[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 251 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 251

  To require the Secretary of the Treasury to issue a portion of the 
     public debt in the form of obligations indexed for inflation.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 5, 1993

  Mr. Neal of North Carolina introduced the following bill; which was 
              referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
  To require the Secretary of the Treasury to issue a portion of the 
     public debt in the form of obligations indexed for inflation.

    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 ``Monetary Policy and Treasury Finance 
Enhancement Act of 1993''.

SEC. 2. PURPOSES.

    The purposes of this Act are to facilitate the inference of 
inflation expectations by the Board of Governors of the Federal Reserve 
System and by investors, to assist the Board of Governors in reducing 
inflation, and, through lower inflation, to contribute to lower 
interest rates.

SEC. 3. ISSUANCE OF INDEXED OBLIGATIONS.

    (a) In General.--Subchapter I of chapter 31 of title 31, United 
States Code, is amended by adding at the end thereof the following new 
section:
``Sec. 3114. Indexed Obligations
    ``(a) Mandatory Issuances.--
            ``(1) In general.--At least 10 percent of the aggregate 
        face amount of longer-term public debt obligations issued 
        during a fiscal year shall be in the form of indexed 
        obligations.
            ``(2) Higher requirement in certain cases.--If, as of the 
        beginning of any fiscal year, less than 10 percent of the 
        aggregate face amount of outstanding obligations issued under 
        section 3102 and 3103 and having at least 5 years to maturity 
        are in the form of indexed obligations, the aggregate face 
        amount of longer-term public debt obligations issued during 
        such fiscal year which shall be in the form of indexed 
        obligations shall be at least the greater of--
                    ``(A) the amount required to be in such form under 
                paragraph (1), or
                    ``(B) 2 percent of the aggregate face amount of 
                obligations issued under section 3102 and 3103 which, 
                as of the beginning of such fiscal year, are 
                outstanding and have at least 5 years to maturity.
        The indexed face amount of an outstanding indexed obligation 
        shall be taken into account under this subparagraph and 
        subsection (c) (in lieu of its actual face amount) in 
        determining the amount of indexed obligations required or 
        permitted to be issued.
            ``(3) Longer-term public debt obligations.--For purposes of 
        this subsection, the term `longer-term public debt obligation' 
        means any obligation issued under section 3102 or 3103 which 
        matures at least 5 years after the date of issue.
    ``(b) Discretionary Issuances.--
            ``(1) In general.--The Secretary of the Treasury may issue 
        obligations under section 3102 or 3103 which mature at least 
        270 days but less than 5 years after the date of issue in the 
        form of indexed obligations.
            ``(2) Minimum issuance if discretion exercised.--The 
        Secretary of the Treasury may exercise the authority under this 
        subsection only if at least 5 percent of the aggregate face 
        amount of the obligations referred to in paragraph (1) which 
        are issued during a fiscal year are in the form of indexed 
        obligations.
    ``(c) Aggregate Limit.--Not more than 50 percent of the aggregate 
face amount of obligations issued under section 3102 or 3103 which 
mature on any day shall be in the form of indexed obligations.
    ``(d) Indexed Obligations.--For purposes of this section--
            ``(1) In general.--The term `indexed obligations' means any 
        obligation--
                    ``(A) which has a redemption value at maturity 
                equal to its indexed face amount,
                    ``(B) which has a face amount at issuance of at 
                least $1,000 but not more than $5,000,
                    ``(C) which may not be redeemed before maturity, 
                and
                    ``(D) the interest (if any) on which is payable for 
                any period on the basis of its indexed face amount as 
                of the beginning of such period.
            ``(2) Indexed face amount.--The term `indexed face amount' 
        means, as of any date, the sum of--
                    ``(A) the face amount of the obligation at 
                issuance, plus
                    ``(B) such face amount multiplied by the percentage 
                by which--
                            ``(i) the selected index for such date, 
                        exceeds
                            ``(ii) the selected index for the issue 
                        date of the obligation.
            ``(3) Selected index for date.--The selected index for any 
        date is the selected index for the second calendar month 
        preceding the calendar month in which such date occurs. If the 
        selected index is not determined on a monthly basis, the 
        Secretary of the Treasury shall prescribe a rule for 
        determining the selected index for any date, and such 
        prescribed rule shall apply in lieu of the preceding sentence.
            ``(4) Selected index.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `selected index' means the 
                CPI.
                    ``(B) Another index may be used.--If the Secretary 
                of the Treasury and the Chairman of the Board of 
                Governors of the Federal Reserve System--
                            ``(i) agree that the use of the CPI for 
                        purposes of paragraph (2) is unsatisfactory and 
                        that the use of another index would be more 
                        satisfactory for such purposes, and
                            ``(ii) submit a report to Congress jointly 
                        recommending the use of such other index,
                the term `selected index' means such other index.
                    ``(C) Changes in index.--The selected index 
                applicable to any indexed obligation shall be such 
                index as of the date of issue of such obligation, and 
                such index shall be determined, with respect to such 
                obligation, without regard to changes in its structure 
                or computation after such date.
            ``(5) CPI.--The term `CPI' means the Consumer Price Index 
        for all urban consumers published by the Department of Labor.
    ``(e) Terms and Conditions.--Indexed obligations may be offered for 
sale on a competitive or other basis under such regulations and upon 
such terms and conditions as the Secretary of the Treasury may 
prescribe. The Secretary shall provide that such obligations shall be 
available for purchase by individuals both directly from the Department 
of the Treasury and through Federal Reserve System facilities.
    ``(f) Consultation With Federal Reserve.--The Secretary of the 
Treasury shall consult with the Chairman of the Board of Governors of 
the Federal Reserve System in determining the amounts, maturities, and 
timing of issuances of indexed obligations under this section. The 
Secretary shall maintain appropriate records of all recommendations 
received from the Chairman in such consultations.
    ``(g) Considerations.--In determining the amounts, maturities, and 
timing of issuances of indexed obligations under this section, the 
Secretary of the Treasury shall--
            ``(1) attribute reasonable benefits to improvements in 
        monetary management resulting from the issuance of indexed 
        obligations, including reasonable estimates for reduced 
        interests costs on obligations that are not indexed obligations 
        arising from better inflation control and from smaller budget 
        deficits as a consequence of improved economic stabilization, 
        and
            ``(2) assure liquidity and pricing reliability in indexed 
        obligations and the competitiveness of such obligations with 
        nonindexed obligations issued under section 3102 and 3103 with 
        comparable maturities, including assuring that each issue of 
        interest-bearing indexed obligations is of an amount sufficient 
        to permit the right to receive interest on such obligations to 
        be traded separately from the underlying obligations.
The Secretary shall periodically announce expected issuance and 
maturity dates of issues of indexed obligations and the expected 
proportion of the total obligations issued under sections 3102 and 3103 
having those maturity dates which are expected to be indexed 
obligations. Such announcements shall precede expected issuance dates 
by at least 1 year.
    ``(h) Monitoring.--The Secretary of the Treasury shall monitor the 
ownership and trading activity of indexed and nonindexed obligations 
issued under section 3102 or 3103 having the same maturity dates for 
purposes of assuring liquidity and pricing reliability with respect to 
indexed obligations.
    ``(i) Reports.--Not later than 2 years after the date of the 
enactment of this section, and not later than the close of each 2-year 
period thereafter, the Secretary of the Treasury shall submit to the 
Congress a report on the program established under this section. No 
report shall be required under this subsection for any period after the 
10th year after the date of the enactment of this section.''.
    (b) Procedure.--Subsection (a) of section 3121 of such title 31 is 
amended by striking ``and'' at the end of paragraph (6), by 
redesignating paragraph (7) as paragraph (8), and by inserting after 
paragraph (6) the following new paragraph:
            ``(7) whether the obligation is to be issued as an indexed 
        obligation; and''.
    (c) Clerical Amendment.--The table of sections for subchapter I of 
chapter 31 of title 31 of such Code is amended by adding at the end 
thereof the following new item:

``3114. Indexed obligations.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fiscal years beginning after the date of the enactment of this 
Act.
    (e) Taxation.--It is the intent of the Congress that--
            (1) except for changes to minimize any Federal income tax 
        incentives or disincentives to acquiring indexed obligations as 
        compared to nonindexed obligations, Federal income tax changes 
        which affect nonindexed obligations should apply to the fullest 
        extent feasible to indexed obligations, and
            (2) there should be symmetrical treatment applied to 
        increases and decreases in the indexed face amount of an 
        indexed obligation such that, for example, if increases in the 
        indexed face amount of an obligation are includible in gross 
        income as ordinary income, decreases in the indexed face amount 
        of an obligation should be allowable as a deduction as an 
        ordinary loss.

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