and 

the savings from lowering the discretionary spending cap for fiscal 

year 2013 by $19 billion below the level set in the bipartisan Budget Control Act of 2011 (BCA). 

Sequestration is a meat-ax approach to deficit reduction that 

does not make sense for our country. It was included in the BCA 

as a last resort intended to pressure Congress to develop a bipartisan alternative to achieve long-term deficit reduction. But because House Republicans continue to resist the balanced approach 

to deficit reduction that has been recommended by every bipartisan 

group that has looked at the budget challenge, on January 2, 2013, 

this ‘‘Sword of Damocles’’ will go into effect. The sequestration 

would impose indiscriminate cuts of almost $1 trillion over the next 

ten years—50 percent from defense and 50 percent from non-defense programs. 

Unfortunately, instead of looking for a balanced solution, the Republican reconciliation package targets programs that help the less 

powerful while protecting the tax breaks of powerful special interests. In fact, the reconciliation package makes deep cuts to food 

and nutrition programs for low-income families and Medicaid— 

both programs that would have been entirely exempt from any sequestration cuts. 

This unbalanced approach to deficit reduction—focused only on 

cutting investments rather than also closing tax loopholes—is the 

wrong choice for America. 

DEMOCRATS OFFERED BETTER, BALANCED DEFICIT REDUCTION PLANS

The deep spending cuts coming through the Republican reconciliation instructions and the sequestration of spending scheduled 

under the BCA are neither the right nor only ways to reduce the 

deficit. In fact, Democrats have proposed to achieve greater deficit 

reduction from targeted, balanced policy choices, rather than the 

slash-and-burn approach taken by an across-the-board sequester or 

the deep cuts made in the Republican reconciliation proposal. The 

President provided Congress with specific policies to reduce the deficit last fall and in his 2013 budget. This spring, the House Democratic budget would have replaced meat-ax spending cuts under sequestration with a combination of mandatory spending cuts and 

revenues from eliminating tax loopholes and asking millionaires to 

return to the same top tax rate they paid during the Clinton Administration, a time of strong economic growth and fiscal responsibility. 

Finally, in the Budget Committee mark-up this week, Democrats 

offered amendments to replace the Republican plans for deficit reduction in 2013 and beyond with a balanced approach that includes 

both spending cuts and revenues. Democrats offered an amendment 

that would have replaced both the reconciliation cuts and the entire multi-year sequester with at least $1.2 trillion of deficit reduction through a balanced approach. The deficit reduction would 


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come through legislation that increases revenues without increasing the tax burden on middle-income Americans, that decreases 

spending while maintaining the Medicare guarantee and protecting 

Social Security and the social safety net for vulnerable Americans, 

and that promotes economic growth and jobs. In addition, Democrats offered a targeted amendment to replace the remaining 2013 

sequester of Medicare with greater deficit reduction from ending a 

tax break for the ‘‘Big 5’’ oil and gas companies. Republicans defeated both of these amendments on party-line votes. 

PART I OF MARK-UP: SEQUESTER REPLACEMENT RECONCILIATION

ACT OF 2012 

The Republican reconciliation package includes many cuts to 

vital services that will affect Americans in many harmful ways. 

Budget Committee Democrats offered motions to achieve similar 

savings by cutting tax breaks and subsidies to special interests. • Rejecting the elimination of the Social Services Block 

Grant while ending taxpayer subsidies to ‘‘Big Oil.’’ The Social Services Block Grant gives states and localities the flexibility 

to target funding for essential services. Overall, it helps 23 million 

children, seniors, and disabled Americans become self-sufficient 

and economically independent. It provides states with flexible 

funds that support a range of services, such as providing Meals on 

Wheels, preventing child abuse and neglect for at-risk children, 

and helping low-income parents return to work by providing child 

care and related assistance. During the Budget Committee reconciliation mark-up this week, Democrats offered a motion to preserve the Social Services Block Grant and to replace cuts with even 

greater savings from repealing tax breaks for the ‘‘Big 5’’ oil companies. This motion was defeated on a party-line vote. • Protecting food and nutrition support for struggling 

children and families while cutting taxpayer direct payments to agricultural Interests. The Republican proposal cuts 

the Supplemental Nutrition Assistance Program (SNAP), which 

helps struggling households purchase adequate food and nutrition. 

The legislation reduces assistance to every single household receiving SNAP benefits almost immediately and cuts 1.8 million people 

off of food assistance entirely. In addition, nearly 300,000 children 

will lose free school meals, on top of losing the benefits that provide 

food at home. During the Budget Committee reconciliation markup this week, Democrats offered a motion to preserve the food and 

nutrition assistance, and instead reduce the deficit through reform 

of agricultural commodity payments and risk management programs. This motion was defeated on a party-line vote. • Protecting health care coverage for at least 300,000 lowincome children and lowering the deficit by eliminating certain tax subsidies for Big Oil. The Republican proposal allows 

states to cut their support for Medicaid and the Children’s Health 

Insurance Program (CHIP) by covering fewer people, and repeals 

bonuses to states for enrolling additional low-income children in 

the program. The first provision will result in a sharp increase in 

the number of uninsured Americans—100,000 children and adults 

in 2013 and at least 300,000 children in 2015, according to CBO. 

The second provision eliminates incentives for states to increase 


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their enrollment of children, also likely increasing the number of 

uninsured children. Further, the legislation eliminates funding for 

state insurance exchanges that will take effect in 2014 to help uninsured people find affordable coverage. States will either have to 

raise their own funds for these exchanges or rely on the federal 

government to run their exchange. During the Budget Committee 

reconciliation mark-up this week, Democrats offered a motion to 

preserve the Medicaid and CHIP payments, and to replace the proposed deficit reduction with savings from ending a wasteful tax 

break that encourages the ‘‘Big 5’’ oil and gas companies to produce 

oil in foreign countries rather than here at home. This motion was 

defeated on a party-line vote. • Protecting the health of women and children through 

the Prevention and Public Health Fund while closing tax 

loopholes that reward corporations that ship American jobs 

overseas. The Republican proposal repeals the Prevention and 

Public Health Fund. The ACA appropriated funding to support 

such programs as cancer screenings, immunizations, research on 

prevention, and education and outreach. The goal of the fund is to 

provide an expanded and sustained investment in these programs 

to improve overall health and help restrain the rate of growth in 

private- and public-sector health care costs. Some of the funding to 

be cut is allocated for women’s health, including breast cancer and 

cervical cancer screening. During the Budget Committee mark-up, 

Democrats offered a motion to reject the Republican recommendation, and instead close loopholes in the U.S. international corporate 

tax system that encourage companies to ship jobs overseas. This 

motion was defeated on a party-line vote. 

ANALYSIS OF REPUBLICAN COMMITTEE PROPOSALS INCLUDED IN

RECONCILIATION

AGRICULTURE COMMITTEE RECONCILIATION RECOMMENDATIONS

The Agriculture Committee recommended reconciliation legislation cutting $36 billion from SNAP (formerly known as Food 

Stamps). The Committee chose to target all its cuts to food and nutrition assistance to low-income Americans, largely families with 

children, the disabled, and elderly, rather than look for savings 

from any other programs supporting the agriculture sector. All together, the recommendations make changes to the SNAP program 

that will reduce benefits to all 47 million people currently receiving 

SNAP and entirely eliminate benefits to almost 2 million people. 

The Republican plan makes the following cuts: • Almost immediately sunsets the Recovery Act SNAP enhancement. The enhancement is currently due to end on October 

31, 2013. This enhancement has been shortened twice already, 

most recently to provide an offset for the Child Nutrition Reauthorization Act in 2010. This saves $6.0 billion under the directed scoring ordered by the Committee (see below for more details), and $4.4 

billion without it. 

• Makes it more difficult to apply for and receive SNAP 

benefits. The bill limits categorical eligibility—a process that allows households who qualify for certain programs to automatically 

be eligible for SNAP—to those receiving cash assistance from TemVerDate Mar 15 2010 04:19 May 12, 2012 Jkt 019006 PO 00000 Frm 00028 Fmt 6604 Sfmt 6602 E:\HR\OC\HR469P1.XXX HR469P1

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porary Assistance for Needy Families, Supplemental Security Income, or a state general assistance program. This change not only 

stops households from receiving SNAP benefits, it removes nearly 

300,000 children from the child nutrition program. The bill also 

eliminates the state option to apply a Standard Utility Allowance 

in determining SNAP benefits for anyone receiving LIHEAP benefits. Together these provisions reduce SNAP by $25 billion while 

taking an additional $0.5 billion from child nutrition. • Eliminates federal match for SNAP’s employment and 

training program. Republicans say that this is one of many job 

training programs funded by the federal government and is duplicative. However, many job programs are oversubscribed and this 

one is geared to a very vulnerable population. Total savings over 

the 11 years are $3.1 billion. • Ends the state bonus program. The program provides additional funds to states that meet certain administrative targets. 

Elimination saves $0.5 billion. • Removes automatic indexing from SNAP’s nutrition 

education and obesity prevention program. Over time, this 

change gradually reduces the program’s purchasing power. This 

saves $0.5 billion over 11 years. 

ENERGY AND COMMERCE COMMITTEE RECONCILIATION

RECOMMENDATIONS

The Energy and Commerce Committee reported reconciliation 

legislation that cuts $115 billion from health expenditures. All of 

the cuts come from repeal of certain provisions of the Affordable 

Care Act (ACA), cuts to Medicaid, and medical malpractice reform, 

over which it shares jurisdiction with the Judiciary Committee. 

Title I—Repeals and defunds parts of the ACA 

The recommendation impedes implementation of the ACA that is 

already benefitting millions of Americans. Overall, the changes cut 

$26.3 billion over the next decade. 

• Repeals the Prevention and Public Health Fund. Repealing this fund and rescinding unobligated funding reduces spending 

on prevention and public health by $11.9 billion. The ACA appropriated a total of $5 billion for 2010 through 2014 and $2 billion 

for each subsequent year to support such programs as cancer 

screenings, immunizations, research on prevention, and education 

and outreach. The goal of the fund is to provide an expanded and 

sustained investment in these programs to improve overall health 

and help restrain the rate of growth in private- and public-sector 

health care costs. Some of the funding to be cut is allocated for 

women’s health, including breast cancer and cervical cancer screening. The Middle Class Tax Relief and Job Creation Act of 2012 (the 

first payroll tax cut extension bill) already reduced funding for this 

fund by $5.0 billion. • Repeals funding for state health insurance exchanges. 

The proposal strikes the mandatory funding for state exchanges 

and rescinds unobligated funds, cutting $13.5 billion. Starting in 

2014, these exchanges will allow individuals and small businesses 

to compare health plans, determine if they are eligible for tax credits for private insurance or health programs like the CHIP, and enVerDate Mar 15 2010 04:19 May 12, 2012 Jkt 019006 PO 00000 Frm 00029 Fmt 6604 Sfmt 6602 E:\HR\OC\HR469P1.XXX HR469P1

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roll in a health plan that meets their needs. As a result of this proposal, states will either have to raise their own funds to pay for 

setting up an exchange or rely on the federal government to run 

their exchange. 

• Defunds the Consumer Operated and Oriented Plan 

(CO-OP) program. The proposal reduces spending by $0.9 billion 

by rescinding all unobligated funds for the CO-OP program, which 

provides subsidized loans to qualified non-profit health insurance 

plans. 

Title II—Cuts Medicaid and CHIP 

The recommendation cuts Medicaid spending and reduces the 

deficit by $22.7 billion over the next decade, harming hundreds of 

thousands of low-income Americans, including at least 300,000 children. 

• Repeals states’ Medicaid and CHIP Maintenance of Effort (MOE) requirements. The ACA requires states to maintain 

their current Medicaid eligibility standards until 2014 (and CHIP 

eligibility standards until 2019), when nationwide Medicaid eligibility standards take effect and state-based health insurance exchanges will begin operating. Repealing the MOE provision would 

increase the number of Americans who are uninsured, as states 

scale back eligibility for low-income children, parents, seniors, and 

people with serious disabilities. CBO estimates that the provision 

will increase the number of uninsured children and adults by 

100,000 in 2013 and increase the number of uninsured children by 

at least 300,000 in 2015. Repealing the MOE reduces the deficit by 

$0.6 billion. 

• Repeals CHIP performance bonus payments for states 

that provide more low-income children with health care 

coverage. The bonus payments, currently slated to end in 2013, 

help states with the additional coverage-related costs in Medicaid 

as well as CHIP; the more children a state enrolls above the target, 

the larger the federal bonus payment. Eliminating the bonuses reduces spending by $0.4 billion. 

• Rebases the Disproportionate Share Hospital (DSH) allotment for uncompensated care to maintain the 2021 level of 

reductions for an additional year, which reduces spending by $4.2 

billion. Current law includes annual aggregate DSH allotment reductions for 2014 through 2021, to reflect the expected reduction in 

uncompensated care that will result from the ACA. 

• Repeals increased federal Medicaid funding cap and 

match for territories. The proposal replaces the ACA’s increased 

Medicaid federal match and cap for the territories with the levels 

in place prior to the ACA, reducing spending by $6.3 billion, or 64 

percent. 

• Reduces the state provider tax threshold to 5.5 percent, 

down from the current threshold of no higher than 6.0 percent of 

the net patient service revenues. States can use these revenues 

from health care provider taxes to help finance the state share of 

Medicaid expenditures. This proposal reduces spending by $11.3 

billion. 


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Title III—Medical Malpractice 

Jurisdiction over medical malpractice is shared by the Energy 

and Commerce and the Judiciary Committees. The medical malpractice proposal approved by Energy and Commerce differs in a 

few respects from the version approved by Judiciary. The Energy 

and Commerce version generates $66.5 billion in on-budget savings 

over ten years ($56 billion in reduced spending and $10.5 billion in 

increased revenues). The Judiciary version saves about $18 billion 

less. The Energy and Commerce version saves more because it includes a provision to allow evidence of income from collateral 

sources (such as life insurance payouts and health insurance) at 

trial. Like the Judiciary bill, it caps non-economic damages at 

$250,000, imposes a strict statute of limitations on filing lawsuits, 

places restrictions on punitive damages, replaces joint-and-several 

liability with a ‘‘fair-share’’ rule, provides a safe harbor from punitive damages for products that meet FDA applicable safety requirements, limits contingency fee payments, and applies the legislation’s provisions beyond medical malpractice to ‘‘any health care liability claim.’’ Both the Judiciary and Energy and Commerce bills 

override applicable state laws in all 50 states. 

WAYS AND MEANS COMMITTEE RECONCILIATION RECOMMENDATIONS

The Ways and Means Committee recommended reconciliation 

changes that save $68 billion. Instead of cutting tax loopholes that 

encourage the outsourcing of jobs overseas, eliminating egregious 

tax breaks, or eliminating additional tax breaks for millionaires, 

the Committee chose instead to raise taxes on families with children, eliminate valuable social services that help to support child 

protection services and home-based services, including Meals on 

Wheels, and make it harder to purchase health insurance for those 

returning to work. Ways and means Democrats attempted to offer 

the Buffett Rule as a substitute for the cuts, but were ruled out of 

order. The Republican proposal makes the following changes: 

• Eliminates the Social Services Block Grant, which gives 

states and localities the flexibility to target funding for essential 

services. Overall, the Block Grant helps 23 million children, seniors, and disabled Americans become self-sufficient and economically independent through services funded in whole, or in part, by 

the program. It provides home-based services, such as Meals on 

Wheels, for 1.7 million seniors. It helps prevent child abuse and neglect, providing child protective services for 1.8 million at-risk children. It supports low-income parents returning to work by providing child care and related assistance for 4.4 million children. It 

also provides services for nearly 1 million disabled individuals, including respite care and transportation. Ending the program saves 

$16.7 billion. 

• Attacks the ACA so another 350,000 Americans go without health care coverage. Under the ACA, Americans whose incomes are low but who are ineligible for Medicaid and do not have 

employer-sponsored coverage can receive a subsidy to help them afford private coverage. For them to receive real-time assistance, the 

tax credit is paid in advance (and directly to the insurer) based on 

prior-year income. However, if their incomes increase later in the 


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year, they are responsible for repaying some or all of this subsidy 

through a process called ‘‘true up.’’ The ACA sensibly limits trueup payments to encourage participation and avoid penalizing individuals and families whose circumstances change mid-year. Congress already raised the true-up limit twice. The Republican proposal requires these families to repay everything even if they got 

the subsidy they were eligible for at the time, saving $43.9 billion. The Joint Committee on Taxation estimates that, as a result, 

350,000 people will forgo purchasing health insurance—mostly 

healthier people who are willing to take the risk. That will leave 

these families at risk and drive up premiums for the remaining 

less-healthy people purchasing health coverage through insurance 

exchanges. • Denies refundable child tax credit to taxpayers filing 

with Individual Taxpayer Identification Numbers (ITINs). 

This provision requires a taxpayer to include his or her Social Security number on tax returns to claim the refundable child tax 

credit, saving $7.6 billion. This measure ends refundable child tax 

credits for more than 3 million children in 2013 alone in families 

with an average income of about $20,000. 

FINANCIAL SERVICES COMMITTEE RECONCILIATION

RECOMMENDATIONS

The Financial Services Committee recommended cuts that save 

$31.1 billion, assuming a July 1 enactment date, as the Republicans requested (in its score, CBO noted that the proposal would 

also increase the net income to the National Flood Insurance Program by $4.9 billion). The reconciliation instruction called for a 

total of $29.8 billion in net savings. Each of the five components 

to the Committee’s proposal is controversial or raises scoring 

issues. • Repeals regulators’ authority to shut down a failing 

large financial firm when that failure would threaten the financial stability of the U.S. This proposal relies on a budget 

gimmick to generate savings. The Dodd-Frank legislation designed 

this authority to pay for itself over time, with any initial up-front 

costs being recouped by selling assets and imposing an assessment, 

after the resolution, on financial institutions with more than $50 

billion in assets. Thus, some of the offsetting recoveries are estimated to come outside the scoring window. Repealing the authority 

entirely eliminates the appearance of costs in the ten-year window, 

and therefore shows savings of $22.6 billion. But repealing the authority will prevent regulators from managing the orderly wind 

down of a failing firm—that inability could result in the disorderly 

collapse of large financial institutions—making future bailouts 

more likely and making it more likely that taxpayers will again be 

stuck with the bill. 

• Eliminates the Home Affordable Modification Program 

(HAMP). Dismantling HAMP eliminates virtually the only federal 

assistance that helps homeowners who are struggling with foreclosure and need loan modifications. Its elimination saves $2.8 billion. 

• Jeopardizes consumers’ rights and protections by eliminating direct spending for the new Consumer Financial ProVerDate Mar 15 2010 04:19 May 12, 2012 Jkt 019006 PO 00000 Frm 00032 Fmt 6604 Sfmt 6602 E:\HR\OC\HR469P1.XXX HR469P1

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tection Bureau (CFPB) and making it subject to appropriations, 

thereby further violating the discretionary spending caps in the 

BCA. This latest attack on the CFPB will likely lessen consumer 

protection while adding to the pressure of keeping to a low discretionary spending cap. The proposal scores $5.4 billion in savings 

from eliminating direct spending for the CFPB, and makes the 

CFPB the only banking regulator to be subject to appropriations. 

If the Budget Committee Chairman exercises his authority to modify the discretionary caps to reflect the shift of the CFPB spending 

from the mandatory to the discretionary category, then there are 

no savings. If he does not adjust the discretionary cap, then he is 

effectively further lowering the discretionary cap by requiring more 

items to be funded under the same limit. Republicans may use that 

argument to further their efforts to slash spending for the CFPB. • Elimination of the Office of Financial Research. This office supports the Financial Stability Oversight Council by collecting 

information on financial markets and conducting research on financial stability issues. It is authorized to collect fees from financial 

institutions with more than $50 billion in assets to offset its expenses. Eliminating the office saves slightly over $250 million. Because the office’s fees also support the activities of the Financial 

Stability Oversight Council, new appropriations of about $10 million per year will be necessary to fund those activities, putting 

more pressure on the discretionary spending cap. • Reforms the flood insurance program. The estimate of 

$4.9 billion in savings relies on the provision in the budget resolution directing CBO to treat the change in the program’s net income 

as if were deposited in the General Fund. The provisions are the 

same as those in H.R. 1309, which passed the House in July 2011. 

JUDICIARY COMMITTEE RECONCILIATION RECOMMENDATIONS

The Judiciary Committee recommended medical malpractice legislation that is substantively identical to the medical malpractice 

provisions in H.R. 5 that the House passed in March. CBO scores 

this legislation as saving a net total of $48.6 billion, for total deficit 

reduction that exceeds the Committee’s instruction to find $39.7 

billion in savings. The legislation caps noneconomic damages at 

$250,000 and makes it more difficult to recover punitive damages, 

replaces joint and several liability for losses with a ‘‘fair share’’ 

rule, imposes a strict statute of limitations for filing lawsuits, provides a safe harbor from punitive damages for products that meet 

FDA applicable safety requirements, and puts limits on contingency fee payments. The provisions of the bill apply to not only 

medical malpractice, but also to any ‘‘health care liability claims’’— 

providing new protections for insurance companies, drug and device 

manufacturers, and nursing homes. Like the Energy and Commerce proposal on medical malpractice, the Judiciary legislation 

also overrides applicable state laws in all 50 states. 

OVERSIGHT AND GOVERNMENT REFORM COMMITTEE RECONCILIATION

RECOMMENDATIONS

The Committee on Oversight and Government Reform passed on 

a party-line vote reconciliation recommendations that generate $83 

billion by requiring all federal employees, including postal workers, 


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to pay more for their retirement benefits. Consequently, each federal employee will, in effect, have their pay cut an average of more 

than $30,000 over the next ten years. These new cuts to federal 

employee pay come on top of $60 billion in cuts resulting from the 

two-year pay freeze and $15 billion in cuts resulting from increasing retirement contributions on new federal employee enacted in 

H.R. 3630, the Middle Class Tax Relief Act of 2012. Under the bill, 

most existing employees under the Civil Service Retirement System (CSRS) and the Federal Employee Retirement System (FERS) 

will face a 5 percentage point increase in their retirement contributions, which will be phased in over five years. The increase for new 

FERS employees is smaller—2.7 percentage points—because their 

contributions were already increased by 2.3 percentage points as 

part of the Middle Class Tax Relief Act of 2012, which will go into 

full effect starting 2013. (The table below shows all changes in employee contributions.) 

[Contribution changes by employee category] 

Beneficiary 

Contribution Rate 

Current 

% 

Proposed 

Increase 

% 

Proposed 

Final 

% 

Existing: 

Federal Employees (CSRS) ......................................................................................... 7 5 12 

Federal LEO Employees (CSRS) ................................................................................. 7 .5 5 12 .5 

Members of Congress (CSRS) .................................................................................... 8 8 .5 16 .5 

Congressional Staff (CSRS) ....................................................................................... 7 .5 7 .5 15 

Federal Employees (FERS) ......................................................................................... 0 .8 5 5 .8 

Federal LEO Employees (FERS) .................................................................................. 1 .3 5 6 .3 

Members of Congress (FERS) .................................................................................... 1 .3 8 .5 9 .8 

Congressional Staff (FERS) ....................................................................................... 1 .3 7 .5 8 .8

Newly Hired: 

Federal Employees (FERS+) ....................................................................................... 3 .1 2 .7 5 .8 

Federal LEO Employees (FERS+) ............................................................................... 3 .6 2 .7 6 .3 

Newly Elected Members (FERS+) .............................................................................. 3 .1 2 .7 5 .8 

Congressional Staff (FERS+) ..................................................................................... 3 .1 2 .7 5 .8 

The proposal requires larger contributions from the paychecks of 

current legislative employees than from other federal employees. 

Current Members of Congress will have to pay an additional 8.5 

percent of their salaries for their retirement benefit and current 

Congressional staff will have to pay an additional 7.5 percent, increases that are also phased in over five years. After full phase-in 

of the increases, most FERS employees will pay 5.8 percent (6.3 

percent if a law enforcement employee) of their salaries toward 

their retirement benefit, up from 0.8 percent (1.3 percent if law enforcement) they pay this year. Current Members of Congress will 

pay 9.8 percent and congressional staff will pay 8.8 percent, up 

from 1.3 percent. 

The bill also eliminates the FERS annuity supplement for new 

employees, except those subject to mandatory retirement, starting 

in 2013. However, any significant savings resulting from this provision will not be realized until beyond the 10-year budget window. 

PART II OF MARK-UP: SEQUESTER REPLACEMENT ACT OF 2012 

In the second part of the reconciliation mark-up, the Budget 

Committee marked up H.R. 4966, Chairman Ryan’s Sequester ReVerDate Mar 15 2010 06:33 May 12, 2012 Jkt 019006 PO 00000 Frm 00034 Fmt 6604 Sfmt 6602 E:\HR\OC\HR469P1.XXX HR469P1

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placement Act of 2012. When that legislation is combined with the 

reconciliation cuts considered during the first part of the mark-up, 

it fulfills the Majority’s plan to repeal and replace the sequester 

scheduled for 2013 under the BCA, as envisioned by the Republican budget resolution. The Majority’s complete reconciliation 

package makes no changes to the BCA that affect the discretionary 

requirements for 2014 and beyond. As a result, the sequester of 

funding for both defense and non-defense remains in place for 

those years. 

Instead of the BCA’s roughly $100 billion across-the-board sequester of spending for 2013—50 percent from defense and 50 percent from non-defense programs—H.R. 4966 cancels the entire defense sequester and the sequester of non-defense discretionary 

spending under existing law. However, certain non-defense mandatory programs—including Medicare—will still be subject to sequester for 2013. In addition, it establishes a temporary discretionary 

cap of $1.047 trillion for 2013—the level set by the BCA—without 

any firewall between defense and non-defense spending. Effective 

in January 2013, the bill reduces that cap by $19 billion, limiting 

regular discretionary spending to $1.028 trillion. Any discretionary 

spending above that level would trigger a sequester. 

REPUBLICAN APPROACH TO REPLACING THE SEQUESTER IS UNFAIR

AND UNBALANCED

The Majority’s legislation is another example of their refusal to 

take a fair and balanced approach to reducing the deficit. Every bipartisan commission has recommended and the majority of Americans agree that we should take a balanced, bipartisan approach to 

reducing the deficit that both increases revenue and decreases 

spending. However, 98 percent of the Majority’s Representatives 

have signed a pledge that they will not reduce the deficit by a single penny by cutting tax breaks for the wealthy. 

Instead, the Republican budget resolution and this reconciliation 

mark-up took a lopsided approach to replacing the sequester and 

reducing the deficit that shreds the social safety net for vulnerable 

Americans, and that fails to protect Medicare from sequester for 

even one year. Rather than asking big corporations and wealthy 

special interests to give up tax breaks they do not need, the Majority passed a plan that asks hundreds of thousands of low-income 

children, women, seniors, and other Americans to give up vital assistance that helps them make it from day to day. 

Two particularly egregious examples of their misguided choices 

are basic nutrition assistance and health care coverage. Although 

the Deficit Control Act of 1985 protects nutrition assistance and 

health care coverage for lower-income children and their families 

from sequester, the Republican reconciliation package that replaces 

the sequester for just one year specifically cuts funding for this important safety net assistance. Furthermore, the Majority made 

these harmful choices while protecting subsidies for agricultural 

businesses, big oil companies, and tax breaks for the wealthiest 

Americans. The Republican approach is not the fair and balanced 

approach to deficit reduction that most Americans want. 


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DEMOCRATIC AMENDMENTS WOULD HAVE MADE THE RIGHT CHOICES

FOR AMERICAN FAMILIES AND REPLACED THE SEQUESTER FOR ALL

10 YEARS

During the Budget Committee’s mark-up of H.R. 4966, Democrats offered two amendments to change the Majority’s legislation 

so that it makes the right choices for American families by taking 

a fair and balanced approach to reducing the deficit. Democrats offered an amendment that would have replaced the sequester for 

the entire 10-year period called for under the BCA—not just one 

year, as the Republican plan does. The amendment would have replaced the sequester with balanced legislation that (1) cuts spending while maintaining the Medicare guarantee and protecting Social Security and a strong social safety net; (2) increases revenues 

without increasing the tax burden on middle-income Americans; 

and (3) grows jobs and the economy by, among other things, making strategic investments in education, science, research, and critical infrastructure necessary to compete in the global economy. 

This amendment was defeated on a party-line vote. 

Democrats also offered an amendment to exempt Medicare from 

the 2013 sequester. This amendment would have prevented acrossthe-board payment cuts to doctors, hospitals, nursing homes, home 

health aides, and others that provide critical care to Medicare 

beneficiaries. The Democratic amendment would have paid for protecting Medicare from sequester by eliminating a wasteful tax 

break for big oil and gas companies. This amendment was defeated 

on a party-line vote. 

DEMOCRATIC MOTIONS AND AMENDMENTS OFFERED IN BUDGET

COMMITTEE MARK-UP

• Motion #1: Protecting Health Care Coverage for At Least 

300,000 Low-Income Children and Lowering the Deficit 

by Eliminating Certain Tax Subsidies for Big Oil 

A motion by Rep. Castor that the Committee on the Budget direct its Chairman to request on behalf of the Committee that the 

rule for consideration of the Sequester Replacement Reconciliation 

Act of 2012 make in order an amendment that would strike from 

Title II of the bill section 213, which repeals the maintenance of 

effort requirements for children in the Children’s Health Insurance 

Program (CHIP) and children and adults in Medicaid; and section 

215, which repeals CHIP performance bonus payments; and replaces them with a provision that increases revenue by eliminating 

a wasteful tax break that encourages big oil companies to produce 

oil in foreign countries rather than here at home. 

• Motion #2: Protecting the Health of Women and Children 

While Closing Tax Loopholes that Reward Corporations 

that Ship American Jobs Overseas 

A motion by Rep. Schwartz and Rep. Wasserman Schultz that 

the Committee on the Budget direct its Chairman to request on behalf of the Committee that the rule for consideration of the Sequester Replacement Reconciliation Act of 2012 make in order an 

amendment that would strike from Title II of the bill section 202, 

which repeals the Prevention and Public Health Fund under the 


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Affordable Care Act, and replace that section with changes in law 

to reduce the deficit by closing loopholes in the U.S. international 

corporate tax system that encourage companies to ship jobs overseas. 

• Motion #3: Rejecting the Elimination of the Social Services Block Grant While Ending Taxpayer Subsidies to 

Big Oil 

A motion by Rep. Doggett and Rep. Bonamici that the Committee 

on the Budget direct its Chairman to request on behalf of the Committee that the rule for consideration of the Sequester Replacement 

Reconciliation Act of 2012 make in order an amendment that 

strikes Subtitle C of Title VI—the elimination of the Social Services 

Block Grant—of the bill, and replaces that section with changes in 

law that reduce the deficit by repealing the tax subsidies for the 

‘‘Big 5’’ major integrated oil companies. 

• Motion #4: Protect Food and Nutrition Support for Struggling Children and Families While Cutting Taxpayer Direct Payments to Agricultural Interests 

A motion by Rep. Blumenauer and Rep. Yarmuth that the Committee on the Budget direct its Chairman to request on behalf of 

the Committee that the rule for consideration of the Sequester Replacement Reconciliation Act of 2012 make in order an amendment 

that (1) would strike Title 1, which reduces spending in the Supplemental Nutrition Assistance Program, and (2) replaces it with 

changes in law to reduce the deficit by reforming agricultural commodity and crop insurance programs. 

• Amendment #1: Taking a Fair and Balanced Approach to 

Reducing the Deficit and Replacing the Sequester 

An amendment by Rep. Van Hollen that replaces the sequester 

for the entire 10-year period called for under the Budget Control 

Act with balanced, bipartisan legislation that: 

» increases revenues without increasing the tax burden on 

middle-income Americans, 

» decreases spending while maintaining the Medicare guarantee and protecting Social Security and the social safety net 

for vulnerable Americans, and 

» promotes economic growth and jobs. 

Amendment #2: Prevent Cuts to Medicare 

An amendment by Rep. McCollum and Rep. Tim Ryan (OH) that 

exempts Medicare from the 2013 sequester, preventing across-theboard payment cuts to doctors, hospitals, nursing homes, home 

health aides, and others that provide critical care to Medicare 

beneficiaries. The amendment pays for protecting Medicare from 

sequester by eliminating wasteful tax breaks for big oil and gas 

companies. 

CHRIS VAN HOLLEN. 

BILL PASCRELL, Jr. 

MARCY KAPTUR. 

KATHY CASTOR. 

KAREN BASS. 


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BETTY MCCOLLUM. TIM RYAN. ALLYSON Y. SCHWARTZ. SUZANNE BONAMICI. GWEN MOORE. DEBBIE WASSERMAN SCHULTZ. JOHN YARMUTH. LLOYD DOGGETT. MICHAEL M. HONDA. EARL BLUMENAUER. HEATH SHULER. 


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DISSENTING VIEWS 

Chairman Ryan, Ranking Member Van Hollen, thank you for giving me the opportunity to address these issues of great importance 

to my district, as well as millions of communities across this country. It is imperative that we use this opportunity to discuss what 

should be the priorities of this Congress: achieving economic 

growth through job creation, expanding our middle class, and protecting our social safety-net. However, the path that the Tea Party 

majority and Chairman Ryan have put before us today rejects 

these priorities, and seeks to double down the the failed policies 

that already brought us massive income inequality, a weakened 

production base and a shrinking middle class. In short, the majority’s choice is to cut $75 billion from programs that directly benefit 

seniors, the middle class and poor, in order to protect special interests and millionaires. 

As a Member of the Committee on Ways and Means, I fought 

against that committee’s unfair reconciliation legislation that inordinately placed the burdens of increased defense spending and tax 

cuts for the very wealthy on seniors, the disabled and middle class 

families. The Democratic minority put forth multiple amendments 

that sought to ask those who have so much already, to contribute 

a little more so we could avoid cuts to important programs. 

Unfortunately, the majority rejected these amendments, and instead favored a path that took $47 billion in tax credits that middle 

class families could use to purchase health insurance. By removing 

the incentive to enter the healthcare exchanges, not only does a 

middle class individual’s tax liability increase, but so do the general costs for the rest of us who will have to shoulder the health 

costs of these uninsured Americans. Additionally, we already made 

appropriate adjustments to the caps on repayment in December of 

2010, and they were reasonable, unlike these changes that are 

being considered today. 

The majority also choose to limit the ability of families to use the 

Child Tax Credit for some U.S. citizens, as well as all but eliminate 

the Social Service Block Grant. In my home state of New Jersey, 

there are almost three-hundred thousand children living in poverty, and almost forty percent of their families use an Individual 

Taxpayer Identification Number (ITIN) to help bear the cost of 

raising these children. Denying the Child Tax Credit to ITIN filers 

will take an average of $1,800 out of the pockets of families who 

earn an average of $21,000 a year. And by eliminating the Social 

Service block grant for 2013, they prioritized oil companies and 

millionaires over 23 million Americans, including the disabled and 

seniors, who rely on programs ranging from transportation assistance to Meals on Wheels. 

Other committees have also enacted devastating cuts that unfairly place the burden on the middle class, seniors, and our most 


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vulnerable citizens. The Agriculture Committee cut $33.2 billion 

from the Supplemental Nutrition Assistance Program (SNAP) over 

ten years, money that goes to making sure children and families 

who are struggling financially have access to healthy food. The Energy and Commerce Committee made $25 billion in cuts to the 

Medicaid program in the form of disproportionate share hospital 

(DSH) payment rebasing in 2022, and changes to Medicaid eligibility rules, a slight decrease in state provider taxes and the repeal 

of the Prevention and Public Health Fund. This is an attack on 

public health efforts and hospitals who treat low income patients. 

There are other fair and balanced methods to reducing our debt 

and deficit. This is why I support the Democratic proposals that 

ask large oil and gas companies, millionaires and companies that 

ship jobs overseas, to pay just a little more to ensure that millions 

of seniors, middle class families and our most vulnerable citizens 

are not left alone to bear the burden of deficit reduction. Plain and 

simple, the majority is choosing millionaires over women and children’s access to healthcare. They are choosing corporate welfare for 

outsourcing jobs over helping the next generation of workers afford 

college. And they are choosing oil and gas companies over ensuring 

that our most vulnerable citizens, including seniors and children, 

have access to important nutrition and healthcare programs. 

Once again we find ourselves debating extreme attempts by Tea 

Party Republicans to hurt middle and lower income Americans, 

while protecting special interests, under the guise of deficit reduction. Not only will these choices fail to produce economic growth 

and job creation, they do not reflect the morals of our country. I 

reject the cynicisms that the Republican majority has in the American people, because I believe that together we can protect seniors 

and our most vulnerable citizens, and lay the foundation for an 

economy that provides future generations with the prosperity we 

have sought for ourselves. 

BILL PASCRELL, Jr. 


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Appendix: Legislative Text 

The following legislative text incorporates both amendments 

adopted in the Committee on the Budget and technical corrections. 

H.R. 4966 

To amend the Balanced Budget and Emergency Deficit Control Act 

of 1985 to replace the sequester established by the Budget Control Act of 2011. 

IN THE HOUSE OF REPRESENTATIVES

APRIL 27, 2012 

Mr. RYAN of Wisconsin introduced the following bill; which was referred to the Committee on the Budget, and in addition to the 

Committee on Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such 

provisions as fall within the jurisdiction of the committee concerned 

A BILL To amend the Balanced Budget and Emergency Deficit Control Act of 1985 

to replace the sequester established by the Budget Control Act of 2011. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Sequester Replacement Act of 

2012’’. 

SEC. 2. CONTINGENT EFFECTIVE DATE. 

This Act and the amendments made by it shall take effect 

upon the enactment of the Act provided for in section 201 of H. 

Con. Res. 112 (112th Congress) and this Act and the amendments 

made by it shall have no force or effect if such Act provided for in 

such section is not enacted. 

SEC. 3. PROTECTING VETERANS PROGRAMS FROM SEQUESTER. 

Section 256(e)(2)(E) of the Balanced Budget and Emergency 

Deficit Control Act of 1985 is repealed. 

SEC. 4. ACHIEVING $19 BILLION IN DISCRETIONARY SAVINGS. 

(a) Revised 2013 Discretionary Spending Limit.—Paragraph (2) 

of section 251(c) of the Balanced Budget and Emergency Deficit 

Control Act of 1985 is amended to read as follows: 

‘‘(2) with respect to fiscal year 2013, for the discretionary category, $1,047,000,000,000 in new budget authority;’’. 


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38 

(b) Discretionary Savings.—Section 251A(7)(A) of the Balanced 

Budget and Emergency Deficit Control Act of 1985 is amended to 

read as follows: 

‘‘(A) Fiscal year 2013.— 

‘‘(i) Fiscal year 2013 adjustment.—On January 2, 

2013, the discretionary category set forth in section 

251(c)(2) shall be decreased by $19,104,000,000 in 

budget authority. 

‘‘(ii) Supplemental sequestration order.—On January 15, 2013, OMB shall issue a supplemental sequestration report for fiscal year 2013 and take the form 

of a final sequestration report as set forth in section 

254(f)(2) and using the procedures set forth in section 

253(f), to eliminate any discretionary spending breach 

of the spending limit set forth in section 251(c)(2) as 

adjusted by clause (i), and the President shall order a 

sequestration, if any, as required by such report.’’. 

SEC. 5. CONFORMING AMENDMENTS TO SECTION 314 OF THE CONGRESSIONAL BUDGET AND IMPOUNDMENT CONTROL ACT 

OF 1974. 

Section 314(a) of the Congressional Budget Act of 1974 is 

amended to read as follows: 

‘‘(a) Adjustments.— 

‘‘(1) In general.—The chair of the Committee on the Budget of the House of Representatives or the Senate may make adjustments as set forth in paragraph (2) for a bill or joint resolution, amendment thereto or conference report thereon, by the 

amount of new budget authority and outlays flowing therefrom 

in the same amount as required by section 251(b) of the Balanced Budget and Emergency Deficit Control Act of 1985. 

‘‘(2) Matters to be adjusted.—The chair of the Committee 

on the Budget of the House of Representatives or the Senate 

may make the adjustments referred to in paragraph (1) to— 

‘‘(A) the allocations made pursuant to the appropriate 

concurrent resolution on the budget pursuant to section 

302(a); 

‘‘(B) the budgetary aggregates as set forth in the appropriate concurrent resolution on the budget; and 

‘‘(C) the discretionary spending limits, if any, set forth 

in the appropriate concurrent resolution on the budget.’’. 

SEC. 6. TREATMENT FOR PAYGO PURPOSES. 

The budgetary effects of this Act and any amendment made by 

it, and the budgetary effects of the Act provided for by section 201 

of H. Con. Res. 112 (112th Congress), shall not be entered on either 

PAYGO scorecard maintained pursuant to section 4(d) of the Statutory Pay-As-You-Go Act of 2010. 

SEC. 7. ELIMINATION OF THE FISCAL YEAR 2013 SEQUESTRATION FOR 

DEFENSE DIRECT SPENDING. 

Any sequestration order issued by the President under the Balanced Budget and Emergency Deficit Control Act of 1985 to carry 

out reductions to direct spending for the defense function (050) for 


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39 

fiscal year 2013 pursuant to section 251A of such Act shall have 

no force or effect. 

Æ 


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