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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4142 Introduced in House (IH)]

104th CONGRESS
  2d Session
                                H. R. 4142

             To amend the Congressional Budget Act of 1974.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           September 24, 1996

   Mr. Barton of Texas (for himself and Mr. Stenholm) introduced the 
 following bill; which was referred to the Committee on Budget, and in 
  addition to the Committees on Government Reform and Oversight, and 
 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 Congressional Budget Act of 1974.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Save Our Savings 
Act of 1996''.
    (b) Table of Contents.--

Sec. 1. Short title and table of contents.
Sec. 2. Definitions.
         TITLE I--CAP ENTITLEMENTS AND OTHER MANDATORY SPENDING

Sec. 101. Timetable.
Sec. 102. Direct spending caps.
Sec. 103. Economic assumptions.
Sec. 104. Revisions to the caps for entitlements and other mandatory 
                            spending.
                    TITLE II--ENFORCEMENT PROVISIONS

Sec. 201. Reporting excess spending.
Sec. 202. Enforcing direct spending caps.
Sec. 203. Enforcing direct spending limits.
Sec. 204. Exempt programs and activities.
Sec. 205. Special rules.
Sec. 206. The current law baseline.

SEC. 2. DEFINITIONS.

    For purposes of this Act:
            (1) Eligible population.--The term ``eligible population'' 
        shall mean those individuals to whom the United States is 
        obligated to make a payment under the provisions of a law 
        creating entitlement authority. Such term shall not include 
        States, localities, corporations or other nonliving entities.
            (2) Sequester and sequestration.--The terms ``sequester'' 
        and ``sequestration'' refer to or mean the cancellation of 
        budgetary resources provided by discretionary appropriations or 
        direct spending law.
            (3) Breach.--The term ``breach'' means, for any fiscal 
        year, the amount (if any) by which outlays for that year 
        (within a category of direct spending) is above that category's 
        direct spending cap for that year.
            (4) Baseline.--The term ``baseline'' means the projection 
        (described in section 206) of current levels of new budget 
        authority, outlays, receipts, and the surplus or deficit into 
        the budget year and the outyears.
            (5) Budgetary resources.--The term ``budgetary resources'' 
        means new budget authority, unobligated balances, direct 
        spending authority, and obligation limitations.
            (6) Discretionary appropriations.--The term ``discretionary 
        appropriations'' means budgetary resources (except to fund 
        direct spending programs) provided in appropriation Acts. If an 
        appropriation Act alters the level of direct spending or 
        offsetting collections, that effect shall be treated as direct 
        spending. Classifications of new accounts or activities and 
        changes in classifications shall be made in consultation with 
        the Committees on Appropriations and the Budget of the House of 
        Representatives and the Senate and with CBO and OMB.
            (7) Direct spending.--The term ``direct spending'' means--
                    (A) budget authority provided by law other than 
                appropriation Acts, including entitlement authority;
                    (B) entitlement authority; and
                    (C) the food stamp program.
        If a law other than an appropriation Act alters the level of 
        discretionary appropriations or offsetting collections, that 
        effect shall be treated as direct spending.
            (8) Entitlement authority.--The term ``entitlement 
        authority'' means authority (whether temporary or permanent) to 
        make payments (including loans and grants), the budget 
        authority for which is not provided for in advance by 
        appropriation Acts, to any person or government if, under the 
        provisions of the law containing such authority, the United 
        States is obligated to make such payments to persons or 
        governments who meet the requirements established by such law.
            (9) Current.--The term ``current'' means, with respect to 
        OMB estimates included with a budget submission under section 
        1105(a) of title 31 U.S.C., the estimates consistent with the 
        economic and technical assumptions underlying that budget.
            (10) Account.--The term ``account'' means an item for which 
        there is a designated budget account designation number in the 
        President's budget.
            (11) Budget year.--The term ``budget year'' means the 
        fiscal year of the Government that starts on the next October 
        1.
            (12) Current year.--The term ``current year'' means, with 
        respect to a budget year, the fiscal year that immediately 
        precedes that budget year.
            (13) Outyear.--The term ``outyear'' means, with respect to 
        a budget year, any of the fiscal years that follow the budget 
        year.
            (14) OMB.--The term ``OMB'' means the Director of the 
        Office of Management and Budget.
            (15) CBO.--The term ``CBO'' means the Director of the 
        Congressional Budget Office.
            (16) Budget outlays and outlays.--The terms ``budget 
        outlays'' and ``outlays'' mean, with respect to any fiscal 
        year, expenditures of funds under budget authority during such 
        year.
            (17) Budget authority and new budget authority.--The terms 
        ``budget authority'' and ``new budget authority'' have the 
        meanings given to them in section 3 of the Congressional Budget 
        and Impoundment Control Act of 1974.
            (18) Tax expenditures.--The term ``tax expenditures'' means 
        those revenue losses attributable to provisions of the Federal 
        tax laws which allow a special exclusion, exemption, or 
        deduction from gross income or which provide a special credit, 
        a preferential rate of tax, or a deferral of tax liability.
            (19) Tax expenditures budget.--The term ``tax expenditures 
        budget'' means an enumeration of such tax expenditures.
            (20) Appropriation act.--The term ``appropriation Act'' 
        means an Act referred to in section 105 of title 1 of the 
        United States Code.
            (21) Deficit.--The term ``deficit'' means, with respect to 
        a fiscal year, the amount by which outlays exceed receipts 
        during that year.
            (22) Surplus.--The term ``surplus'' means, with respect to 
        a fiscal year, the amount by which receipts exceed outlays 
        during that year.
            (23) Government-sponsored enterprise.--The term 
        ``government-sponsored enterprise'' means a corporate entity 
        created by a law of the United States that--
                    (A) has a Federal charter authorized by law;
                    (B) is privately owned, as evidenced by capital 
                stock owned by private entities or individuals;
                    (C) is under the direction of a board of directors, 
                a majority of which is elected by private owners;
                    (D) is a financial institution with power to--
                            (i) make loans or loan guarantees for 
                        limited purposes such as to provide credit for 
                        specific borrowers or one sector; and
                            (ii) raise funds by borrowing (which does 
                        not carry the full faith and credit of the 
                        Federal Government) or to guarantee the debt of 
                        others in unlimited amounts;
                            (iii) does not exercise powers that are 
                        reserved to the Government as sovereign (such 
                        as the power to tax or to regulate interstate 
                        commerce);
                            (iv) does not have the power to commit the 
                        Government financially (but it may be a 
                        recipient of a loan guarantee commitment made 
                        by the Government); and
                            (v) has employees whose salaries and 
                        expenses are paid by the enterprise and are not 
                        Federal employees subject to title 5 of the 
                        United States Code.
            (23) Sale of an asset.--The term ``sale of an asset'' means 
        the sale to the public of any physical asset owned in whole or 
        in part by the United States.
            (24) Direct spending caps.--The term ``direct spending 
        caps'' means the nominal dollar limits for entitlements and 
        other mandatory spending pursuant to section 102 (as modified 
        by any revisions provided for in this Act).

SEC. 101. TIMETABLE.

On or before:                       Action to be completed:
    January 15.....................
                                        CBO economic and budget update.
    First Monday in February.......
                                        President's budget. Includes 
                                                sequestration update 
                                                based on new 
                                                assumptions.
    July l.........................
                                        Cut off for in-session 
                                                sequester.
    August l.......................
                                        Baseline update--OMB and CBO.
    August l5......................
                                        Preview report.
    October l......................
                                        Start of new fiscal year.
    December l5....................
                                        OMB issues final (look back) 
                                                report for prior year 
                                                and preview for current 
                                                year.
    December 15....................
                                        Presidential sequester order.

SEC. 102. DIRECT SPENDING CAPS.

    Effective upon the date of enactment of this Act, the following 
direct spending caps shall apply to all entitlement authority except 
for undistributed offsetting receipts and net interest outlays.
  

                                                                                                                
                                          [Fiscal years--$ in millions]                                         
----------------------------------------------------------------------------------------------------------------
                                                   1997       1998       1999       2000       2001       2002  
----------------------------------------------------------------------------------------------------------------
Medicaid......................................   $106,505   $113,524   $120,576   $128,327   $135,318   $144,758
Food stamps...................................     26,001     25,763     26,963     28,282     29,513     30,715
Supplemental security income..................     25,944     25,457     27,011     31,737     28,844     33,910
Family support................................     19,673     20,189     20,832     21,319     21,701     21,791
Earned income tax credit......................     19,746     20,438     21,228     22,106     22,919     23,642
Social security...............................    365,403    383,402    402,351    422,412    444,081    466,767
Medicare......................................    188,684    204,807    217,543    232,051    248,109    266,981
Federal retirement:                                                                                             
  Civilian/other..............................     46,030     48,448     51,044    53,8888     56,689     59,680
  Military....................................     29,848     30,881     31,949     33,022     34,122     35,259
Unemployment compensation.....................     25,555     26,613     27,644     28,698     29,814     30,989
Veterans' benefits............................     20,179     20,499     20,644     22,243     19,643     21,131
Other entitlements and mandatory spending.....     26,421     36,887     34,352     36,269     36,760     36,524
                                               -----------------------------------------------------------------
    Total entitlements and other mandatory                                                                      
     spending.................................    899,989    956,908  1,002,137  1,060,311  1,107,470  1,172,285
----------------------------------------------------------------------------------------------------------------

SEC. 103. ECONOMIC ASSUMPTIONS.

    Subject to periodic reestimation based on changed economic 
conditions or changes in eligible population, determinations of the 
direct spending caps under section 102, any breaches of such caps, and 
actions necessary to remedy such breaches shall be based on the 
following economic assumptions (Fiscal Years).
  

                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                                                     Forecast                   
                                                  Preliminary\1\ -----------------------------------------------
                                                       1996        1997    1998    1999-   2000    2001    2002 
----------------------------------------------------------------------------------------------------------------
Nominal GDP (billions of dollars)...............        7,491      7,853   8,225   8,627   9,047   9,489   9,952
Nominal GDP (percentage change).................          4.3        4.8     4.7     4.9     4.9     4.9     4.9
Real GDP\2\ (percentage change).................          1.8        2.0     2.0     2.1     2.1     2.1     2.1
Chain-type GDP price:                                                                                           
  Index (percent change)........................          2.6        2.8     2.7     2.7     2.7     2.7     2.7
  CPI-U\3\ (percentage change)..................          2.7        3.1     3.1     2.9     2.9     2.9     3.0
Unemployment rate (percent).....................          5.7        6.0     6.0     6.0     6.0     6.0     6.0
20    Three-month Treasury bill rate (percent)..          5.0        4.8     4.8     4.8     4.8     4.8     4.8
Ten-year Treasury note rate (percent)...........          6.0        6.3     6.4     6.4     6.4     6.4     6.4
Tax bases (billions of dollars):                                                                                
  Corporate profits.............................          595        609     618     618     626     643     665
  Other taxable income..........................        1,578      1,643   1,731   1,834   1,933   2,033   2,132
  Wage and salary disbursements.................        3,548      3,719   3,889   4,076   4,272   4,475   4,688
                                                 ---------------------------------------------------------------
    Total.......................................        5,721      5,972   6,237   6,529   6,831   7,151   7,485
Tax bases (percentage of GDP):                                                                                  
  Corporate profits.............................          7.9        7.8     7.5     7.2     6.0     6.9     6.8
  Other taxable income..........................         21.1       20.9    21.0    21.3    21.4    21.4    21.4
  Wage and salary disbursements.................         47.4       47.4    47.3    47.3    47.2    47.2    47.1
                                                 ---------------------------------------------------------------
        Total...................................         76.4       76.0    75.8    75.7    75.5    75.4    75.2
----------------------------------------------------------------------------------------------------------------
Source: The Congressional Budget Office. The Economic and Budget Outlook: Fiscal Year 1997-2006, p. 15.         
\1\Consistent with the first official estimate for 1995 published on March 5, 1996.                             
\2\Based on chained (1992) dollars.                                                                             
\3\CPI-U is the Consumer Price Index for all Urban Consumers.                                                   

SEC. 104. REVISIONS TO THE CAPS FOR ENTITLEMENTS AND OTHER MANDATORY 
              SPENDING

    (a) Automatic Adjustments to Caps for Entitlements and Other 
Mandatory Spending.--When the President submits the budget under 
section 1105(a) of title 31, United States Code, for any year, OMB 
shall calculate (in the order set forth below), and the budget and 
reports shall include, adjustments to the direct spending caps (and 
those limits as cumulatively adjusted) for the current year, the budget 
year, and each outyear, to reflect the following:
            (1) Changes in concepts and definitions.--The adjustments 
        produced by changes in concepts and definitions shall equal the 
        baseline levels of new budget authority and outlays using up-
        to-date concepts and definitions minus those levels using the 
        concepts and definitions in effect before such changes. Such 
        changes in concepts and definitions may only be made in 
        consultation with the Committees on Appropriations, the Budget, 
        and Government Reform and Oversight and Governmental Affairs of 
        the House of Representatives and the Senate.
            (2) Changes in net outlays.--Changes in net outlays for all 
        programs and activities exempt from sequestration under section 
        204.
            (3) Changes in inflation.--Inflation adjustment factors 
        shall equal the ratio between the level of year-over-year 
        inflation measured for the fiscal year most recently completed 
        and the applicable estimated level for that year as set forth 
        in the table at section 103 (Economic Assumptions). Inflation 
        shall be measured as follows: for indexed programs, inflation 
        shall be measured by the changes in the index specified in law; 
        for programs providing health care, inflation shall be measured 
        by changes in the consumer price index for all urban consumers 
        for medical care components (CPI-U medical care); and for all 
        other programs, inflation shall be measured by changes in the 
        consumer price index for all urban consumers (CPI-U). The 
        baseline and the direct spending caps shall be adjusted to 
        reflect those changes.
            (4) Changes in eligible populations.--Changes in the 
        projection of the number of eligible beneficiaries from the 
        projections in the calculation of CBO's Estimates of the 
        President's Budgetary Proposals contained in The Economic and 
        Budget Outlook: Fiscal Years 1997-2006.
            (5) Intra-budgetary payments.--From discretionary accounts 
        to mandatory accounts. The baseline and the discretionary 
        spending caps shall be adjusted to reflect those changes.
    (b) Permissible Revisions to Direct Spending Caps.--Direct spending 
caps as enacted pursuant to section 102 may be revised as follows: 
Except as required pursuant to section 104(a), direct spending caps may 
only be amended by recorded vote. It shall be a matter of highest 
privilege in the House of Representatives and the Senate for a Member 
of the House of Representatives or the Senate to insist on a recorded 
vote solely on the question of amending such caps. It shall not be in 
order for the Committee on Rules of the House of Representatives to 
report a resolution waiving the provisions of this subsection. This 
subsection may be waived in the Senate only by an affirmative vote of 
three-fifths of the Members duly chosen and sworn.

                    TITLE II--ENFORCEMENT PROVISIONS

SEC. 201. REPORTING EXCESS SPENDING.

    (a) Analysis of Actual Spending Levels.--Following the end of any 
fiscal year OMB shall compile a statement of actual direct spending for 
that year. The statement shall identify such spending by categories 
contained in section 102.
    (b) Estimate of Necessary Spending Reduction.--Based on the 
statement provided under subsection (a), the OMB shall issue a report 
to the President and the Congress on December 15 of any year in which 
such statement identifies actual or projected spending in the current 
or immediately preceding fiscal years in excess of the applicable total 
direct spending caps in section 102, as adjusted pursuant to section 
104, by more than one percent of the applicable total direct spending 
caps for such year. The report shall include:
            (1) All instances in which actual direct spending has 
        exceeded the applicable direct spending cap.
            (2) The difference between the amount of spending available 
        under the direct spending caps for the current year and 
        estimated actual spending for the categories associated with 
        such caps.
            (3) The amounts by which direct spending must be reduced in 
        the current fiscal year so that total actual and estimated 
        direct spending for all cap categories for the current and 
        immediately preceding fiscal years shall not exceed the amounts 
        available under the direct spending caps for such fiscal years.
            (4) The amount of excess spending attributable solely to 
        changes in inflation or eligible populations.
    (c) Timetable.--

Date:                               Actions to be completed:
    January 15.....................
                                        CBO economic and budget update.
    First Monday in February.......
                                        President's budget (includes 
                                                sequestration update 
                                                based on new 
                                                assumptions.
    August 1.......................
                                        CBO and OMB updates.
    August 15......................
                                        Preview report.
    December 15....................
                                        OMB issues final (look back) 
                                                report for prior year 
                                                and preview for current 
                                                year.
    December 15....................
                                        Presidential sequester order.

SEC. 202. ENFORCING DIRECT SPENDING CAPS.

    (a) General Statement on Spending Caps.--This title provides 
enforcement of the direct spending caps on categories of spending 
established pursuant to section 102. This section shall apply for any 
fiscal year in which direct spending exceeds the applicable direct 
spending cap.
    (b) Overall Rules.--
            (1) Eliminating a breach.--Each non-exempt account within a 
        category shall be reduced by a dollar amount calculated by 
        multiplying the baseline level of sequestrable budgetary 
        resources in that account at that time by the uniform 
        percentage necessary to eliminate a breach within that 
        category.
            (2) Programs, projects, or activities.--Except as otherwise 
        provided, the same percentage sequestration shall apply to all 
        programs, projects and activities within a budget account (with 
        programs, projects and activities as delineated in the 
        appropriation Act or accompanying report for the relevant 
        fiscal year covering that account, or for amounts not included 
        in appropriation Acts, as identified in the section ``Federal 
        Programs by Agency and Account'' as it appears in the 
        Analytical Perspectives to the President's FY 1997 Budget 
        Proposal beginning at page 383.
            (3) Administrative expenses associated with certain 
        programs.--Notwithstanding any exemption, general rule or 
        special rule in this Act, administrative expenses associated 
        with all programs shall be fully subject to sequestration under 
        this section.
            (4) Indefinite authority.--Except as otherwise provided, 
        sequestration in accounts for which obligations are indefinite 
        shall be taken in a manner to ensure that obligations in the 
        fiscal year of a sequestration and succeeding fiscal years are 
        reduced, from the level that would actually have occurred, by 
        the applicable sequestration percentage or percentages.
            (5) Cancellation of budgetary resources.--Budgetary 
        resources sequestered from any account other than an 
        entitlement trust, special or revolving fund account shall 
        revert to the Treasury and be permanently canceled or repealed.
            (6) Implementing regulations.--Administrative regulations 
        or similar actions implementing the sequestration of a program 
        or activity shall be made within 30 days of the effective date 
        of the sequestration of that program or activity.

SEC. 203. ENFORCING DIRECT SPENDING LIMITS.

    (a) In General.--All direct spending (except matters exempted from 
the caps under section 204) shall be subject to caps on total direct 
spending outlays for each fiscal year. Consistent with the cap on total 
outlays, separate caps are established for--
            (1) any program (named in the table at section 102,
            (2) such other program or groups of programs for which 
        additional caps shall be established in subsequent legislation, 
        and
            (3) the remainder of direct spending programs,
except that the separate caps in section 102, plus any additional 
direct spending under such additional separate caps as shall be 
established in subsequent legislation, shall not exceed the cap for 
total direct spending in section 102, as adjusted in accordance with 
section 104.
    (b) General Rules.--For programs subject to direct spending caps:
            (1) Triggering of Sequestration.--Sequestration is 
        triggered if total direct spending subject to the caps exceeds 
        or is projected to exceed the aggregate cap for direct spending 
        for the current or immediately preceding fiscal year.
            (2) Calculation of reductions.--Sequestration shall reduce 
        spending under each separate direct spending cap in proportion 
        to the amounts each category of direct spending contributes or 
        contributed to the overage.
            (3) Uniform percentages.--In calculating the uniform 
        percentage applicable to the sequestration of all spending 
        programs or activities within each category, or the uniform 
        percentage applicable to the sequestration of nonexempt direct 
        spending programs or activities, the sequestrable base for 
        direct spending programs and activities is the total level of 
        outlays for the fiscal year for those programs or activities in 
        the current law baseline.
            (4) Permanent sequestration of direct spending.--
        Obligations in sequestered direct spending accounts shall be 
        reduced in the fiscal year in which a sequestration occurs and 
        in all succeeding fiscal years. Notwithstanding any other 
        provision of this section, after the first direct spending 
        sequestration, any later sequestration shall reduce direct 
        spending by an amount in addition to, rather than in lieu of, 
        the reduction in direct spending in place under the existing 
        sequestration or sequestrations.
            (5) Special rule.--For any direct spending program in 
        which--
                    (A) outlays pay for entitlement benefits;
                    (B) a current-year sequestration takes effect after 
                the 1st day of the budget year;
                    (C) that delay reduces the amount of entitlement 
                authority that is subject to sequestration in the 
                budget; and
                    (D) the uniform percentage otherwise applicable to 
                the budget-year sequestration of a program or activity 
                is increased due to the delay;
        then it shall revert to the uniform percentage calculated under 
        paragraph (3) when the budget year is completed.
            (6) Indexed benefit payments.--If, under any entitlement 
        program--
                    (A) benefit payments are made to persons or 
                governments more frequently than once a year; and
                    (B) the amount of entitlement authority is 
                periodically adjusted under existing law to reflect 
                changes in a price index (commonly called ``cost of 
                living adjustments'');
        sequestration shall first be applied to the cost of living 
        adjustment before reductions are made to the base benefit. For 
        the first fiscal year to which a sequestration order applies, 
        the benefit payment reductions in such programs accomplished by 
        the order shall take effect starting with the payment made at 
        the beginning of January following a final sequester order. For 
        the purposes of this subsection Veterans Compensation shall be 
        considered a program that meets the conditions of the preceding 
        sentence.
            (7) Loan programs.--For all loans made, extended or 
        otherwise modified on or after the date of sequestration, under 
        loan programs subject to direct spending caps--
                    (A) the sequestrable base shall be total fees 
                associated with all loans made extended or otherwise 
                modified on or after the date of sequestration; and
                    (B) the fees paid by borrowers shall be increased 
                by a uniform percentage sufficient to produce the 
                dollar savings in such loan programs for the fiscal 
                year or years of the sequestrations required by this 
                section.
        Notwithstanding any other provision of law, in any year in 
        which a sequester is in effect, all subsequent fees shall be 
        increased by the uniform percentage and all proceeds from such 
        fees shall be paid into the general fund of the Treasury.
            (8) Insurance programs.--Any sequestration in a Federal 
        program that sells insurance contracts to the public (including 
        the Federal Crop Insurance Fund, the National Insurance 
        Development Fund, the National Flood Insurance fund, insurance 
        activities of the Overseas Private Insurance Corporation, and 
        Veterans' Life insurance programs) shall be accomplished by 
        increasing premiums on contracts entered into extended or 
        otherwise modified, after the date a sequestration order takes 
        effect by the uniform sequestration percentage. Notwithstanding 
        any other provision of law, for any year in which a sequester 
        affecting such programs is in effect, subsequent premiums shall 
        be increased by the uniform percentage and all proceeds from 
        the premium increase shall be paid from the insurance fund or 
        account to the general fund of the Treasury.
            (9) State grant formulas.--For all State grant programs 
        subject to direct spending caps--
                    (A) the total amount of funds available for all 
                states shall be reduced by the amount required to be 
                sequestered; and
                    (B) if in the absence of caps states would receive 
                increased funding in the budget year compared to the 
                immediately preceding fiscal year, sequestration shall 
                first be applied to the estimated increases before 
                reductions are made compared to actual payments to 
                states in the previous year--
                            (i) the reductions shall be applied first 
                        to the total estimated increases for all 
                        states; then
                            (ii) the uniform reduction shall be made 
                        from each state's grant; and
                            (iii) the uniform reduction shall apply to 
                        the base funding levels available to states in 
                        the immediately preceding fiscal year only to 
                        the extent necessary to eliminate any remaining 
                        excess over the applicable direct spending cap.
                    (10) Special rule for certain programs.--Except 
                matters exempted under section 204 and programs subject 
                to special rules set forth under section 205 and 
                notwithstanding any other provisions of law, any 
                sequestration required under this Act shall reduce 
                benefit levels by an amount sufficient to eliminate all 
                excess spending identified in the report issued 
                pursuant to section 201, while maintaining the same 
                uniform percentage reduction in the monetary value of 
                benefits subject to reduction under this subsection.
    (c) Within Session Sequester.--If a bill or resolution providing 
direct spending for a fiscal year in progress is enacted before July 1 
of that fiscal year and causes a breach within a direct spending cap or 
caps for that fiscal year, 15 days later there shall be a sequestration 
to eliminate that breach within that cap or caps following the 
procedures set forth in subsection (a).

SEC. 204. EXEMPT PROGRAMS AND ACTIVITIES.

    The following budget accounts, activities within accounts, or 
income shall be exempt from sequestration--
            (1) net interest;
            (2) all payments to trust funds from excise taxes or other 
        receipts or collections properly creditable to those trust 
        funds;
            (3) offsetting receipts and collections;
            (4) all payments from one Federal direct spending budget 
        account to another Federal budget account;
            (5) all intragovernmental funds including those from which 
        funding is derived primarily from other Government accounts;
            (6) expenses to the extent they result from private 
        donations, bequests, or voluntary contributions to the 
        Government;
            (7) nonbudgetary activities, including but not limited to--
                    (A) credit liquidating and financing accounts;
                    (B) the Pension Benefit Guarantee Corporation Trust 
                Funds;
                    (C) the Thrift Savings Fund;
                    (D) the Federal Reserve System; and
                    (E) appropriations for the District of Columbia to 
                the extent they are appropriations of locally raised 
                funds;
            (8) payments resulting from Government insurance, 
        Government guarantees, or any other form of contingent 
        liability, to the extent those payments result from contractual 
        or other legally binding commitments of the Government at the 
        time of any sequestration;
            (9) the following accounts, which largely fulfill 
        requirements of the Constitution or otherwise make payments to 
        which the Government is committed--
                    Bureau of Indian Affairs, miscellaneous trust 
                funds, tribal trust funds (14-9973-0-7-999);
                    Claims, defense;
                    Claims, judgments and relief act (20-1895-0-1-806);
                    Compact of Free Association, economic assistance 
                pursuant to Public Law 99-658 (14-0415-0-1-806);
                    Compensation of the President (11-0001-0-1-802);
                    Customs Service, miscellaneous permanent 
                appropriations (20-9992-0-2-852);
                    Eastern Indian land claims settlement fund (14-
                2202-0-1-806);
                    Farm Credit System Financial Assistance 
                Corporation, interest payments (20-1850-0-1-351);
                    Internal Revenue collections of Puerto Rico (20-
                5737-0-2-852);
                    Payments of Vietnam and USS Pueblo prisoner-of-war 
                claims (15-0104-0-1-153):
                    Payments to copyright owners (03-5175-0-2-376);
                    Salaries of Article III judges (not including cost 
                of living adjustments);
                    Soldier's and Airman's Home, payment of claims (84-
                8930-0-7-705);
                    Washington Metropolitan Area Transit Authority, 
                interest payments (46-0300-0-1-401);
            (10) the following noncredit special, revolving, or trust-
        revolving funds--
                    Exchange Stabilization Fund (20-4444-0-3-155); and
                    Foreign Military Sales trust fund (11-82232-0-7-
                155).
    (j) Optional Exemption of Military Personnel.--
            (1) The President may, with respect to any military 
        personnel account, exempt that account from sequestration or 
        provide for a lower uniform percentage reduction that would 
        otherwise apply.
            (2) The President may not use the authority provided by 
        paragraph (1) unless he notifies the Congress of the manner in 
        which such authority will be exercised on or before the initial 
        snapshot date for the budget year.

SEC. 205. SPECIAL RULES.

    (a) Child Support Enforcement Program.--Any sequestration order 
shall accomplish the full amount of any required reduction in payments 
under sections 455 and 458 of the Social Security Act by reducing the 
Federal matching rate for State administrative costs under the program, 
as specified (for the fiscal year involved) in section 455(a) of such 
Act, to the extent necessary to reduce such expenditures by that 
amount.
    (b) Commodity Credit Corporation.--
            (1) Effective date.--For the Commodity Credit Corporation, 
        the date on which a sequestration order takes effect in a 
        fiscal year shall vary for each crop of a commodity. In 
        general, the sequestration order shall take effect when issued, 
        but for each crop of a commodity for which 1-year contracts are 
        issued as an entitlement, the sequestration order shall take 
        effect with the start of the sign-up period for that crop that 
        begins after the sequestration order is issued. Payments for 
        each contract in such a crop shall be reduced under the same 
        terms and conditions.
            (2) Dairy program.--
                    (A) As the sole means of achieving any reduction in 
                outlays under the milk price-support program, the 
                Secretary of Agriculture shall provide for a reduction 
                to be made in the price received by producers for all 
                milk in the United States and marketed by producers for 
                commercial use.
                    (B) That price reduction (measured in cents per 
                hundred-weight of milk marketed) shall occur under 
                subparagraph (A) of section 201(d)(2) of the 
                Agricultural Act of 1949 (7 U.S.C. 1446(d)(2)(A)), 
                shall begin on the day any sequestration order is 
                issued, and shall not exceed the aggregate amount of 
                the reduction in outlays under the milk price-support 
                program, that otherwise would have been achieved by 
                reducing payments made for the purchase of milk or the 
                products of milk under this subsection during that 
                fiscal year.
            (3) Effect of delay.--For purposes of subsection (b)(1), 
        the sequestrable base for Commodity Credit Corporation is the 
        current-year level of gross outlays resulting from new budget 
        authority that is subject to reduction under paragraphs (1) and 
        (2).
            (4) Certain authority not to be limited.--Nothing in this 
        Act shall restrict the Corporation in the discharge of its 
        authority and responsibility as a corporation to buy and sell 
        commodities in world trade, or limit or reduce in any way any 
        appropriation that provides the Corporation with funds to cover 
        its realized losses.
    (c) Earned Income Tax Credit.--
            (1) The sequestrable base for earned income tax credit 
        program is the dollar value of all current year benefits to the 
        entire eligible population.
            (2) In the event sequestration is triggered to reduce 
        earned income tax credits, all earned income tax credits shall 
        be reduced, whether or not such credits otherwise would result 
        in cash payments to beneficiaries, by a uniform percentage 
        sufficient to produce the dollar savings required by the 
        sequestration.
    (d) Regular and Extended Unemployment Compensation.--
            (1) A State may reduce each weekly benefit payment made 
        under the regular and extended unemployment benefit programs 
        for any week of unemployment occurring during any period with 
        respect to which payments are reduced under any sequestration 
        order by a percentage not to exceed the percentage by which the 
        Federal payment to the State is to be reduced for such week as 
        a result of such order.
            (2) A reduction by a State in accordance with paragraph (1) 
        shall not be considered as a failure to fulfill the 
        requirements of section 3304(a)(11) of the Internal Revenue 
        Code of 1986.
    (e) Federal Employees Health Benefits Fund.-- For the Federal 
Employees Health Benefits Fund, a sequestration order shall take effect 
with the next open season. The sequestration shall be accomplished by 
annual payments from that Fund to the General Fund of the Treasury. 
Those annual payments shall be financed solely by charging higher 
premiums. The sequestrable base for the Fund is the current-year level 
of gross outlays resulting from claims paid after the sequestration 
order takes effect.
    (f) Federal Housing Finance Board.-- Any sequestration of the 
Federal Housing Board shall be accomplished by annual payments (by the 
end of each fiscal year) from that Board to the general fund of the 
Treasury, in amounts equal to the uniform sequestration percentage for 
that year times the gross obligations of the Board in that year.
    (g) Federal Pay.--
            (1) In general.-- New budget authority to pay Federal 
        personnel from direct spending accounts shall be reduced by the 
        uniform percentage calculated under section 203(c)(3), as 
        applicable, but no sequestration order may reduce or have the 
        effect of reducing the rate of pay to which any individual is 
        entitled under any statutory pay system (as increased by any 
        amount payable under section 5304 of title 5, United States 
        Code, or any increase in rates of pay which is scheduled to 
        take effect under section 5303 of title 5, United States Code, 
        section 1109 of title 37, United States Code, or any other 
        provision of law.
            (2) Definitions.--For purposes of this subsection--
                    (A) the term ``statutory pay system'' shall have 
                the meaning given that term in section 5302(1) of title 
                5, United States Code;
                    (B) the term ``elements of military pay'' means--
                            (i) the elements of compensation of members 
                        of the uniformed services specified in section 
                        1009 of title 37, United States Code;
                            (ii) allowances provided members of the 
                        uniformed services under sections 403(a) and 
                        405 of such title; and
                            (iii) cadet pay and midshipman pay under 
                        section 203(c) of such title; and
                    (C) the term ``uniformed services'' shall have the 
                same meaning given that term in section 101(3) of title 
                37, United States Code.
    (h) Medicare.--
            (1) Timing of application of reductions.--
                    (A) In general.-- Except as provided in 
                subparagraph (B), if a reduction is made in payment 
                amounts pursuant to sequestration order, the reduction 
                shall be applied to payment for services furnished 
                after the effective date of the order. For purposes of 
                the previous sentence, in the case of inpatient 
                services furnished for an individual, the services 
                shall be considered to be furnished on the date of the 
                individual's discharge from the inpatient facility.
                    (B) Payment on the basis of cost reporting 
                periods.-- In the case in which payment for services of 
                a provider of services is made under title XVIII of the 
                Social Security Act on a basis relating to the 
                reasonable cost incurred for the services during a cost 
                reporting period of the provider, if a reduction is 
                made in payment amounts pursuant to a sequestration 
                order, the reduction shall be applied to payment for 
                costs for such services incurred at any time during 
                each cost reporting period of the provider any part of 
                which occurs after the effective date of order, but 
                only (for each such cost reporting period) in the same 
                proportion as the fraction of the cost reporting period 
                that occurs after the effective date of the order.
            (2) No increase in beneficiary charges in assignment-
        related cases.--If a reduction in payment amounts is made 
        pursuant to a sequestration order for services for which 
        payment under part B of title XVIII of the Social Security Act 
        is made on the basis of an assignment described in section 
        1842(b)(3)(B)(ii), in accordance with section 1842(b)(6)(B), or 
        under the procedure described in section 1870(f)(1) of such 
        Act, the person furnishing the services shall be considered to 
        have accepted payment of the reasonable charge for the 
        services, less any reduction in payment amount made pursuant to 
        a sequestration order, as payment in full.
            (3) Part b premiums.--In computing the amount and method of 
        sequestration from part B of title XVIII of the Social Security 
        Act--
                    (A) the amount of sequestration shall be calculated 
                by multiplying the total amount by which Medicare 
                spending exceeds the appropriate spending cap by a 
                percentage that reflects the ratio of total spending 
                under Part B to total Medicare spending; and
                    (B) sequestration in the Part B program shall be 
                accomplished by increasing premiums to beneficiaries.
            (4) No effect on computation of aapcc.--In computing the 
        adjusted average per capita cost for purposes of section 
        1876(a)(4) of the Social Security Act, the Secretary of Health 
        and Human Services shall not take into account any reductions 
        in payment amounts which have been or may be effected under 
        this part.
    (i) Postal Service Fund.-- Any sequestration of the Postal Service 
Fund shall be accomplished by annual payments from that Fund to the 
General Fund of the Treasury, and the Postmaster General of the United 
States and shall have the duty to make those payments during the first 
fiscal year to which the sequestration order applies and each 
succeeding fiscal year. The amount of each annual payment shall be--
            (1) the uniform sequestration percentage, times
            (2) the estimated gross obligations of the Postal Service 
        Fund in that year other than those obligations financed with an 
        appropriation for revenue forgone that year.
Any such payment for a fiscal year shall be made as soon as possible 
during the fiscal year, except that it may be made in installments 
within that year if the payment schedule is approved by the Secretary 
of the Treasury. Within 30 days after the sequestration order is 
issued, the Postmaster General shall submit to the Postal Rate 
Commission a plan for financing the annual payment for that fiscal year 
and publish that plan in the Federal Register. The plan may assume 
efficiencies in the operation of the Postal Service, reductions in 
capital expenditures, increases in the prices of services, or any 
combination, but may not assume a lower Fund surplus or higher Fund 
deficit and must follow the requirements of existing law governing the 
Postal Service in all other respects. Within 30 days of the receipt of 
that plan, the Postal Rate Commission shall approve the plan or modify 
it in the manner that modifications are allowed under current law. If 
the Postal Rate Commission does not respond to the plan within 30 days, 
the plan submitted by the Postmaster General shall go into effect. Any 
plan may be later revised by the submission of a new plan to the Postal 
Rate Commission, which may approve or modify it.
    (j) Power Marketing Administrations and T.V.A.-- Any sequestration 
of the Department of Energy power marketing administration funds or the 
Tennessee Valley Authority fund shall be accomplished by annual 
payments from those funds to the General Fund of the Treasury, and the 
administrators of those funds shall have the duty to make those 
payments during the fiscal year to which the sequestration order 
applies and each succeeding fiscal year. The amount of each payment by 
a fund shall be--
            (1) the direct spending uniform sequestration percentage, 
        times
            (2) the estimated gross obligations of the fund in that 
        year other than those obligations financed from discretionary 
        appropriations for that year.
Any such payment for a fiscal year shall be made as soon as possible 
during the fiscal year, except that it may be made in installments 
within that year if the payment schedule is approved by the Secretary 
of the Treasury. Annual payments by a fund may be financed by 
reductions in costs required to produce the pre-sequester amount of 
power (but those reductions shall not include reductions in the amount 
of power supplied by the fund), by reductions in capital expenditures, 
by increases in tax rates, or by any combination, but may not be 
financed by a lower fund surplus, a higher fund deficit, additional 
borrowing, delay in repayment of principal on outstanding debt and must 
follow the requirements of existing law governing the fund in all other 
respects. The administrator of a fund or the TVA Board is authorized to 
take the actions specified in this subsection in order to make the 
annual payments to the Treasury.
    (k) Businesslike Transactions.--Notwithstanding any other provision 
of law, for programs which provide a businesslike service in exchange 
for a fee, sequestration shall be accomplished through a uniform 
increase in fees (sufficient to produce the dollar savings in such 
programs for the fiscal year of the sequestration required by section 
201(a)(2), all subsequent fees shall be increased by the same 
percentage, and all proceeds from such fees shall be paid into the 
general fund of the Treasury, in any year for which a sequester 
affecting such programs are in effect.

SEC. 206. THE CURRENT LAW BASELINE.

    (a) Determination of the Budget Baseline.--CBO and OMB shall submit 
to the President and the Congress reports setting forth the budget 
baselines for the budget year and at least the subsequent nine fiscal 
years. The CBO report shall be submitted on or before January 15. The 
OMB report shall accompany the President's budget.
            (1) The budget baseline shall be based on the 
        commoneconomic assumptions set forth in section 103, adjusted 
        to reflect revisions pursuant to subsection (b).
            (2) The budget baseline shall consist of a projection of 
        current year levels of budget authority, outlays, revenues and 
        the surplus or deficit into the budget year and the relevant 
        outyears based on current enacted laws as of the date of the 
        projection.
    (b) Revisions to the Baseline.--The baseline shall be adjusted for 
up-to-date economic assumptions when CBO submits its Economic and 
Budget Update and when OMB submits its Budget Update, and by August 1 
each year, when CBO and OBM submit their Midyear Reviews.
            (1) For Discretionary spending items, the baseline shall be 
        the spending caps in effect pursuant to section 601(a)(2) of 
        the Congressional Budget Act of 1974. For years in which there 
        are no caps, the baseline for discretionary spending shall be 
        the same as in the last year for which there were statutory 
        caps.
            (2) For all other expenditures and for revenues, the 
        baseline shall be adjusted by comparing unemployment, 
        inflation, interest rates, growth and other economic 
        indicators-and changes ineligible population-for the most 
        recent period for which actual data are available, compared to 
        the assumptions contained in section 103.
            (3) The budget baseline shall provide the basis for 
        scorekeeping procedures pursuant to title II.
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