‘‘(b) SEQUESTRATION.—Within 15 days after Con-
gress adjourns to end a session (other than of the second 
session of the One Hundred Ninth Congress), and on the 
same day as a sequestration (if any) under section 251, 
there shall be a sequestration to reduce the amount of di-
rect spending for the fiscal year beginning in the year the 
Congress adjourns by any amount necessary to reduce 
such spending to the level set forth in subsection (a) un-
less that amount is less than $250,000,000. 
‘‘(c) UNIFORM
REDUCTIONS; LIMITATIONS.—The 
amount required to be sequestered for the fiscal year 
under subsection (a) shall be obtained from nonexempt di-
rect spending accounts by actions taken in the following 
order: 
‘‘(1) FIRST.—The reductions in the programs 
specified in section 255(a) (National Wool Act and 
special milk), section 255(b) (student loans), and 
section 255(c) (foster care and adoption assistance) 
shall be made. 
‘‘(2) SECOND.—Any additional reductions that 
may be required shall be achieved by reducing each 
remaining nonexempt direct spending account by the 
uniform percentage necessary to achieve those addi-
tional reductions, except that—
‘‘(A) the low-income programs specified in 
section 255(d) shall not be reduced by more 
than 2 percent; 
‘‘(B) the retirement and veterans benefits 
specified in sections 255(f), (g), and (h) shall 
not be reduced by more than 2 percent in the 
manner specified in that section; and 
‘‘(C) the medicare programs shall not be 
reduced by more than 2 percent in the manner 
specified in section 255(i). 
The limitations set forth in subparagraphs (A), (B), 
and (C) shall be applied iteratively, and after each 
iteration the uniform percentage applicable to all 
other programs under this paragraph shall be in-
creased (if necessary) to a level sufficient to achieve 
the reductions required by this paragraph. 
‘‘(d) EXCLUSION
OF
MEDICARE
PRESCRIPTION 
DRUG PROGRAM UNTIL FULLY OPERATIONAL.—For pur-
poses of this section with respect to the limitation under 
subsection (a) for a fiscal year before fiscal year 2008, 
direct spending programs and direct spending shall not 
be construed to include part D of title XVIII of the Social 
Security Act (or spending under part C of such title that 
is attributable to such part D).’’.
(b) TABLE OF CONTENTS AMENDMENT.—The table 
of contents set forth in 250(c) of the Balanced Budget 
and Emergency Deficit Control Act of 1985 is amended 
by adding after the item relating to section 252 the fol-
lowing new item: 
‘‘252A. Enforcing controls on direct spending.’’. 
SEC. 202. EXEMPT PROGRAMS AND ACTIVITIES. 
Section 255 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended to read as follows: 
‘‘SEC. 255. EXEMPT PROGRAMS AND ACTIVITIES. 
‘‘(a) SOCIAL SECURITY BENEFITS; TIER I RAILROAD 
RETIREMENT BENEFITS; AND CERTAIN MEDICARE BEN-
EFITS.—(1) Benefits payable under the old-age, survivors, 
and disability insurance program established under title 
II of the Social Security Act, and benefits payable under 
section 3(a), 3(f)(3), 4(a), or 4(f) of the Railroad Retire-
ment Act of 1974, shall be exempt from reduction under 
any order issued under this part. 
‘‘(2) Payments made under part A of title XVIII (re-
lating to part A medicare hospital insurance benefits) of 
the Social Security Act and payments made under part 
C of such title (relating to the Medicare Advantage pro-
gram) insofar as they are attributable to part A of such 
title shall be exempt from reduction under any order 
issued under this part.
‘‘(b) DESCRIPTIONS
AND
LISTS.—The following 
budget accounts or activities shall be exempt from seques-
tration: 
‘‘(1) net interest; 
‘‘(2) all payments to trust funds from excise 
taxes or other receipts or collections properly cred-
itable to those trust funds; 
‘‘(3) all payments from one Federal direct 
spending budget account to another Federal budget 
account; and all intragovernmental funds including 
those from which funding is derived primarily from 
other Government accounts, except to the extent 
that such funds are augmented by direct appropria-
tions for the fiscal year for which the order is in ef-
fect; 
‘‘(4) activities resulting from private donations, 
bequests, or voluntary contributions to the Govern-
ment; 
‘‘(5) payments from any revolving fund or 
trust-revolving fund (or similar activity) that pro-
vides deposit insurance or other Government insur-
ance, Government guarantees, or any other form of 
contingent liability, to the extent those payments re-
sult from contractual or other legally binding com-
mitments of the Government at the time of any se-
questration; 
‘‘(6) credit liquidating and financing accounts; 
‘‘(7) the following accounts, which largely fulfill 
requirements of the Constitution or otherwise make 
payments to which the Government is committed: 
‘‘Administration of Territories, Northern 
Mariana Islands Covenant grants (14–0412–0– 
1–806); 
‘‘Armed Forces Retirement Home Trust 
Fund, payment of claims (84–8930–0–7–705); 
‘‘Bureau of Indian Affairs, miscellaneous 
payments to Indians (14–2303–0–1–452); 
‘‘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 perma-
nent appropriations (20–9992–0–2–852); 
‘‘Eastern Indian land claims settlement 
fund (14–2202–0–1–806); 
‘‘Farm Credit Administration, Limitation 
on Administration Expenses (78–4131–0–3– 
351); 
‘‘Farm Credit System Financial Assistance 
Corporation, interest payments (20–1850–0–1– 
351); 
‘‘Internal Revenue collections of Puerto 
Rico (20–5737–0–2–852); 
‘‘Panama Canal Commission, operating ex-
penses and capital outlay (95–5190–0–2–403); 
‘‘Payments of Vietnam and USS Pueblo 
prisoner-of-war claims (15–0104–0–1–153); 
‘‘Payments to copyright owners (03–5175– 
0–2–376); 
‘‘Payments to health care trust funds (75– 
0580–0–1–571); 
‘‘Payments to social security trust funds 
(75–0404–0–1–651); 
‘‘Payments to the United States terri-
tories, fiscal assistance (14–0418–0–1–801);
100 
‘‘Payments to widows and heirs of de-
ceased Members of Congress (00–0215–0–1– 
801); 
‘‘Pension Benefit Guaranty Corporation 
Fund (16–4204–0–3–601); 
‘‘Salaries of Article III judges; 
‘‘Washington Metropolitan Area Transit 
Authority, interest payments (46–0300–0–1– 
401); 
‘‘(8) the following noncredit special, revolving, 
or trust-revolving funds: 
‘‘Coinage profit fund (20–5811–0–2–803); 
‘‘Comptroller of the Currency; 
‘‘Director of the Office of Thrift Super-
vision; 
‘‘Exchange Stabilization Fund (20–4444– 
0–3–155); 
‘‘Federal Housing Finance Board; 
‘‘Foreign Military Sales trust fund (11– 
82232–0–7–155); 
‘‘National Credit Union Administration, 
central liquidating facility (25–4470–0–3–373); 
‘‘National Credit Union Administration, 
credit union insurance fund (25–4468–0–3– 
373);