[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1050 Introduced in Senate (IS)]

  1st Session
                                S. 1050

To promote freedom, fairness, and economic opportunity for families by 
       reducing the power and reach of the Federal establishment.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                July 19 (legislative day, July 10), 1995

   Mr. Shelby (for himself, Mr. Craig, and Mr. Helms) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
To promote freedom, fairness, and economic opportunity for families by 
       reducing the power and reach of the Federal establishment.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    (a) Short Title.--This Act may be cited as the ``Freedom and 
Fairness Restoration Act of 1995''.
    (b) Table of Contents.--

Sec. 1. Short title.
 TITLE I--TAX REDUCTION AND SIMPLIFICATION; SUPERMAJORITY REQUIRED FOR 
                              TAX CHANGES

              Subtitle A--Tax Reduction and Simplification

Sec. 101. Individual income tax.
Sec. 102. Tax on business activities.
Sec. 103. Simplification of rules relating to qualified retirement 
                            plans.
Sec. 104. Repeal of alternative minimum tax.
Sec. 105. Repeal of credits.
Sec. 106. Repeal of estate and gift taxes and obsolete income tax 
                            provisions.
Sec. 107. Effective date.
           Subtitle B--Supermajority Required for Tax Changes

Sec. 111. Supermajority required.
         TITLE II--SPENDING RESTRAINT AND BUDGET PROCESS REFORM

                  Subtitle A--Joint Budget Resolution

Sec. 201. Joint budget resolution.
       Subtitle B--Zero Based Budgeting and Decennial Sunsetting

Sec. 211. Reauthorization of discretionary programs and unearned 
                            entitlements.
Sec. 212. Point of order.
Sec. 213. Decennial sunsetting.
  Subtitle C--Spending Caps on the Growth of Entitlements for Fiscal 
                        Years 1996 Through 2002

Sec. 221. Spending caps on growth of entitlements and mandatories.
Sec. 222. Exempt programs and activities.
Sec. 223. Exceptions, limitations, and special rules.
Sec. 224. Point of order.
            Subtitle D--Balanced Budget by Fiscal Year 2002

Sec. 231. Maximum spending amounts.
Sec. 232. Enforcing maximum spending sequestration.
Sec. 233. Total spending point of order.
 TITLE I--TAX REDUCTION AND SIMPLIFICATION; SUPERMAJORITY REQUIRED FOR 
                              TAX CHANGES

              Subtitle A--Tax Reduction and Simplification

SEC. 101. INDIVIDUAL INCOME TAX.

    (a) In General.--Section 1 of the Internal Revenue Code of 1986 is 
amended to read as follows:

``SECTION 1. TAX IMPOSED.

    ``There is hereby imposed on the taxable income of every individual 
a tax equal to 20 percent (17 percent in the case of taxable years 
beginning after December 31, 1997) of the taxable income of such 
individual for such taxable year.''
    (b) Taxable Income.--Section 63 of such Code is amended to read as 
follows:

``SEC. 63. TAXABLE INCOME.

    ``(a) In General.--For purposes of this subtitle, the term `taxable 
income' means the excess of--
            ``(1) the sum of--
                    ``(A) wages (as defined in section 3121(a) without 
                regard to paragraph (1) thereof) which are paid in cash 
                and which are received during the taxable year for 
                services performed in the United States,
                    ``(B) retirement distributions which are includible 
                in gross income for such taxable year, plus
                    ``(C) amounts received under any law of the United 
                States or of any State which is in the nature of 
                unemployment compensation, over
            ``(2) the standard deduction.
    ``(b) Standard Deduction.--
            ``(1) In general.--For purposes of this subtitle, the term 
        `standard deduction' means the sum of--
                    ``(A) the basic standard deduction, plus
                    ``(B) the additional standard deduction.
            ``(2) Basic standard deduction.--For purposes of paragraph 
        (1), the basic standard deduction is--
                    ``(A) $21,400 in the case of--
                            ``(i) a joint return, or
                            ``(ii) a surviving spouse (as defined in 
                        section 2(a)),
                    ``(B) $14,000 in the case of a head of household 
                (as defined in section 2(b)), and
                    ``(C) $10,700 in the case of an individual--
                            ``(i) who is not married and who is not a 
                        surviving spouse or head of household, or
                            ``(ii) who is a married individual filing a 
                        separate return.
            ``(3) Additional standard deduction.--For purposes of 
        paragraph (1), the additional standard deduction is $5,000 for 
        each dependent (as defined in section 152) who is described in 
        section 151(c)(1) for the taxable year and who is not required 
        to file a return for such taxable year.
    ``(c) Retirement Distributions.--For purposes of subsection (a), 
the term `retirement distribution' means any distribution from--
            ``(1) a plan described in section 401(a) which includes a 
        trust exempt from tax under section 501(a),
            ``(2) an annuity plan described in section 403(a),
            ``(3) an annuity contract described in section 403(b),
            ``(4) an individual retirement account described in section 
        408(a),
            ``(5) an individual retirement annuity described in section 
        408(b),
            ``(6) an eligible deferred compensation plan (as defined in 
        section 457);
            ``(7) a governmental plan (as defined in section 414(d)); 
        or
            ``(8) a trust described in section 501(c)(18).
Such term includes any plan, contract, account, annuity, or trust 
which, at any time, has been determined by the Secretary to be such a 
plan, contract, account, annuity, or trust.
    ``(d) Income of Certain Children.--For purposes of this subtitle--
            ``(1) an individual's taxable income shall include the 
        taxable income of each dependent child of such individual who 
        has not attained age 14 as of the close of such taxable year, 
        and
            ``(2) such dependent child shall have no liability for tax 
        imposed by section 1 with respect to such income and shall not 
        be required to file a return for such taxable year.
    ``(e) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 1996, each dollar amount 
        contained in subsection (b) shall be increased by an amount 
        determined by the Secretary to be equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment for such 
                calendar year.
            ``(2) Cost-of-living adjustment.--For purposes of paragraph 
        (1), the cost-of-living adjustment for any calendar year is the 
        percentage (if any) by which--
                    ``(A) the CPI for the preceding calendar year, 
                exceeds
                    ``(B) the CPI for the calendar year 1995.
            ``(3) CPI for any calendar year.--For purposes of paragraph 
        (2), the CPI for any calendar year is the average of the 
        Consumer Price Index as of the close of the 12-month period 
        ending on August 31 of such calendar year.
            ``(4) Consumer price index.--For purposes of paragraph (3), 
        the term `Consumer Price Index' means the last Consumer Price 
        Index for all-urban consumers published by the Department of 
        Labor. For purposes of the preceding sentence, the revision of 
        the Consumer Price Index which is most consistent with the 
        Consumer Price Index for calendar year 1986 shall be used.
            ``(5) Rounding.--If any increase determined under paragraph 
        (1) is not a multiple of $10, such increase shall be rounded to 
        the next highest multiple of $10.
    ``(f) Marital Status.--For purposes of this section, marital status 
shall be determined under section 7703.''

SEC. 102. TAX ON BUSINESS ACTIVITIES.

    (a) In General.--Section 11 of the Internal Revenue Code of 1986 
(relating to tax imposed on corporations) is amended to read as 
follows:

``SEC. 11. TAX IMPOSED ON BUSINESS ACTIVITIES.

    ``(a) Tax Imposed.--There is hereby imposed on every person engaged 
in a business activity a tax equal to 20 percent (17 percent in the 
case of taxable years beginning after December 31, 1997) of the 
business taxable income of such person.
    ``(b) Liability for Tax.--The tax imposed by this section shall be 
paid by the person engaged in the business activity, whether such 
person is an individual, partnership, corporation, or otherwise.
    ``(c) Business Taxable Income.--For purposes of this section--
            ``(1) In general.--The term `business taxable income' means 
        gross active income reduced by the deductions specified in 
        subsection (d).
            ``(2) Gross active income.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `gross active income' means gross receipts 
                from--
                            ``(i) the sale or exchange of property or 
                        services in the United States by any person in 
                        connection with a business activity, and
                            ``(ii) the export of property or services 
                        from the United States in connection with a 
                        business activity.
                    ``(B) Exchanges.--For purposes of this section, the 
                amount treated as gross receipts from the exchange of 
                property or services is the fair market value of the 
                property or services received, plus any money received.
                    ``(C) Coordination with special rules for financial 
                services, etc.--Except as provided in subsection (e)--
                            ``(i) the term `property' does not include 
                        money or any financial instrument, and
                            ``(ii) the term `services' does not include 
                        financial services.
            ``(3) Exemption from tax for activities of governmental 
        entities and tax-exempt organizations.--For purposes of this 
        section, the term `business activity' does not include any 
        activity of a governmental entity or of any other organization 
        which is exempt from tax under this chapter.
    ``(d) Deductions.--
            ``(1) In general.--The deductions specified in this 
        subsection are--
                    ``(A) the cost of business inputs for the business 
                activity,
                    ``(B) wages (as defined in section 3121(a) without 
                regard to paragraph (1) thereof) which are paid in cash 
                for services performed in the United States as an 
                employee, and
                    ``(C) retirement contributions to or under any plan 
                or arrangement which makes retirement distributions (as 
                defined in section 63(c)) for the benefit of such 
                employees to the extent such contributions are allowed 
                as a deduction under section 404.
            ``(2) Business inputs.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `cost of business inputs' means--
                            ``(i) the amount paid for property sold or 
                        used in connection with a business activity,
                            ``(ii) the amount paid for services (other 
                        than for the services of employees, including 
                        fringe benefits paid by reason of such 
                        services) in connection with a business 
                        activity, and
                            ``(iii) any excise tax, sales tax, customs 
                        duty, or other separately stated levy imposed 
                        by a Federal, State, or local government on the 
                        purchase of property or services which are for 
                        use in connection with in a business activity.
                Such term shall not include any tax imposed by chapter 
                2 or 21.
                    ``(B) Exceptions.--Such term shall not include--
                            ``(i) items described in subparagraphs (B) 
                        and (C) of paragraph (1), and
                            ``(ii) items for personal use not in 
                        connection with any business activity.
                    ``(C) Exchanges.--For purposes of this section, the 
                amount treated as paid in connection with the exchange 
                of property or services is the fair market value of the 
                property or services exchanged, plus any money paid.
    ``(e) Special Rules for Financial Intermediation Service 
Activities.--In the case of the business activity of providing 
financial intermediation services, the taxable income from such 
activity shall be equal to the value of the intermediation services 
provided in such activity.
    ``(f) Exception for Services Performed as Employee.--For purposes 
of this section, the term `business
 activity' does not include the performance of services by an employee 
for the employee's employer.
    ``(g) Carryover of Excess Deductions.--
            ``(1) In general.--If the aggregate deductions for any 
        taxable year exceed the gross active income for such taxable 
        year, the amount of the deductions specified in subsection (d) 
        for the succeeding taxable year (determined without regard to 
        this subsection) shall be increased by the sum of--
                    ``(A) such excess, plus
                    ``(B) the product of such excess and the 3-month 
                Treasury rate for the last month of such taxable year.
            ``(2) 3-month treasury rate.--For purposes of paragraph 
        (1), the 3-month Treasury rate is the rate determined by the 
        Secretary based on the average market yield (during any 1-month 
        period selected by the Secretary and ending in the calendar 
        month in which the determination is made) on outstanding 
        marketable obligations of the United States with remaining 
        periods to maturity of 3 months or less.''
    (b) Tax on Tax-Exempt Entities Providing Noncash Compensation to 
Employees.--Section 4977 of such Code is amended to read as follows:

``SEC. 4977. TAX ON NONCASH COMPENSATION PROVIDED TO EMPLOYEES NOT 
              ENGAGED IN BUSINESS ACTIVITY.

    ``(a) Imposition of Tax.--There is hereby imposed a tax equal to 20 
percent (17 percent in the case of calendar years beginning after 
December 31, 1997) of the value of excludable compensation provided 
during the calendar year by an employer for the benefit of employees to 
whom this section applies.
    ``(b) Liability for Tax.--The tax imposed by this section shall be 
paid by the employer.
    ``(c) Excludable Compensation.--For purposes of subsection (a), the 
term `excludable compensation' means any remuneration for services 
performed as an employee other than--
            ``(1) wages (as defined in section 3121(a) without regard 
        to paragraph (1) thereof) which are paid in cash,
            ``(2) remuneration for services performed outside the 
        United States, and
            ``(3) retirement contributions to or under any plan or 
        arrangement which makes retirement distributions (as defined in 
        section 63(c)).
    ``(d) Employees to Whom Section Applies.--This section shall apply 
to an employee who is employed in any activity by--
            ``(1) any organization which is exempt from taxation under 
        this chapter, or
            ``(2) any agency or instrumentality of the United States, 
        any State or political subdivision of a State, or the District 
        of Columbia.''

SEC. 103. SIMPLIFICATION OF RULES RELATING TO QUALIFIED RETIREMENT 
              PLANS.

    (a) In General.--The following provisions of the Internal Revenue 
Code of 1986 are hereby repealed:
            (1) Nondiscrimination rules.--
                    (A) Paragraphs (4) and (5) of section 401(a) 
                (relating to nondiscrimination requirements).
                    (B) Sections 401(a)(10)(B) and 416 (relating to top 
                heavy plans).
                    (C) Section 401(a)(17) (relating to compensation 
                limit).
                    (D) Sections 401(a)(26) and 410(b) (relating to 
                minimum participation and coverage requirements).
                    (E) Sections 401(k)(3), 401(k)(8), and 4979 
                (relating to actual deferral percentage).
                    (F) Section 401(l) (relating to permitted disparity 
                in plan contributions or benefits).
                    (G) Section 401(m) (relating to nondiscrimination 
                test for matching contributions and employee 
                contributions).
                    (H) Paragraphs (1)(D) and (12) of section 403(b) 
                (relating to nondiscrimination requirements).
                    (I) Paragraph (3) of section 408(k) and paragraph 
                (6) (other than subparagraph (A)(i)) of such section 
                (relating to simplified employee pensions).
            (2) Contribution limits.--
                    (A) Sections 401(a)(16), 403(b)(2) and (3), and 415 
                (relating to limitations on benefits and contributions 
                under qualified plans).
                    (B) Sections 401(a)(30) and 402(g) (relating to 
                limitation on exclusion for elective deferrals).
                    (C) Paragraphs (3) and (7) of section 404(a) 
                (relating to percentage of compensation limits).
                    (D) Section 404(l) (relating to limit on includible 
                compensation).
            (3) Restrictions on distributions.--
                    (A) Section 72(t) (relating to 10-percent 
                additional tax on early distributions from qualified 
                retirement plans).
                    (B) Sections 401(a)(9), 403(b)(10), and 4974 
                (relating to minimum distribution rules).
                    (C) Section 402(d) (relating to tax on lump sum 
                distributions).
                    (D) Section 402(e)(4) (relating to net unrealized 
                appreciation).
                    (E) Section 4980A (relating to tax on excess 
                distributions from qualified retirement plans).
            (4) Special requirements for plan benefiting self-employed 
        individuals.--Subsections (a)(10)(A) and (d) of section 401.
            (5) Prohibition of tax-exempt organizations and governments 
        from having qualified cash or deferred arrangements.--Section 
        401(k)(4)(B).
    (b) Employer Reversions of Excess Pension Assets Permitted Subject 
Only to Income Inclusion.--
            (1) Repeal of tax on employer reversions.--Section 4980 of 
        such Code is hereby repealed.
            (2) Employer reversions permitted without plan 
        termination.--Section 420 of such Code is amended to read as 
        follows:

``SEC. 420. TRANSFERS OF EXCESS PENSION ASSETS.

    ``(a) In General.--If there is a qualified transfer of any excess 
pension assets of a defined benefit plan (other than a multiemployer 
plan) to an employer--
            ``(1) a trust which is part of such plan shall not be 
        treated as failing to meet the requirements of section 401(a) 
        or any other provision of law solely by reason of such transfer 
        (or any other action authorized under this section), and
            ``(2) such transfer shall not be treated as a prohibited 
        transaction for purposes of section 4975.
The gross income of the employer shall include the amount of any 
qualified transfer made during the taxable year.
    ``(b) Qualified Transfer.--For purposes of this section--
            ``(1) In general.--The term `qualified transfer' means a 
        transfer--
                    ``(A) of excess pension assets of a defined benefit 
                plan to the employer, and
                    ``(B) with respect to which the vesting 
                requirements of subsection (c) are met in connection 
                with the plan.
            ``(2) Only 1 transfer per year.--No more than 1 transfer 
        with respect to any plan during a taxable year may be treated 
        as a qualified transfer for purposes of this section.
    ``(c) Vesting Requirements of Plans Transferring Assets.--The 
vesting requirements of this subsection are met if the plan provides 
that the accrued pension benefits of any participant or beneficiary 
under the plan become nonforfeitable in the same manner which would be 
required if the plan had terminated immediately before the qualified 
transfer (or in the case of a participant who separated during the 1-
year period ending on the date of the transfer, immediately before such 
separation).
    ``(d) Definition and Special Rule.--For purposes of this section--
            ``(1) Excess pension assets.--The term `excess pension 
        assets' means the excess (if any) of--
                    ``(A) the amount determined under section 
                412(c)(7)(A)(ii), over
                    ``(B) the greater of--
                            ``(i) the amount determined under section 
                        412(c)(7)(A)(i), or
                            ``(ii) 125 percent of current liability (as 
                        defined in section 412(c)(7)(B)).
        The determination under this paragraph shall be made as of the 
        most recent valuation date of the plan preceding the qualified 
        transfer.
            ``(2) Coordination with section 412.--In the case of a 
        qualified transfer--
                    ``(A) any assets transferred in a plan year on or 
                before the valuation date for such year (and any income 
                allocable thereto) shall, for purposes of section 412, 
                be treated as assets in the plan as of the valuation 
                date for such year, and
                    ``(B) the plan shall be treated as having a net 
                experience loss under section 412(b)(2)(B)(iv) in an 
                amount equal to the amount of such transfer and for 
                which amortization charges begin for the first plan 
                year after the plan year in which such transfer occurs, 
                except that such section shall be applied to such 
                amount by substituting `10 plan years' for `5 plan 
                years'.''

SEC. 104. REPEAL OF ALTERNATIVE MINIMUM TAX.

    Part VI of subchapter A of chapter 1 of the Internal Revenue Code 
of 1986 is hereby repealed.

SEC. 105. REPEAL OF CREDITS.

    Part IV of subchapter A of chapter 1 of the Internal Revenue Code 
of 1986 is hereby repealed.

SEC. 106. REPEAL OF ESTATE AND GIFT TAXES AND OBSOLETE INCOME TAX 
              PROVISIONS.

    (a) Repeal of Estate and Gift Taxes.--
            (1) In general.--Subtitle B of the Internal Revenue Code of 
        1986 is hereby repealed.
            (2) Effective date.--The repeal made by paragraph (1) shall 
        apply to the estates of decedents dying, and gifts and 
        generation-skipping transfers made, after December 31, 1995.
    (b) Repeal of Obsolete Income Tax Provisions.--
            (1) In general.--Except as provided in paragraph (2), 
        chapter 1 of the Internal Revenue Code of 1986 is hereby 
        repealed.
            (2) Exceptions.--Paragraph (1) shall not apply to--
                    (A) sections 1, 11, and 63 of such Code, as amended 
                by this Act,
                    (B) those provisions of chapter 1 of such Code 
                which are necessary for determining whether or not--
                            (i) retirement distributions are includible 
                        in the gross income of employees, or
                            (ii) an organization is exempt from tax 
                        under such chapter, and
                    (C) subchapter D of such chapter 1 (relating to 
                deferred compensation).

SEC. 107. EFFECTIVE DATE.

    Except as otherwise provided in this subtitle, the amendments made 
by this subtitle shall apply to taxable years beginning after December 
31, 1995.

           Subtitle B--Supermajority Required for Tax Changes

SEC. 111. SUPERMAJORITY REQUIRED.

    (a) In General.--It shall not be in order in the House of 
Representatives or the Senate to consider any bill, joint resolution, 
amendment thereto, or conference report thereon that includes any 
provision that--
            (1) increases any Federal income tax rate,
            (2) creates any additional Federal income tax rate,
            (3) reduces the standard deduction, or
            (4) provides any exclusion, deduction, credit or other 
        benefit which results in a reduction in Federal revenues.
    (b) Waiver or Suspension.--This section may be waived or suspended 
in the House of Representatives or
 the Senate only by the affirmative vote of three-fifths of the 
Members, duly chosen and sworn.

         TITLE II--SPENDING RESTRAINT AND BUDGET PROCESS REFORM

                  Subtitle A--Joint Budget Resolution

SEC. 201. JOINT BUDGET RESOLUTION.

    (a) Definitions.--Paragraph (4) of section 3 of the Congressional 
Budget Act of 1974 is amended to read as follows:
            ``(4) the term `joint resolution on the budget' means--
                    ``(A) a joint resolution setting forth the 
                congressional budget for the United States Government 
                for a fiscal year as provided in section 301; and
                    ``(B) any other joint resolution revising the 
                congressional budget for the United States Government 
                for a fiscal year as described in section 304.''.
    (b) Joint Resolution on the Budget.--(1) Section 300 is amended by 
striking ``concurrent resolution'' each place it appears and inserting 
``joint resolution''.
    (2) Section 301(a) of the Congressional Budget Act of 1974 is 
amended by striking ``concurrent resolution'' each place it appears 
including in the caption and inserting ``joint resolution''.
    (3) Section 301(b) is amended by striking ``concurrent resolution'' 
each place it appears including in the caption and inserting ``joint 
resolution''.
    (4) Section 301(c) is amended by striking ``concurrent resolution'' 
each place it appears and inserting ``joint resolution''.
    (5) Section 301(e) is amended by striking ``concurrent resolution'' 
each place it appears and inserting ``joint resolution''.
    (6) Section 301(f) is amended by striking ``concurrent resolution'' 
each place it appears and inserting ``joint resolution''.
    (7) Section 301(g) is amended by striking ``concurrent resolution'' 
each place it appears and inserting ``joint resolution''.
    (8) Section 301(h) is amended by striking ``concurrent resolution'' 
and inserting ``joint resolution''.
    (9) Section 301(i) is amended by striking ``concurrent resolution'' 
each place it appears and inserting ``joint resolution''.
    (10) The section heading of section 301 is amended by striking 
``annual adoption of concurrent'' and inserting ``annual adoption of 
joint''.
    (11) The table of contents set forth in section 1(b) of the 
Congressional Budget and Impoundment Control Act of 1974 is amended by 
striking ``Annual adoption of the concurrent'' in the item relating to 
section 301 and inserting ``Annual adoption of the joint''.
    (12) Section 302 is amended by striking ``concurrent resolution'' 
each place it appears and inserting ``joint resolution''.
    (13) Section 303, including the heading, is amended by striking 
``concurrent resolution'' each place it appears and inserting ``joint 
resolution''.
    (14) The table of contents set forth in section 1(b) of the 
Congressional Budget and Impoundment Control Act of 1974 is amended by 
striking ``Concurrent'' in the item relating to section 303 and 
inserting ``Joint''.
    (15) Section 304 is amended by striking ``concurrent resolution'', 
including in the heading, each place it appears and inserting ``joint 
resolution''.
    (16) The table of contents set forth in section 1(b) of the 
Congressional Budget and Impoundment Control Act of 1974 is amended by 
striking ``Concurrent'' in the item relating to section 304 and 
inserting ``Joint''.
    (17) Section 305 is amended by striking ``concurrent resolution'', 
including in the heading, each place it appears and inserting ``joint 
resolution''.
    (18) Section 308 is amended by striking ``concurrent resolution'' 
each place it appears and inserting ``joint resolution''.
    (19) Section 310 is amended by striking ``concurrent resolution'' 
each place it appears and inserting ``joint resolution''.
    (20) Section 311 is amended by striking ``concurrent resolution'' 
each place it appears and inserting ``joint resolution''.

       Subtitle B--Zero Based Budgeting and Decennial Sunsetting

SEC. 211. REAUTHORIZATION OF DISCRETIONARY PROGRAMS AND UNEARNED 
              ENTITLEMENTS.

    (a) Fiscal Year 1996.--Effective October 1, 1995, spending 
authority for each unearned entitlement and high-cost discretionary 
spending program is terminated unless such spending authority is 
reauthorized after the date of enactment of this Act.
    (b) Fiscal Year 1997.--Effective October 1, 1996, spending 
authority for each discretionary spending program (not including high-
cost discretionary spending programs) is terminated unless such 
spending authority is reauthorized after the date of enactment of this 
Act.
    (c) Definitions.--For purposes of this subtitle--
            (1) the term ``unearned entitlement'' means an entitlement 
        not earned by service or paid for in total or in part by 
        assessments or contributions such as Social Security, veterans' 
        benefits, retirement programs, and medicare; and
            (2) the term ``high-cost discretionary program'' means the 
        most expensive one-third of discretionary program within each 
        budget function account.

SEC. 212. POINT OF ORDER.

    (a) In General.--It shall not be in order in the House of 
Representatives or the Senate to consider any bill, joint resolution, 
amendment, or conference report that includes any provision that 
appropriates funds unless such appropriation has been previously 
authorized by law.
    (b) Waiver or Suspension.--This section may be waived or suspended 
in the House of Representatives or the Senate only by the affirmative 
vote of three-fifths of the Members, duly chosen and sworn.

SEC. 213. DECENNIAL SUNSETTING.

    (a) First Decennial Census Year.--Effective on the first day of the 
fiscal year beginning in the first decennial census year after the year 
2001 and each 10 years thereafter, the spending authority described in 
section 211(a) is terminated unless such spending authority is 
reauthorized after the last date the spending authority was required to 
be reauthorized under this subtitle.
    (b) First Decennial Census Year.--Effective on the first day of the 
fiscal year beginning in the year after the first decennial census year 
after the year 2001 and each 10 years thereafter, the spending 
authority described in section 211(b) is terminated unless such 
spending authority is reauthorized after the last date the spending 
authority was required to be reauthorized under this subtitle.
  Subtitle C--Spending Caps on the Growth of Entitlements for Fiscal 
                        Years 1996 Through 2002

SEC. 221. SPENDING CAPS ON GROWTH OF ENTITLEMENTS AND MANDATORIES.

    (a) Cap on Growth of Entitlements.--Effective for each of the 
fiscal years 1996 through 2002, the total level of entitlement and 
mandatory spending, excluding Social Security, shall not exceed the 
total level for the previous fiscal year increased by the consumer 
price index, and the growth in eligible population.
    (b) Sequestration.--Within 15 days after Congress adjourns to end a 
session, and on the same day as a sequestration (if any) under section 
253 of the Balanced Budget and Emergency Deficit Control Act of 1985, 
there shall be a sequestration to reduce the amount of entitlement
 and mandatory 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) unless 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 direct spending accounts by actions taken in the 
following order:
            (1) First.--The reductions in the programs specified in 
        section 223(a) (National Wool Act and special milk), section 
        223(b) (guaranteed student loans), and section 223(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 additional reductions, except that--
                    (A) the low-income programs specified in section 
                223(d) shall not be reduced by more than 1 percent;
                    (B) the retirement and veterans benefits specified 
                in section 223(e) 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 4 percent in the manner specified in section 
                223(f).
        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 increased (if necessary) to a level 
        sufficient to achieve the reductions required by this 
        paragraph.

SEC. 222. EXEMPT PROGRAMS AND ACTIVITIES.

    (a) Descriptions and Lists.--Except as provided in subsection (b), 
the following budget accounts or activities 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) 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 appropriations 
        for the fiscal year for which the order is in effect.
            (4) Activities resulting from private donations, bequests, 
        or voluntary contributions to the Government.
            (5) Payments from any revolving fund or trust-revolving 
        fund (or similar activity) that provides deposit insurance or 
        other 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.
            (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).
                    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 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).
                    Panama Canal Commission, operating expenses 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 the United States territories, fiscal 
                assistance (14-0418-0-1-801).
                    Payments to widows and heirs of deceased Members of 
                Congress (00-0215-0-1-801).
                    Salaries of Article III judges.
                    Soldier's and Airmen's Home, payment of claims (84-
                8930-0-7-705).
                    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 Supervision.
                    Exchange Stabilization Fund (20-4444-0-3-155).
                    Federal Housing Finance Board.
                    Foreign Military Sales trust fund (11-82232-0-7-
                155).
                    (9) Thrift Savings Fund.
                    (10) Appropriations for the District of Columbia to 
                the extent they are appropriations of locally raised 
                funds.
                    (11)(A) Any amount paid as regular unemployment 
                compensation by a State from its account in the 
                Unemployment Trust Fund (established by section 904(a) 
                of the Social Security Act).
            (B) Any advance made to a State from the Federal 
        unemployment account (established by section 904(g) of such 
        Act) under title XII of such Act and
         any advance appropriated to the Federal unemployment account 
pursuant to section 1203 of such Act.
            (C) Any payment made from the Federal Employees 
        Compensation Account (as established under section 909 of such 
        Act) for the purpose of carrying out chapter 85 of title 5, 
        United States Code, and funds appropriated or transferred to or 
        otherwise deposited in such Account.
            (12) The earned income tax credit (payments to individuals 
        pursuant to section 32 of the Internal Revenue Code of 1986).
    (b) Federal Administrative Expenses.--
            (1) Notwithstanding any provision of law other than 
        paragraph (3), administrative expenses incurred by the 
        departments and agencies, including independent agencies, of 
        the Federal Government in connection with any program, project, 
        activity, or account shall be subject to reduction pursuant to 
        any sequestration order, without regard to any exemption, 
        exception, limitation, or special rule otherwise applicable 
        with respect to such program, project, activity, or account, 
        and regardless of whether the program, project, activity, or 
        account is self-supporting and does not receive appropriations.
            (2) Payments made by the Federal Government to reimburse or 
        match administrative costs incurred by a State or political 
        subdivision under or in connection with any program, project, 
        activity, or account shall not be considered administrative 
        expenses of the Federal Government for purposes of this 
        section, and shall be subject to sequestration to the extent 
        (and only to the extent) that other payments made by the 
        Federal Government under or in connection with that program, 
        project, activity, or account are subject to that reduction or 
        sequestration; except that Federal payments made to a State as 
        reimbursement of administrative costs incurred by that State 
        under or in connection with the unemployment compensation 
        programs specified in subsection (a)(11) shall be subject to 
        reduction or sequestration under this part notwithstanding the 
        exemption otherwise granted to such programs under that 
        subsection.
            (3) Notwithstanding any other provision of law, the 
        administrative expenses of the following programs shall be 
        exempt from sequestration:
                    (A) Comptroller of the Currency.
                    (B) Federal Deposit Insurance Corporation.
                    (C) Office of Thrift Supervision.
                    (D) National Credit Union Administration.
                    (E) National Credit Union Administration, central 
                liquidity facility.
                    (F) Federal Retirement Thrift Investment Board.
                    (G) Resolution Funding Corporation.
                    (H) Resolution Trust Corporation.
                    (I) Board of Governors of the Federal Reserve 
                System.

SEC. 223. EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES.

    (a) National Wool Act and the Special Milk Program.--Automatic 
spending increases are increases in outlays due to changes in indexes 
in the following programs:
            (1) National Wool Act.
            (2) Special milk program.
In those programs all amounts other than the automatic spending 
increases shall be exempt from reduction under any sequestration order.
    (b) The Guaranteed Student Loan Program.--(1) Any reductions which 
are required to be achieved from the student loan programs operated 
pursuant to part B of title IV of the Higher Education Act of 1965 
under any sequestration order shall be achieved only from loans 
described in paragraphs (2) and (3) by the application of the measures 
described in such paragraphs.
    (2) For any loan made during the period beginning on the date that 
a sequestration order takes effect with respect to a fiscal year, the 
rate used in computing the special allowance payment pursuant to 
section 438(b)(2)(A)(iii) of such Act for each of the first four 
special allowance payments for such loan shall be adjusted by reducing 
such rate by the lesser of--
            (A) 0.40 percent, or
            (B) the percentage by which the rate specified in such 
        section exceeds 3 percent.
    (3) For any loan made during the period beginning on the date that 
a sequestration order takes effect with respect to a fiscal year, the 
origination fee which is authorized to be collected pursuant to section 
438(c)(2) of such Act shall be increased by 0.50 percent.
    (c) Foster Care and Adoption Assistance Programs.--Any 
sequestration order shall make the reduction otherwise required under 
the foster care and adoption assistance programs (established by part E 
of title IV of the Social Security Act) only with respect to payments 
and expenditures made by States in which increases in foster care 
maintenance payment rates or adoption assistance payment rates (or 
both) are to take effect during the fiscal year involved, and only to 
the extent that the required reduction can be accomplished by applying 
a uniform percentage reduction to the Federal matching payments that 
each such State would otherwise receive under section 474 of that Act 
(for such fiscal year) for that portion of the State's payments 
attributable to the increases taking effect during that year. No 
State's matching payments from the Federal Government for foster care 
maintenance payments or for adoption assistance maintenance payments 
may be reduced by a percentage exceeding the applicable domestic 
sequestration percentage. No State may, after the date of the enactment 
of this Act, make any change in the timetable for making payments under 
a State plan approved under part E of title IV of the Social Security 
Act which has the effect of changing the fiscal year in which 
expenditures under such part are made.
    (d) Low-Income Entitlements.--(1) Benefit payments or payments to 
States or other entities for the programs listed in paragraph (2) shall 
not be reduced by more than 1 percent under any sequestration order. 
When reduced under an end-of-session sequestration order, those benefit 
reductions shall occur starting with the payment made at the start of 
January. When reduced under a within-session sequestration order, those 
benefit reductions shall occur starting with the next periodic payment.
    (2) The programs referred to in paragraph (1) are the following:
            Aid to families with dependent children (75-0412-0-1-609);
            Child nutrition (12-3539-0-1-605);
            Food stamp programs (12-3505-0-1-605) and (12-3550-0-1-
        605);
            Grants to States for medicaid (75-0512-0-1-551); and
            Supplemental security income program (75-0406-0-1-609).
    (e) Federal Retirement and Veterans' Programs.--
            (1) For each of the programs listed in paragraph (2) and 
        except as provided in paragraph (3), monthly (or other 
        periodic) benefit payments shall be reduced by the uniform 
        percentage applicable to direct spending sequestrations for 
        such programs under section 221(c)(2), which shall in no case 
        exceed 2 percent under any sequestration order. When reduced 
        under an end-of-session sequestration order, those benefit 
        reductions shall occur starting with the payment made at the 
        start of January or 7 weeks after the order is issued, 
        whichever is later. When reduced under a within-session 
        sequestration order, those benefit reductions shall occur 
        starting with the next periodic payment.
            (2) The programs subject to paragraph (1) are:
                    Benefits payable under sections 3(a), 3(f)(3), 
                4(a), or 4(f) of the Railroad Retirement Act of 1974;
                    Benefits under chapter 21 of title 38, United 
                States Code, relating to specially adapted housing and 
                mortgage-protection life insurance for certain veterans 
                with service-connected disabilities (36-0137-0-1-702);
                    Benefits under section 907 of title 38, United 
                States Code, relating to burial benefits for veterans 
                who die as a result of service-connected disability 
                (36-0155-0-1-701);
                    Benefits under chapter 39 of title 38, United 
                States Code, relating to automobiles and adaptive 
                equipment for certain disabled veterans and members of 
                the Armed Forces (36-0137-0-1-702);
                    Black lung benefits (20-8144-0-7-601);
                    Central Intelligence Agency retirement and 
                disability system fund (56-3400-0-1-054);
                    Civil service retirement and disability fund (24-
                8135-0-7-602);
                    Comptrollers general retirement system (05-0107-0-
                1-801);
                    Foreign service retirement and disability fund (19-
                8186-0-7-602);
                    Judicial survivors' annuities fund (10-8110-0-7-
                602);
                    Longshoremen's and harborworkers' compensation 
                benefits (16-9971-0-7-601);
                    Military retirement fund (97-8097-0-7-602);
                    National Oceanic and Atmospheric Administration 
                retirement (13-1450-0-1-306);
                    Pensions for former Presidents (47-0105-0-1-802);
                    Railroad retirement tier II (60-8011-0-7-601);
                    Railroad supplemental annuity pension fund (60-
                8012-0-7-602);
                    Retired pay, Coast Guard (69-0241-0-1-403);
                    Retirement pay and medical benefits for 
                commissioned officers, Public Health Service (75-0379-
                0-1-551);
                    Special benefits, Federal Employees' Compensation 
                Act (16-1521-0-1-600);
                    Special benefits for disabled coal miners (75-0409-
                0-1-601);
                    Tax Court judges survivors annuity fund (23-8115-0-
                7-602);
                    Veterans' compensation (36-0153-0-1-701); and
                    Veterans' pensions (36-0154-0-1-701).
    (f) Medicare Program.--
            (1) Calculation of reduction in individual payment 
        amounts.--To achieve the total percentage reduction in those 
        programs required by section 221, the percentage reduction that 
        shall apply to payments under the health insurance programs 
        under title XVIII of the Social Security Act for services 
        furnished after any sequestration order is issued shall be such 
        that the reduction made in payments under that order shall 
        achieve the required total percentage reduction in those 
        payments for that fiscal year as determined on a 12-month 
        basis.
            (2) Timing of application of reductions.--
                    (A) In general.--Except as provided in subparagraph 
                (B), if a reduction is made under paragraph (1) in 
                payment amounts pursuant to a 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 under paragraph (1) 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 
                the 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.
            (3) No increase in beneficiary charges in assignment-
        related cases.--If a reduction in payment amounts is made under 
        paragraph (1) 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.
            (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 subtitle.
    (g) Federal Pay.--
            (1) In general.--Except as provided in section 222(b)(3), 
        new budget authority to pay Federal personnel shall be reduced 
        by the uniform percentage calculated under section 221(c), 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 
        section 302 of the Federal Employees Pay Comparability Act of 
        1990) or the rate of any element of military pay to which any 
        individual is entitled under title 37, 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 1009 
        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 403a and 405 
                        of such title, and
                            (iii) cadet pay and midshipman pay under 
                        section 203(c) of such title.
                    (C) The term ``uniformed services'' shall have the 
                meaning given that term in section 101(3) of title 37, 
                United States Code.
    (h) Child Support Enforcement Program.--Any sequestration order 
shall accomplish the full amount of any required reduction in 
expenditures under sections 455 and 458 of the Social Security Act by 
reducing the Federal matching rate for State administrative costs under 
such 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.
    (i) Extended Unemployment Compensation.--(1) A State may reduce 
each weekly benefit payment made under the Federal-State Extended 
Unemployment Compensation Act of 1970 for any week of unemployment 
occurring during any period with respect to which payments are reduced 
under an order issued under this subtitle by a percentage not to exceed 
the percentage by which the Federal payment to the State under section 
204 of such Act is to be reduced for such week as a result of such 
order.
    (2) A reduction by a State in accordance with subparagraph (A) 
shall not be considered as a failure to fulfill the requirements of 
section 3304(a)(11) of the Internal Revenue Code of 1986.
    (j) Commodity Credit Corporation.--
            (1) Powers and authorities of the commodity credit 
        corporation.--This subtitle shall not restrict the Commodity 
        Credit Corporation in the discharge of its authority and 
        responsibility as a corporation to buy and sell commodities in 
        world trade, to use the proceeds as a revolving fund to meet 
        other obligations and otherwise operate as a corporation, the 
        purpose for which it was created.
            (2) Reduction in payments made under contracts.--(A) 
        Payments and loan eligibility under any contract entered into 
        with a person by the Commodity Credit Corporation prior to the 
        time any sequestration order has been issued shall not be 
        reduced by an order subsequently issued. Subject to 
        subparagraph (B), after any sequestration order is issued for a 
        fiscal year, any cash payments made by the Commodity Credit 
        Corporation--
                    (i) under the terms of any one-year contract 
                entered into in or after such fiscal year and after the 
                issuance of the order; and
                    (ii) out of an entitlement account,
        to any person (including any producer, lender, or guarantee 
        entity) shall be subject to reduction under the order.
            (B) Each contract entered into with producers or producer 
        cooperatives with respect to a particular crop of a commodity 
        and subject to reduction under subparagraph (A) shall be 
        reduced in accordance with the same terms and conditions. If 
        some, but not all, contracts applicable to a crop of a 
        commodity have been entered into prior to the issuance of any 
        sequestration order, the order shall provide that the necessary 
        reduction in payments under contracts applicable to the 
        commodity be uniformly applied to all contracts for succeeding 
        crops of the commodity, under the authority provided in 
        paragraph (3).
            (3) Delayed reduction in outlays permissible.--
        Notwithstanding any other provision of this subtitle, if any 
        sequestration order is issued with respect to a fiscal year, 
        any reduction under the order applicable to contracts described 
        in paragraph (2) may provide for reductions in outlays for the 
        account involved to occur in the fiscal years following the 
        fiscal year to which the order applies.
            (4) Uniform percentage rate of reduction and other 
        limitations.--All reductions described in paragraph (2) that 
        are required to be made in connection with any sequestration 
        order with respect to a fiscal year--
                    (A) shall be made so as to ensure that outlays for 
                each program, project, activity, or account involved 
                are reduced by a percentage rate that is uniform for 
                all such programs, projects, activities, and accounts, 
                and may not be made so as to achieve a percentage rate 
                of reduction in any such item exceeding the rate 
                specified in the order; and
                    (B) with respect to commodity price support and 
                income protection programs, shall be made in such 
                manner and under such procedures as will attempt to 
                ensure that--
                            (i) uncertainty as to the scope of benefits 
                        under any such program is minimized;
                            (ii) any instability in market prices for 
                        agricultural commodities resulting from the 
                        reduction is minimized; and
                            (iii) normal production and marketing 
                        relationships among agricultural commodities 
                        (including both contract and non-contract 
                        commodities) are not distorted.
                In meeting the criterion set out in clause (iii) of 
                subparagraph (B) of the preceding sentence, the 
                President shall take into consideration that reductions 
                under an order may apply to programs for two or more 
                agricultural commodities that use the same type of 
                production or marketing resources or that are 
                alternative commodities among which a producer could 
                choose in making annual production decisions.
            (5) Certain authority not to be limited.--Nothing in this 
        subtitle shall limit or reduce in any way any appropriation 
        that provides the Commodity Credit Corporation with funds to 
        cover the Corporation's net realized losses.
    (k) The JOBS Portion of AFDC.--
            (1) Full amount of sequestration required.--Any 
        sequestration order shall accomplish the full amount of any 
        required reduction of the job opportunities and basic skills 
        training program under section 402(a)(19), and part F of title 
        VI, of the Social Security Act, in the manner specified in this 
        subsection. Such an order may not reduce any Federal matching 
        rate pursuant to section 403(l) of the Social Security Act.
            (2) New allotment formula.--
                    (A) General rule.--Notwithstanding section 403(k) 
                of the Social Security Act, each State's percentage 
                share of the amount available after sequestration for 
                direct spending pursuant to section 403(l) of such Act 
                shall be equal to that percentage of the total amount 
                paid to the States pursuant to such section 403(l) for 
                the prior fiscal year that is represented by the amount 
                paid to such State pursuant to such section 403(l) for 
                the prior fiscal year, except that a State may not be 
                allotted an amount under this subparagraph that exceeds 
                the amount that would have been allotted to such State 
                pursuant to such section 403(k) had the sequestration 
                not been in effect.
                    (B) Reallotment of amounts remaining unallotted 
                after application of general rule.--Any amount made 
                available after sequestration for direct spending 
                pursuant to section 403(l) of the Social Security Act 
                that remains unallotted as a result of subparagraph (A) 
                of this paragraph shall be allotted among the States in 
                proportion to the absolute difference between the 
                amount allotted, respectively, to each State as a 
                result of such subparagraph and the amount that would 
                have been allotted to such State pursuant to section 
                403(k) of such Act had the sequestration not been in 
                effect, except that a State may not be allotted an 
                amount under this subparagraph that results in a total 
                allotment to the State under this paragraph of more 
                than the amount that would have been allotted to such 
                State pursuant to such section 403(k) had the 
                sequestration not been in effect.
    (l) Postal Service Fund.--Notwithstanding any other provision of 
law, any sequestration of the Postal Service Fund shall be accomplished 
by a payment from that Fund to the General Fund of the Treasury, and 
the Postmaster General of the United States shall make the full amount 
of that payment during the fiscal year to which the presidential 
sequestration order applies.
    (m) Effects of Sequestration.--The effects of sequestration shall 
be as follows:
            (1) 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.
            (2) 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 accounts not included in appropriation Acts, as 
        delineated in the most recently submitted President's budget).
            (3) Administrative regulations or similar actions 
        implementing a sequestration shall be made within 120 days of 
        the sequestration order. To the extent that formula allocations 
        differ at different levels of budgetary resources within an 
        account, program, project, or activity, the sequestration shall 
        be interpreted as producing a lower total appropriation, with 
        that lower appropriation being obligated as though it had been 
        the pre-sequestration appropriation and no sequestration had 
        occurred.
            (4) Except as otherwise provided, obligations in 
        sequestered direct spending accounts shall be reduced in the 
        fiscal year in which a sequestration occurs and in all 
        succeeding fiscal years.
            (5) If an automatic spending increase is sequestered, the 
        increase (in the applicable index) that was disregarded as a 
        result of that sequestration shall not be taken into account in 
        any subsequent fiscal year.
            (6) 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.

SEC. 224. POINT OF ORDER.

    (a) In General.--It shall not be in order in the House of 
Representatives or the Senate to consider any bill, joint resolution, 
amendment thereto, or conference report thereon that includes any 
provision that has the effect of modifying the application of this 
subtitle to any entitlement program subject to sequestration or exempt 
from sequestration under this subtitle.
    (b) Waiver or Suspension.--This section may be waived or suspended 
in the House of Representatives or the Senate only by the affirmative 
vote of three-fifths of the Members, duly chosen and sworn.
            Subtitle D--Balanced Budget by Fiscal Year 2002

SEC. 231. MAXIMUM SPENDING AMOUNTS.

    Section 601(a)(1) of the Congressional Budget Act of 1974 is 
amended to read as follows:
            ``(1) Maximum spending amount.--The term `maximum spending 
        amount' means--
                    ``(A) with respect to fiscal year 1996, 
                $1,561,000,000,000 in outlays;
                    ``(B) with respect to fiscal year 1997, 
                $1,592,000,000,000 in outlays;
                    ``(C) with respect to fiscal year 1998, 
                $1,624,000,000,000 in outlays;
                    ``(D) with respect to fiscal year 1999, 
                $1,657,000,000,000 in outlays;
                    ``(E) with respect to fiscal year 2000, 
                $1,706,000,000,000 in outlays;
                    ``(F) with respect to fiscal year 2001, 
                $1,757,000,000,000 in outlays; and
                    ``(G) with respect to fiscal year 2002, 
                $1,810,000,000,000 in outlays.

SEC. 232. ENFORCING MAXIMUM SPENDING SEQUESTRATION.

    (a) Sequestration.--Section 253(a) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended to read as follows:
    ``(a) Sequestration.--Within 15 days after Congress adjourns to end 
a session (other than the One Hundred Third Congress), and on the same 
day as sequestration (if any) under sections 251 and 252, but after any 
sequestration required by those sections, there shall be a 
sequestration (if necessary) to reduce total Federal spending to the 
maximum permissible level as set forth in section 601(a)(1) of the 
Congressional Budget Act of 1974.''.
    (b) Conforming Amendment to Heading.--The section heading of 
section 253 of the Balanced Budget and Emergency Deficit Control Act of 
1985 is amended to read as follows:

``SEC. 253. ENFORCING MAXIMUM SPENDING LIMITS.''.

    (c) Additional Conforming Amendments.--Section 253 of the Balanced 
Budget and Emergency Deficit Control Act of 1985 is amended--
            (1) by repealing subsections (b), (g), and (h), and by 
        redesignating subsections (c), (d), (e), and (f), as 
        subsections (b), (c), (d), and (e), respectively;
            (2) in subsection (b) (as redesignated), by amending the 
        first sentence to read as follows: ``To reduce total Federal 
        spending to the maximum permissible level for a budget year, 20 
        percent of the required outlay reductions shall be obtained 
        from non-exempt defense accounts (accounts designated as 
        function 050 in the President's fiscal year 1996 budget 
        submission) and 80 percent from non-exempt, non-defense 
        accounts (all other non-exempt accounts).'';
            (3) in subsection (c) (as redesignated), by striking 
        ``subsection (c)'' and inserting ``subsection (b)''; and
            (4) in subsection (e) (as redesignated), by striking ``(b), 
        (c), (d), and (e)'' and inserting ``(b), (c), and (d)'' and by 
        striking ``(d) or (e)'' and inserting ``(c) or (d)''.
    (d) Look-Back Sequester.--Section 253 of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended by adding at the end 
the following new subsection:
    ``(f) Look-Back Sequester.--
            ``(1) In general.--On July 1 of each fiscal year, the 
        Director of OMB shall determine if laws effective during the 
        current fiscal year will cause spending to exceed the maximum 
        spending amount for such fiscal year. If the limit is exceeded, 
        there shall be a preliminary sequester on July 1 to eliminate 
        the excess.
            ``(2) Permanent sequester.--Budget authority sequestered on 
        July 1 pursuant to paragraph (1) shall be permanently canceled 
        on July 15.
            ``(3) No margin.--The margin for determining a sequester 
        under this subsection shall be zero.
            ``(4) Sequestration procedures.--The provision of 
        subsections (b), (c), and (d) of this section shall apply to a 
        sequester under this subsection.''.
    (e) Reports.--Section 254 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended--
            (1) by striking subsection (c);
            (2) in subsection (d)(1), by striking ``deficit 
        sequestration'' and inserting ``total spending sequestration'';
            (3) in subsection (d) by repealing paragraph (4) and 
        inserting the following new paragraph:
            ``(4) Total Spending Sequestration Reports.--The preview 
        reports shall set forth for the budget year estimates for each 
        of the following:
                    ``(A) The amount of reductions required from 
                defense accounts and the reductions required from non-
                defense accounts.
                    ``(B) The sequestration percentage necessary to 
                achieve the required reduction in defense accounts 
                under section 253(c).
                    ``(C) The reductions required under sections 
                253(d)(1) and 253(d)(2).
                    ``(D) The sequestration percentage necessary to 
                achieve the required reduction in non-defense accounts 
                under section 253(d)(3).''; and
            (4) in subsection (g)(3), by striking ``Deficit'' and 
        inserting ``Total Spending'' in the side heading and in the 
        first sentence by striking ``deficit'' and inserting ``total 
        spending''.
    (f) Conforming Amendment to Table of Contents.--The item relating 
to section 253 is amended by striking ``Enforcing deficit targets'' and 
inserting ``Enforcing maximum spending limits''.
SEC. 233. TOTAL SPENDING POINT OF ORDER.

    (a) Total Spending Point of Order.--Section 605(b) of the 
Congressional Budget Act of 1974 is amended to read as follows:
    ``(b) Total Spending Point of Order.--
            ``(1) In general.--It shall not be in order in the House of 
        Representatives or the Senate to consider any bill, joint 
        resolution, amendment thereto, or conference report thereon, 
        that includes any provision that would result in total spending 
        for a fiscal year that exceeds the maximum permissible total 
        spending amount for such fiscal year as set forth in section 
        601(a)(1).
            ``(2) Waiver or suspension.--This subsection may be waived 
        or suspended in the House of Representatives or the Senate only 
        by the affirmative vote of three-fifths of its Members, duly 
        chosen and sworn.''.
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