[House Report 108-442]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-442

======================================================================



 
                      SPENDING CONTROL ACT OF 2004

                                _______
                                

 March 19, 2004.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Nussle, from the Committee on the Budget, submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3973]

    The Committee on the Budget, to whom was referred the bill 
(H.R. 3973) to amend part C of the Balanced Budget and 
Emergency Deficit Control Act of 1985 to extend the 
discretionary spending limits and pay-as-you-go through fiscal 
year 2009, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
Legislative Language.............................................     2
Introduction.....................................................     7
Short Summary....................................................    11
Background and Purpose...........................................    13
Legislative History..............................................    17
Section-by-Section Description...................................    25
Committee Hearings...............................................    29
Explanation of Amendments Adopted In Committee...................    31
Committee Rollcall Votes.........................................    33
Other Matters To Be Discussed Under House Rules..................    35
    Application of Law to the Legislative Branch.................    35
    Unfunded Mandates Statement..................................    35
    Statement of General Performance Goals and Objectives........    35
    Constitutional Authority Statement...........................    35
    Committee Estimate...........................................    35
    Congressional Budget Office Cost Estimate....................    36
    Changes in Existing Law Made by the Bill, as Reported........    36
    Views of Committee Members...................................    45

                          Legislative Language

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Spending Control Act of 
2004''.

SEC. 2. EXTENSION OF DISCRETIONARY SPENDING LIMITS.

  (a) Discretionary Spending Limits.--(1) Section 251(c)(2) of 
the Balanced Budget and Emergency Deficit Control Act of 1985 
is amended by inserting a dash after ``2005'', by redesignating 
the remaining portion of such paragraph as subparagraph (B) and 
by moving it two ems to the right, and by inserting after the 
dash the following new subparagraph:
                  ``(A) for the general purpose discretionary 
                category: $____ in new budget authority and 
                $____ in outlays; and''.
  (2) Section 251(c)(3) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended by inserting a dash 
after ``2006'', by redesignating the remainingportion of such 
paragraph as subparagraph (B) and by moving it two ems to the right, 
and by inserting after the dash the following new subparagraph:
                    ``(A) for the general purpose discretionary 
                category: $____ in new budget authority and 
                $____ in outlays; and''.
    (3) Section 251(c) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended by redesignating 
paragraphs (4) through (9) as paragraphs (7) through (12) and 
inserting after paragraph (3) the following new paragraphs:
            ``(4) with respect to fiscal year 2007 for the 
        general purpose discretionary category: $____ in new 
        budget authority and $____ in outlays;
            ``(5) with respect to fiscal year 2008 for the 
        general purpose discretionary category: $____ in new 
        budget authority and $____ in outlays; and
            ``(6) with respect to fiscal year 2009 for the 
        general purpose discretionary category: $____ in new 
        budget authority and $____ in outlays;''.
    (b) Advance Appropriations.--Section 251 of the Balanced 
Budget and Emergency Deficit Control Act of 1985 is amended by 
adding at the end the following new subsection:
    ``(d) Advance Appropriations.--In any of fiscal years 2005 
through 2009, discretionary advance appropriations provided in 
appropriation Acts in excess of $____ shall be counted against 
the discretionary spending limits for the fiscal year for which 
the appropriation Act containing the advance appropriation is 
enacted.''.

SEC. 3. EXTENSION OF PAY-AS-YOU-GO REQUIREMENT.

    (a) Purpose.--Section 252(a) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended to read as 
follows:
    ``(a) Purpose.--The purpose of this section is to assure 
that any legislation that is enacted before October 1, 2009, 
that causes a net increase in direct spending will trigger an 
offsetting sequestration.''.
    (b) Timing.--Section 252(b)(1) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended by striking 
``any net deficit increase'' and all that follows through 
``2002,'' and by inserting ``any net increase in direct 
spending enacted before October 1, 2009,''.
    (c) Calculation of Direct Spending Increase.--Section 
252(b)(2) of the Balanced Budget and Emergency Deficit Control 
Act of 1985 is amended--
            (1) by striking ``deficit'' the first place it 
        appears and inserting ``direct spending'';
            (2) in subparagraph (A) by striking ``and 
        receipts'';
            (3) in subparagraph (C) by striking ``and 
        receipts''; and
            (4) by amending the heading to read as follows: 
        ``Calculation of direct spending increase.--''.
    (d) Conforming Amendments.--(1) The heading of section 
252(c) of the Balanced Budget and Emergency Deficit Control Act 
of 1985 is amended to read as follows: ``Eliminating a Direct 
Spending Increase.--''.
    (2) Paragraphs (1), (2), and (4) of section 252(d) of the 
Balanced Budget and Emergency Deficit Control Act of 1985 are 
amended by striking ``or receipts'' each place it appears.
    (3) Section 252(e) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended by striking ``or 
receipts'' and by striking ``, outlays, and receipts'' and 
inserting ``and outlays''.
    (4) Section 254(c)(3) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended--
            (A) in subparagraph (A) by striking ``net deficit 
        increase or decrease'' and by inserting ``net increase 
        or decrease in direct spending'';
            (B) in subparagraph (B) by striking ``amount of 
        deficit increase or decrease'' and by inserting 
        ``increase or decrease in direct spending''; and
            (C) in subparagraph (C) by striking ``a deficit 
        increase'' and by inserting ``an increase in direct 
        spending''.

SEC. 4. DEFINITIONS.

    (a) In General.--Section 250(c) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended by adding at 
the end the following new paragraphs:
            ``(20) The term `advance appropriation' means 
        appropriations that first become available one fiscal 
        year or more beyond the fiscal year for which an 
        appropriation Act making such funds available is 
        enacted.
            ``(21)(A) Except as provided by subparagraph (B), 
        the term `emergency requirement' means any provision 
        that provides new budget authority and resulting 
        outlays for a situation that poses a threat to life, 
        property, or national security and is--
                    ``(i) sudden, quickly coming into being, 
                and not building up over time;
                    ``(ii) an urgent, pressing, and compelling 
                need requiring immediate action;
                    ``(iii) subject to subparagraph (B), 
                unforeseen, unpredictable, and unanticipated; 
                and
                    ``(iv) not permanent, temporary in nature.
            ``(B) An emergency that is part of an aggregate 
        level of anticipated emergencies, particularly when 
        normally estimated in advance, is not unforeseen.''.
    (b) Contingency Operations Related to Global War on 
Terrorism.--Section 251(b)(2) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended by adding at 
the end the following new subparagraph:
                    ``(I) Contingency operations related to 
                global war on terrorism.--If supplemental 
                appropriations for discretionary accounts are 
                enacted for contingency operations related to 
                the global war on terrorism that, pursuant to 
                this subparagraph, the President designates as 
                a contingency operation related to the global 
                war on terrorism and the Congress so designates 
                in statute, the adjustment shall be the total 
                of such appropriations in discretionary 
                accounts so designated and the outlays flowing 
                in all fiscal years from such 
                appropriations.''.
    (c) Conforming Amendment.--The second sentence of section 
250(c)(4)(A) of the Balanced Budget and Emergency Deficit 
Control Act of 1985 is amended to read as follows: ``The 
general purpose discretionary category shall consist of 
accounts designated in the joint explanatory statement of 
managers accompanying the conference report on the Spending 
Control Act of 2004.''.

SEC. 5. PROJECTIONS UNDER SECTION 257.

    Section 257(c) of the Balanced Budget and Emergency Deficit 
Control Act of 1985 is amended by inserting after paragraph (6) 
the following new paragraph:
            ``(7) Emergencies.--New budgetary resources 
        designated under section 251(b)(2)(A) or 251(b)(2)(I) 
        shall not be assumed beyond the fiscal year for which 
        they have been enacted.''.

SEC. 6. EXCEPTION FOR OUTLAY COMPONENTS OF EXPIRING RECEIPTS 
                    LEGISLATION.

    Section 252(d)(4) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended by striking ``and'' at 
the end of subparagraph (A), by striking the period and 
inserting ``; and'' at the end of subparagraph (B), and by 
adding at the end the following new subparagraph:
                    ``(C) extending provisions in the Economic 
                Growth and Tax Relief Reconciliation Act of 
                2001 or provisions in sections 101 through 104, 
                section 202, or sections 301 and 302 of the 
                Jobs and Growth Tax Relief Reconciliation Act 
                of 2003.''.

SEC. 7. REPORTS.

    Subsections (c)(2) and (f)(2)(A) of section 254 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 are 
amended by striking ``2002'' and inserting ``2009''.

SEC. 8. EXPIRATION.

    Section 275(b) of the Balanced Budget and Emergency Deficit 
Control Act of 1985 is amended by striking ``2002'' and 
inserting ``2009'' and by striking ``2006'' and inserting 
``2013''.

SEC. 9. TECHNICAL CORRECTIONS TO THE BALANCED BUDGET AND EMERGENCY 
                    DEFICIT CONTROL ACT OF 1985.

    Part C of the Balanced Budget and Emergency Deficit Control 
Act of 1985 is amended as follows:
            (1) In section 250(a), strike ``SEC. 256. GENERAL 
        AND SPECIAL SEQUESTRATION RULES'' and insert ``Sec. 
        256. General and special sequestration rules'' in the 
        item relating to section 256.
            (2) In subparagraphs (F), (G), (H), (I), (J), and 
        (K) of section 250(c)(4), insert ``subparagraph'' after 
        ``described in'' each place it appears.
            (3) In section 250(c)(18), insert ``of'' after 
        ``expenses''.
            (4) In section 251(b)(1)(A), strike ``committees'' 
        the first place it appears and insert ``Committees''.
            (5) In section 251(b)(1)(C)(i), strike ``fiscal 
        years'' and insert ``fiscal year''.
            (6) In section 251(b)(1)(D)(ii), strike ``fiscal 
        years'' and insert ``fiscal year''.
            (7) In section 252(b)(2)(B), insert ``the'' before 
        ``budget year''.
            (8) In section 252(c)(1)(C)(i), strike ``paragraph 
        (1)'' and insert ``subsection (b)''.
            (9) In section 254(c)(3)(A), strike ``subsection'' 
        and insert ``section''.
            (10) In section 254(f)(4), strike ``subsection'' 
        and insert ``section'' and strike ``sequesterable'' and 
        insert ``sequestrable''.
            (11) In section 255(g)(1)(B), move the fourteenth 
        undesignated clause 2 ems to the right.
            (12) In section 255(g)(2), insert ``and'' after the 
        semicolon at the end of the next-to-last undesignated 
        clause.
            (13) In section 255(h)--
                    (A) strike ``and'' after the semicolon in 
                the ninth undesignated clause;
                    (B) insert ``and'' after the semicolon at 
                the end of the tenth undesignated clause; and
                    (C) strike the semicolon at the end and 
                insert a period.
            (14) In section 256(k)(1), strike ``paragraph (5)'' 
        and insert ``paragraph (6)''.
            (15) In section 257(b)(2)(A)(i), strike 
        ``differenes'' and insert ``differences''.

                              Introduction

    The alarming budget deficits that emerged in the past 2 
years resulted from one factor more than any other: government 
spending. In response to a series of extraordinary 
circumstances, Congress--out of necessity--increased spending 
significantly. There was no other option. Responding to the 
terrorists attack, leading the war against global terrorism, 
and protecting America's homeland required large investments--
investments beyond the reach of the government's cash 
resources. This led to borrowing, the product of budget 
deficits.
    Deficits do matter--but they must be understood correctly 
for what they are: a symptom of excess government spending. 
When Congress controls its spending, it can reduce deficits, 
and eventually restore the common-sense sanity of balancing 
budgets.
    That is the purpose of the Spending Control Act of 2004 
(H.R. 3973). It restores a system of spending control measures 
that lapsed at the end of fiscal year 2002; and it gives those 
measures, once again, the force of law. The controls are backed 
with automatic spending cuts if they are breached. The 
discipline cannot be waived--it can be altered only by enacting 
laws amending it.
    The measure restores the system of caps on discretionary 
spending, and a pay-as-you-go strategy for entitlement 
spending. This bill rests on three principles:
     All government spending must be paid for--through 
taxes or borrowing--and both are burdens on the economy. 
Raising taxes--even if the intent is to close deficits--does 
not by itself reduce the economic burden of government 
spending. Only spending control can do this.
     Chasing entitlement expansions with higher taxes--
as some recommend--does not reduce the problem of higher 
spending. Only spending control can control spending.
    The discussion below explains why this bill is necessary, 
and why it is the appropriate means.

                        NEED FOR THE LEGISLATION

    The Congressional Budget Act was enacted in 1974, and has 
been the congressional budget blueprint since that time. It 
established a method for Congress to examine its spending needs 
from a government-wide perspective, and therefore choosing 
priorities and distributing resources accordingly. It also 
created a means of managing subsequent legislation to implement 
the budget blueprint, and for enforcing the levels Congress 
envisions in the budget resolution.
    The points of order provided for in the Budget Act can be 
an effective means of budget enforcement, if applied 
diligently. They can help control spending, and thereby keep 
deficits relatively small and short-lived.
    But exceptional times require exceptional measures--in this 
case, measures with the force of law. The deficits that grew 
from recent crises are large, and threaten to become chronic if 
not controlled swiftly and firmly. It will take several years 
of determined effort at controlling spending to restore budget 
balance. Along the way, other unexpected events will arise. 
Points of order can be waived, and the discipline sustained 
solely by political will can be challenged. Congress needs to 
embrace spending control in a law by which it will be governed 
for several years. The Spending Control Act is such a law.
    Federal Reserve Chairman Alan Greenspan is just one of many 
prominent observers who has endorsed the restoration of 
disciplines such as those contained here. As he has put it, ``I 
would like to see the restoration of PAYGO and discretionary 
caps which essentially will restrain the expansion of the 
deficit and, indeed, ultimately contain it. It did that back in 
the early '90s, and I thought it was quite and surprisingly 
successful in restraining what had been a budget which had 
gotten out of kilter. I would like to see those restraints 
reimposed, and by their very nature they will bring back fiscal 
balance.'' (July 2003)
    A look at historical trends supports this point. Total 
government spending as a share of the economy (as a percentage 
of gross domestic product [GDP]) declined steadily from the 
time the statutory disciplines were imposed until the beginning 
of the current decade. In 2001, it began to surge upward again, 
largely because of budget surpluses, and then September 11 and 
its ramifications. But a significant additional factor was that 
the existing statutory budget disciplines expired at the end of 
fiscal year 2002.

                      STRUCTURE OF THE LEGISLATION

    The key elements of the bill are the following:
Discretionary spending caps
    The discretionary spending caps provided for in this bill--
which establish ceilings for spending that is subject to annual 
appropriations--have two principal advantages over existing 
enforcement procedures. Because the caps are embraced in law, 
they cannot be waived or altered in the way that points of 
order can be. They can only be changed by a new law, or an 
amendment to the existing law--and either requires the approval 
of both Houses of Congress, and the President's signature.
    A breach of the caps leads to automatic, across-the-board 
spending cuts in discretionary programs. This is a powerful 
sanction against excess spending. As with total spending, 
discretionary spending also declined as a share of the economy 
throughout the 1990s, when the spending caps were in place.

Pay-as-you-go for spending

    When the Budget Act was adopted in 1974, mandatory spending 
accounted for about 41 percent of the budget; discretionary 
spending was about 51 percent. By 1988, mandatory spending had 
grown to 42 percent of the budget; discretionary was 44 
percent. Today, 30 years after adoption of the Budget Act, more 
than half of the budget is mandatory spending--thus, more than 
half of the Federal Government's spending is on ``autopilot.''
    The statutory discipline of pay-as-you-go--which required 
entitlement spending increases to be offset--was effective in 
controlling mandatory spending. But the previous version of 
PAYGO allowed entitlement spending increases to be financed by 
tax increases. This practice may have prevented deficits from 
increasing. But it did not, in principle, control the growth of 
spending.
    As noted above, deficits are a symptom of an inability to 
control spending. The Budget Act itself defines a ``deficit'' 
not as a shortage of tax revenue, but an excess of spending. 
All government spending must be paid for--through taxes or 
borrowing--and both are burdens on the economy. Raising taxes--
even if the intent is to close deficits--does not by itself 
reduce the economic burden of government spending. Chasing 
entitlement expansions with higher taxes does not reduce the 
problem of higher spending. Only spending control can control 
spending.
    Furthermore, now is not the time to be raising taxes on the 
economy, when it is in the early stages of expansion and 
struggling to produce stronger jobs growth. Congress needs to 
maintain policies that are pro-growth. Tax increases are anti-
growth and would hurt our economy and prospects for jobs 
growth. Even Federal Reserve Chairman Greenspan has cautioned 
about raising taxes. He has stated that ``tax rate increases * 
* * pose significant risks to economic growth and the revenue 
base. * * * [S]uch risks * * * are of enough concern * * * to 
warrant aiming to close the fiscal gap primarily, if not 
wholly, from the outlay side.''
    For all these reasons, this bill focuses the PAYGO 
discipline on spending, consistent with the President's 
recommendations.

                               CONCLUSION

    This legislation would be useful for budget enforcement 
under any circumstances. But it is especially important now, 
with Congress facing large budget deficits that threaten to 
become chronic. A long-term approach to budget enforcement is 
now a necessary step; and it must focus on the central problem: 
the need to control government spending.

                             Short Summary

    The Spending Control Act of 2004 restores a system of 
spending control measures with the force of law, and the 
backing of automatic spending cuts if the controls are 
breached. The discipline cannot be waived; it can be altered 
only by enacting laws amending it.
    Spending Controls. Both annual appropriations and permanent 
mandatory spending are addressed.
     Spending Caps--The measure reestablishes, though 
2009, the caps on discretionary (annually appropriated) 
spending, which expired at the end of fiscal year 2002. These 
caps are set for budget authority and outlays at specific 
levels. The caps put firm limits on discretionary spending--and 
those limits have the force of law. (The actual cap levels will 
be specified through a manager's amendment, consistent with 
levels in the forthcoming conference report on the budget 
resolution for fiscal year 2005.)
     PAYGO for Spending--The bill also extends through 
2009 the pay-as-you-go [PAYGO] requirements, which expired at 
the end of fiscal year 2002, for mandatory spending only. This 
PAYGO-for-spending regimen requires that bills increasing 
entitlement spending must be offset by reductions in other 
spending. They may not be financed by raising taxes. The intent 
is to restrain the growth of government, and that can only be 
done by controlling spending--not by financing higher spending 
with higher taxes.
    Enforcement of Caps and PAYGO. Any breach of either of 
these spending disciplines results in automatic spending cuts--
known as ``sequesters.''
     Discretionary Sequester--Any breach of the 
discretionary spending cap in a given fiscal year results in a 
compensating, across-the-board reduction in discretionary 
spending programs.
     Entitlement Sequester--Similarly, if the sum of 
all entitlement spending bills in a given fiscal year increases 
the budget deficit, then a compensating sequester is applied to 
all non-exempt entitlement spending. (The measure retains the 
exemptions from sequester that were contained in the previous 
Budget Enforcement Act. Exempt programs included Social 
Security and several other highly sensitive benefits programs.)
    Emergencies. The bill ratifies previous and current 
treatment of emergencies, consistent with administration policy 
and recent budget resolutions. It allows the discretionary caps 
to be adjusted in the event spending provisions are designated 
as emergencies. It also codifies the definition of an emergency 
as an unanticipated and temporary event requiring funding for 
the preservation of life, property, or national security. The 
bill also requires that future spending projections will no 
longer assume that ``emergency'' spending amounts will be 
repeated in future years.
    Advance Appropriations. The bill limits the amount of 
``advance appropriations''--spending authority provided for a 
year subsequent to the budget year--and the programs for which 
advances may be used. These provisions, too, are consistent 
with administration policy and recent budget resolutions.

                         Background and Purpose

                                SUMMARY

    A brief summary of the reasons for this bill, and the 
disciplines it contains, is the following:
     Discretionary spending caps. The principal aim of 
these is to augment controls provided for in the Congressional 
Budget Act, which are currently enforced through points of 
order. Statutory spending caps with reinforce these mechanisms.
     Pay-as-you-go for spending. This mechanism 
provides a tough enforcement tool to begin gaining control of 
mandatory spending programs. These programs--which run 
essentially on a kind of ``automatic pilot''--have grown to 
more than half of the Federal budget. They are highly subject 
to factors outside the control of Congress--such as 
demographics and economic changes--but are rarely subjected to 
congressional review, except when they are being expanded.
     Emergency designations. The bill recognizes the 
need for a designating and emergency--a means of responding to 
sudden, dramatic events that cannot be anticipated in the 
regular budget process. Nevertheless, it seeks to limit 
emergency designations by placing in law a consensus 
understanding of what truly constitutes an ``emergency.'' In 
doing so, the bill intends to remove an incentive for 
circumventing budgetary limits, and thereby making use of the 
emergency designation more responsible and credible.

                     DISCRETIONARY SPENDING LIMITS

Background
    Discretionary spending limits were first established in 
1990. The limits were revised and extended through fiscal year 
2002 by various laws, including the Omnibus Budget 
Reconciliation Act of 1993 [OBRA '93] and the Budget 
Enforcement Act of 1997 [BEA '97]. In addition, discretionary 
spending limits established in other laws--for violent crime 
reduction programs, highway and mass transit programs, and 
conservation programs--eventually were incorporated into the 
limits. Violations of the discretionary spending limits were 
enforced by automatic, across-the-board spending cuts called 
``sequestration.'' Statutory limits on discretionary spending 
expired at the end of fiscal year 2002.
    Through much of the 1990s, statutory caps proved a 
surprisingly effective means of restraining discretionary 
spending. This was at least partly true because exceeding them 
required agreement from both Houses of Congress and the 
President. Over the past 5 years, however, discretionary 
spending increased steeply, according to calculations by both 
the Office of Management and Budget [OMB] and the Congressional 
Budget Office [CBO]. One reason surely was the emergence of 
budget surpluses in the late 1990s, which created an 
irresistible temptation toward higher spending. Another was 
September 11 and subsequent related events--which clearly 
demanded a vigorous response. But a third factor undoubtedly 
was the expiration of spending caps at the end of fiscal year 
2002. Under normal conditions, this might have been less 
significant. But in the extraordinary circumstances of the past 
2 years, the absence of statutory caps has only created another 
strong incentive for higher spending.
    Some discretionary spending is provided in the form of 
``advance appropriations.'' An advance appropriation becomes 
available in a fiscal year following the fiscal year to which 
the annual appropriations act generally applies. Both the 
President and Congress, over the years, have used advance 
appropriations to circumvent budgetary controls.

Purpose
    As noted above, discretionary spending caps written in law 
are designed to reinforce procedures contained in the 
congressional budget process. The process constrains 
discretionary spending through the Congressional budget process 
through points of order. These mechanisms can be effective when 
applied diligently. But they are confined to congressional 
consideration of legislation, and--because they do not have the 
force of law--they can be waived.
    Statutory discretionary spending limits augment 
congressional budget discipline on this category of spending 
through the prospect of sequestration. Spending above a 
statutory cap will cause a sequester, an across-the-board 
spending reduction in all discretionary programs. This is 
further supported by the constitutional arrangement: the only 
way to circumvent the statutory spending level is by agreement 
among both Houses of Congress and the President. There can be 
no unilateral waiver (as there can be with points of order), 
and either Congress or the President can effectively halt an 
attempt to evade the caps simply by refusing to agree to it.
    The bill includes a restriction on the total amount of 
advance appropriations that may be enacted for a fiscal year 
for the same period for which the new discretionary spending 
limits will apply. Any amount provided in excess of the limit 
is counted against the discretionary spending limits for the 
fiscal year to which the annual appropriations act generally 
applies, not to the fiscal year for which the advance 
appropriation is made. Generally this puts into law a curb on 
the use of advance appropriations to push spending higher.

                     THE PAY-AS-YOU-GO REQUIREMENT

Background
    A ``pay-as-you-go'' [PAYGO] requirement was established in 
1990. PAYGO was extended for legislation enacted through fiscal 
year 2002 by various laws, including OBRA '93 and BEA '97. 
Although the PAYGO requirement only applied to legislation 
enacted by the end of fiscal year 2002, it covered the out-year 
effects of the legislation through fiscal year 2006.
    Under the PAYGO requirement, legislation causing an 
increase in direct spending or a decrease in revenue for a 
fiscal year was prohibited from resulting in a net cost for 
that year. Balances for each fiscal year were maintained on a 
rolling PAYGO ``scorecard'' that accumulated the budgetary 
effects of laws enacted during the session and in prior years. 
Violations of the PAYGO requirement were enforced by 
sequestration, an across the board cut in all non-exempt 
mandatory spending programs.

Purpose
    The bill extends the PAYGO requirement through fiscal year 
2009, but amends the law to only apply to bills which increase 
the level of direct spending without offsetting the spending 
withreductions in other direct spending programs. If the total 
effect on direct spending in a fiscal year increases spending without 
offsets, a sequester is triggered across mandatory spending programs.
    Mandatory spending programs are set in law and the level of 
outlays may rise or fall due to events entirely outside 
congressional decision making. These programs are usually 
entitlements that have a set beneficiary class and formula by 
which those benefits are distributed. Consequently, the varying 
number of beneficiaries or the rate of inflation--factors that 
are outside the control of Congress--can cause steep increases 
in spending.
    Unlike annual appropriation bills--these programs cause 
spending without yearly action by Congress and so are often the 
most volatile, and can increase rapidly. Further, the programs 
are rarely subjected to congressional review, except when they 
are being expanded. For all these reasons, the Spending Control 
Act re-establishes PAYGO with respect to mandatory spending. 
When new mandatory spending programs are considered--because of 
the prospect of a program increasing without further 
congressional action--other mandatory spending should be 
decreased to offset it. This is the first step in preventing 
unrestricted expansion in entitlement programs.

                              EMERGENCIES

Background

    Since 1990, spending designated as an ``emergency'' 
generally was exempted from budget controls. There are 
legitimate reasons for this: unforeseen events with dramatic 
consequences--events that cannot be anticipated in normal 
budgeting.
    But the emergency designation also has become another 
opportunity for evading budget discipline, and has served as a 
method for back-door spending on items that might not otherwise 
merit funding. Though genuine emergencies require such a 
designation, much spending has proceeded through the 
legislative process that was clearly not a genuine emergency. 
This generally has contributed to higher spending. There have 
been a variety of attempts, both through statute and 
congressional rule making, to reign in the ability of 
congressional spending committees to use the designation. These 
attempts have been unsuccessful.

Purpose
    As noted above, this bill acknowledges the need for an 
emergency designation. But it seeks to prevent misuse by 
placing in law a consensus understanding of what truly 
constitutes an ``emergency.'' This will remove an incentive for 
circumventing budgetary limits, and thereby make use of the 
emergency designation more responsible and credible.
    The bill adds a definition of the term ``emergency 
requirement'' as ``any such provision is an emergency 
requirement if the underlying situation poses a threat to life, 
property, or national security and is: (i) sudden, quickly 
coming into being, and not building up over time; (ii) an 
urgent, pressing, and compelling need requiring immediate 
action; (iii) subject to subparagraph (B), unforeseen, 
unpredictable, and unanticipated; and (iv) not permanent, 
temporary in nature.''
    The bill also includes a new adjustment in the 
discretionary spending limit for 2005 for supplemental 
appropriations for ``contingency operations related to the 
global war on terrorism.'' If spending is designated as such, 
OMB adjusts the discretionary spending cap by that amount.

                          Legislative History

    For nearly 30 years, the House and Senate have considered 
revenue, spending, and debt-limit legislation within the 
framework of concurrent resolutions on the budget required by 
the Congressional Budget and Impoundment Control Act of 1974 
(Public Law 93-344). The policies reflected in the budget 
resolution adopted each year are enforced during the 
consideration of individual budgetary measures by various 
points of order contained in Titles III and IV of the 1974 act 
and by optional budget reconciliation procedures set forth in 
Section 310 of the act.
    After a decade of experience with the congressional budget 
process, and facing large deficits, Congress and the President 
enacted the Balanced Budget and Emergency Deficit Control Act 
of 1985 (Title II of Public Law 99-177). The 1985 act augmented 
budget enforcement procedures under the 1974 Congressional 
Budget Act with additional statutory controls involving 
declining deficit targets enforced by sequestration, a process 
by which automatic, across-the-board spending cuts are made in 
nonexempt programs to eliminate any deficit excess. The process 
by which a sequester could be triggered was modified by the 
Balanced Budget and Emergency Deficit Control Reaffirmation Act 
of 1987 (Title I of Public Law 100-119), placing carefully 
delineated authority for a triggering report in the hands of 
the Director of the Office of Management and Budget [OMB]. If 
the OMB Director determined that a sequester was necessary, the 
President was required to issue a sequestration order in strict 
conformity with the OMB Director's sequestration report.
    The Budget Enforcement Act [BEA] of 1990 (Title XIII of 
Public Law 101-508, the Omnibus Budget Reconciliation Act of 
1990) amended the 1985 Balanced Budget Act in order to revise 
the statutory enforcement scheme. The BEA of 1990 effectively 
replaced the deficit targets with two new enforcement devices 
for the period covering fiscal year 1991-1995--annual limits on 
discretionary spending (i.e., spending controlled through the 
annual appropriations process) and a ``pay-as-you-go'' [PAYGO] 
requirement applicable to revenue and direct spending 
legislation (i.e., spending controlled in substantive 
legislation). These procedural changes were an integral 
component of the 5-year budget agreement reached that year 
between Congress and the President and were seen as key to 
preserving the significant deficit reduction achieved at that 
time. Sequestration was retained as the means of enforcing 
violations under either of the two new mechanisms.
    The discretionary spending limits and PAYGO requirement 
were extended through fiscal year 1998 by the Omnibus Budget 
Reconciliation Act of 1993 (Public Law 103-66), and later 
through fiscal year 2002, by the Budget Enforcement Act of 1997 
(Title X of Public Law 105-33), which was part of the Balanced 
Budget Act of 1997, a reconciliation bill. In addition, they 
have been modified and expanded over the years through the 
enactment of various laws.
    The discretionary spending limits expired on September 30, 
2002, at the end of fiscal year 2002. The PAYGO requirement, 
which applies to the out-year effects (through fiscal year 
2006) of legislation enacted on or before September 30, 2002, 
effectively expired at the same time due to the enactment of 
legislation (Public Law 107-312) setting the balances for all 
years on the PAYGO scorecard to zero.
    The Committee on the Budget has taken several actions with 
regard to the revision and extension of the discretionary 
spending limits and PAYGO requirement. On June 27, 2001, the 
Committee held a hearing on the Forthcoming Extension/
Modification of the Budget Enforcement Act. Testimony was 
received from Mitchell E. Daniels, Jr., Director of the Office 
of Management and Budget; Dan L. Crippen, Director of the 
Congressional Budget Office; Dr. Kevin A. Hassett, Resident 
Scholar, the American Enterprise Institute; and Carol Cox Wait, 
President, Committee for a Responsible Federal Budget.
    On July 19, 2001, the Committee on the Budget held another 
hearing, Federal Budget Process Structural Reform, in which the 
issue of modifying and extending the discretionary spending 
limits and PAYGO requirement was addressed, along with various 
other matters. Testimony was received from the Honorable Bill 
Frenzel, former ranking member of the House Budget Committee; 
the Honorable Robert L. Livingston, former chairman of the 
House Appropriations Committee; Robert D. Reischauer, President 
of the Urban Institute and former Director of the Congressional 
Budget Office; the Honorable Christopher Cox, chairman of the 
Republican Policy Committee; Barry B. Anderson, Deputy Director 
of the Congressional Budget Office; and Susan J. Irving, 
Director for Federal Budget Analysis of the General Accounting 
Office.
    Legislation to modify the discretionary spending limits for 
fiscal year 2002, and for other purposes, was reported by the 
Committee on the Budget on December 13, 2001 (see H.Rpt. 107-
338, Interim Budget Control and Enforcement Act of 2001, to 
accompany H.R. 3084).
    In 2002, the Committee on the Budget held a hearing on 
April 25 on Predictability and Control: Twin Reasons for 
Restoring Budget Disciplines. Testimony was received from 
Thomas J. Donohue, President and CEO of the U.S. Chamber of 
Commerce; Susan J. Irving, Director for Federal Budget Analysis 
of the General Accounting Office; Barry B. Anderson, deputy 
Director of the Congressional Budget Office; and Richard Kogan, 
Senior Fellow, Center on Budget and Policy Priorities.

                       THE SEQUESTRATION PROCESS

    The sequestration process was established in 1985 as a 
means of enforcing compliance with a series of annual deficit 
targets leading to a balanced budget. If the estimate of the 
deficit made around the beginning of a fiscal year exceeded the 
allowed level, sequestration was triggered automatically, 
resulting in largely across-the-board spending reductions in 
nonexempt appropriations and budget accounts. Appropriations 
and other forms of budgetary resources were required to be 
reduced by amounts sufficient to achieve the necessary outlay 
savings. The sequestration was to be evenly distributed across 
domestic and other discretionary accounts. Some of the 
reductions in direct spending accounts were to be made under 
``special rules'' that determined the amounts to be cut and 
limited their size or application; the remaining domestic 
spending programs and all of the defense spending programs were 
to be cut by uniform reduction percentages (the domestic and 
defense percentages could differ from each other). Further, the 
required reductions for each account were to be applied 
uniformly to programs, projects, and activities within that 
account.
    Initially, the authority to trigger a sequester was lodged 
with the Comptroller General of the United States (as head of 
the General Accounting Office), who was required to issue 
initial and final sequestration reports based reports prepared 
jointly by OMB and CBO. In anticipation of a constitutional 
challenge to this arrangement, the 1985 act included ``fallback 
procedures'' under which the necessary reductions could be 
implemented through the enactment of a joint resolution 
reported by a Temporary Joint Committee on Deficit Reduction 
(consisting of the membership of the House and Senate Budget 
Committees). Whenever a sequester was triggered, the President 
was required to issue immediately a sequestration order in 
strict conformity with the requirements of the sequestration 
report (or joint resolution). The authority to trigger a 
sequester was placedsolely in the hands of the OMB Director in 
1987.
    Beginning in 1990, sequestration was used to enforce the 
discretionary spending limits and PAYGO requirement. As a 
general rule, the enforcement procedures for the discretionary 
spending limits, on the one hand, and the PAYGO requirement on 
the other, were separated by a ``firewall.'' Violations of the 
discretionary spending limits were to be remedied by reductions 
only in discretionary spending programs; violations of the 
PAYGO requirement were to be corrected by reductions solely in 
direct spending programs.
    Some flexibility in these procedures was provided by 
``scorekeeping rule number three.'' The rule provided that 
changes in direct spending made in an annual appropriations act 
be counted under the discretionary spending limits. 
Accordingly, a reduction in direct spending made in an annual 
appropriations act had to be treated as an offset to an 
equivalent increase in discretionary spending; such changes in 
direct spending were referred to as ``mandatory offsets.'' In 
addition, ``directed scorekeeping'' provisions were included in 
legislation from time to time that have instructed the OMB 
Director not to score the direct spending or revenue impact of 
a measure for purposes of the PAYGO requirement.
    Like the earlier deficit sequestration procedures, the 
revised sequestration procedures were automatic and were 
triggered by a report from the OMB Director. For sequestration 
purposes generally, there was only one triggering report issued 
each year (just after the end of the congressional session). 
However, OMB reports triggering a ``within-session sequester'' 
in one or more categories of discretionary spending were to be 
issued during the following session if legislative developments 
so warranted (i.e., the enactment of a supplemental 
appropriations measure that violated the limit for one or more 
discretionary spending categories).
    Spending for the Social Security program, except for 
administrative expenses, was exempt from sequestration, as were 
many other programs. Reductions in certain programs were to be 
made under ``special rules.''
    OMB and CBO each were required to prepare three different 
types of sequestration reports annually, as discussed below. 
The CBO reports, which were advisory only, preceded the OMB 
reports by several days. In all three types of reports, OMB had 
to explain any differences between its estimates and those of 
CBO.
    If the President was required to issue a sequestration 
order in any year, the order was to be issued on the same day 
that the final OMB sequestration report was issued and the 
order had to implement without change all of the reductions 
identified in the OMB report.
    Two preliminary sequestration reports were required to be 
issued before the final sequestration report, in order to give 
the President and Congress advance warning of any possible 
sequester. Early in the session, OMB and CBO issued 
sequestration preview reports. The reports provided estimates 
of the discretionary spending limits, with the adjustments 
prescribed by law. Also, the reports provided estimates of any 
net change in the balances on the PAYGO scorecard caused by the 
enactment of direct spending or revenue legislation subject to 
the PAYGO process. The OMB preview report contained the same 
information as the CBO preview report and explained any 
differences between its estimates and those of CBO.
    In August, OMB and CBO issued sequestration update reports 
to reflect the impact of legislation enacted in the interim.
    Finally, OMB and CBO issued final sequestration reports 
shortly after Congress adjourned to end the session. Both 
reports had to reflect any pertinent legislation enacted since 
the update reports were issued. The final reports indicated the 
baseline amount of budgetary resources and the amount and 
percentage of the reduction for each account subject to 
sequestration. As indicated previously, further sequestration 
reports were to be issued if a ``within-session sequester'' was 
required.
    In preparing its update and final sequestration reports, 
OMB had to use the economic and technical assumptions that were 
used in the earlier preview report. (In the first years of 
sequestration, OMB could determine in late summer the economic 
and technical assumptions that it would use for sequestration 
in October.)
    During the course of the session, OMB was required to 
provide Congress with cost estimates of budgetary legislation 
within several days of its enactment, so that compliance with 
the discretionary spending limits and PAYGO requirements could 
be monitored. The cost estimates had to be based on the 
economic and technical assumptions used in the President's most 
recent budget, and had to include similar cost estimates 
prepared by CBO together with an explanation of any differences 
between the two sets of estimates.
    During the period that sequestration was in previously 
effect, sequesters were triggered five times in four different 
years. The first three sequesters occurred during the 5-year 
period when deficit targets were in effect, covering fiscal 
years 1986-1990. One deficit sequester occurred each year for 
fiscal year 1986, fiscal year 1988, and fiscal year 1990 (no 
sequester was triggered for fiscal year 1987 or fiscal year 
1989). Sequestration was intended to deter Congress and the 
President from enacting spending in excess of the set limit.
    During the remaining 12 years, covering fiscal years 1991-
2001, sequestration applied to the enforcement of the 
discretionary spending limits and PAYGO requirement. Two 
sequesters occurred under the discretionary spending limits, 
both for fiscal year 1991. No sequesters under the 
discretionary spending limits occurred subsequently, and no 
PAYGO sequester ever occurred.

                     DISCRETIONARY SPENDING LIMITS

Procedures under the discretionary spending limits

    The discretionary spending limits applied to two different 
measurements of spending-budget authority and outlays. Budget 
authority represents the legal authority for agencies to incur 
obligations. Annual appropriations are perhaps the most well 
known form of budget authority. Outlays represent the 
liquidation of the obligation, usually in the form of an 
electronic funds transfer or the issuance of a check by the 
Treasury Department.
    Enforcement of the discretionary spending limits involved 
different broad categories of discretionary spending. The 
categorization scheme varied from year to year, initially from 
three categories to subsequently a single category (variously 
called the ``general purpose discretionary'' category, the 
``other discretionary'' category, or simply the 
``discretionary'' category).
    The Budget Enforcement Act of 1990 set separate limits for 
new budget authority and outlays for fiscal years 1991-1993 for 
three different categories--defense, international, and 
domestic. For fiscal years 1994-1995, the limits on new budget 
authority and outlays were established for a single category-
total discretionary spending. The Omnibus Budget Reconciliation 
Act of 1993 retained the existing limits for fiscal year 1994 
and fiscal year 1995 without change and added new limits on 
total discretionary spending for fiscal years 1996-1998.
    In 1994, the Violent Crime Control Act (Public Law 103-322) 
established separate limits through fiscal year 2000 on 
discretionary spending from the Violent Crime Reduction Trust 
Fund. When this category lapsed at the end of fiscal year 2000, 
such spending was placed under the general purpose 
discretionary limit.
    The Budget Enforcement Act of 1997 revised the 
discretionary spending limits again and extended them through 
fiscal year 2002 with new categories for defense and nondefense 
spending for fiscal year 1998 and fiscal year 1999; for fiscal 
years 2000-2002, all discretionary spending was merged into a 
single category (except for the separate Violent Crime 
Reduction category in effect through fiscal year 2000).
    In 1998, the Transportation Equity Act for the 21st Century 
(Public Law 105-178), also known as TEA-21, established 
separate outlay limits for two new categories, highways and 
mass transit, through fiscal year 2003.
    In 2000, the Interior Appropriations Act for fiscal year 
2001 (Public Law 106-291) established limits for fiscal years 
2002-2006 under a new category, conservation spending. Further, 
the Act established six different subcategories under the 
conservation category for each of the fiscal years covered. 
These subcategories include: (1) federal land and state land 
water conservation fund; (2) state and other conservation; (3) 
urban and historic preservation; (4) payments in lieu of taxes; 
(5) federal deferred maintenance; and (6) coastal assistance.
    Finally, the outlay limits established by TEA-21 for 
highway and mass transit categories were extended through 
fiscal year 2004 by the Surface Transportation Extension Act of 
2003, which was signed into law on September 30, 2003, as 
Public Law 108-88.
    Although the outlay limits on highway and mass transit 
spending extended through fiscal year 2004, and budget 
authority and outlay limits for conservation spending extend 
through fiscal year 2006, the procedures necessary to enforce 
them expired at the end of fiscal year 2002.
    Any breach of the discretionary spending limits was to be 
enforced only in the category in which the violation occurred, 
except that breaches of the highway and mass-transit outlay 
limits were counted toward the single discretionary category.
    The discretionary spending limits were adjusted from time 
to time by the OMB Director. Adjustments were made for several 
factors specified in law, including changes in budgetary 
concepts, the enactment of measures containing spending 
designated by the President and Congress as an emergency 
requirement, and the enactment of legislation meeting certain 
predetermined requirements (i.e., spending for continuing 
disability reviews, adoption incentive payments, the earned 
income tax credit compliance initiative, and international 
arrearages). With regard to the conservation category 
established by the Interior Appropriations Act for fiscal year 
2001, the adjustment amount (added to the limit for the 
following fiscal year) equaled the amount, if any, by which 
appropriations for a fiscal year fell below the limit for that 
fiscal year; the adjustment applied to each of the 
subcategories as well.
    Factors upon which adjustments were based periodically 
changed. For example, the Budget Enforcement Act of 1990 
provided for adjustments due to changes in inflation, but this 
factor was eliminated by the BEA of 1997.
    A sequester under the discretionary spending limits is 
triggered by a sequestration report prepared by the OMB 
Director, generally within 15 days after the end of a 
congressional session. If a sequester under this process is 
required at the end of a session, it must occur on the same day 
as any sequestration tied to enforcement of the PAYGO 
procedures. During the following session, a ``within-session 
sequester'' could occur prior to July 1 if Congress and the 
President enacted legislation (e.g., a supplemental 
appropriations act) causing a violation of one or more of the 
discretionary spending limits for the ongoing fiscal year. Any 
breaches of the limits that occur during the final quarter of 
the ongoing fiscal year (i.e., July 1-September 30) would 
result in a lowering of the applicable limits for the following 
fiscal year rather than a within-session sequester.

                         THE PAYGO REQUIREMENT

Procedures under the PAYGO requirement

    Under the ``pay-as-you-go'' [PAYGO] requirement, total 
legislation enacted in a year causing an increase in new direct 
spending or a decrease in revenues for a fiscal year was 
prohibited from resulting in a net cost for that year. The 
PAYGO requirement was intended to keep newly enacted 
entitlement and tax laws from increasing the deficit. This 
requirement, which was revised and extended over the years, 
applied to legislation enacted through the end of fiscal year 
2002 (on September 30, 2002) and covered the out-year effects 
of such legislation through fiscal year 2006.
    Direct spending is controlled by the legislative committees 
of the House and Senate through substantive law and funds 
entitlement and other mandatory programs, such as Medicare, 
federal military and civilian retirement, and unemployment 
compensation. Spending for Social Security is not subject to 
the PAYGO requirement. Direct spending is distinguished from 
discretionary spending, which falls under the control of the 
House and Senate Appropriations Committees and is provided in 
annual appropriations acts. Direct spending and discretionary 
spending together make up total federal spending.
    The PAYGO requirement, as originally set forth in the BEA 
of 1990, covered fiscal years 1991-1995. Like the discretionary 
spending limits, it was extended by the Omnibus Budget 
Reconciliation Act of 1993, through fiscal year 1998, and by 
the BEA of 1997, through fiscal year 2002. With regard to 
direct spending, the PAYGO requirement applied to outlay levels 
rather than levels of budget authority.
    The PAYGO balances for each fiscal year were maintained on 
a rolling PAYGO ``scorecard'' that accumulated the budgetary 
effects of laws enacted during the session and in prior years 
(beginning with fiscal year 1992). On several occasions, PAYGO 
balances were reset to zero or otherwise modified pursuant to 
law, primarily to prevent the sizeable savings from 
reconciliation legislation from being used as offsets to 
subsequent direct spending increases.
    As was the case with the discretionary spending limits, the 
sequestration process was retained by the BEA of 1990 and later 
laws as the means of enforcing the PAYGO requirement.
    If the OMB Director's final sequestration report indicated 
that enacted direct spending and revenue levels incurred a net 
cost for the fiscal year on the PAYGO scorecard, then the 
President was required to immediately issue a sequestration 
order to remedy the violation. The sequester would have 
eliminated any net positive balance on the PAYGO scorecard, for 
that fiscal year and the prior fiscal year combined, caused by 
the enactment of legislation during the session and in prior 
years.
    Any required reductions would have been made in non-exempt 
direct spending programs. Emergency direct spending and revenue 
legislation, so designated by the President and in statute, was 
not covered by the PAYGO sequestration process. Spending for 
the Social Security program, except for administrative 
expenses, was exempt from sequestration, as were many other 
direct spending programs.

                           Section by Section

Section 1. Short title; table of contents
    Section 1 gives the bill the following short title: 
``Spending Control Act of 2003''.
Section 2. Extension of discretionary spending limits
    Subsection (a) amends section 251(c) of the Balanced Budget 
and Emergency Deficit Control Act [Deficit Control Act] to re-
establish a set of spending limits for each of fiscal years 
2005 through 2009. It does not amend the existing limits and 
assumes separate limits will be established for highways and 
mass transit pending final negotiations on a reauthorization of 
the Transportation Equity Act. A new cap is set forth for 
fiscal year 2005, and each year thereafter through fiscal year 
2009.
    The bill, as reported, does not include the specific 
spending caps. At the time the measure was ordered to be 
reported, the House had not acted on the budget resolution or 
reached an agreement with the Senate on the overall 
discretionary level for the discretionary spending limits. The 
spending levels will be set within the context of a conference 
report on the fiscal year 2005 budget resolution, the budget 
committee will cause these levels to be inserted into the 
legislative text.
    Subsection (b) establishes a limit on advance 
appropriations comparable to the limit established in the most 
recent concurrent resolution on the budget (see section 501 of 
H. Con. Res. 95 and the budget resolution for fiscal year 2005 
reported by the House Budget Committee). The limit is set at 
$23.548 billion and is the same as recent budget resolutions. 
It has been adjusted to reflect advance appropriations first 
made available two or more years after the applicable budget 
resolution is enacted.
Section 3. Extension of the pay-as-you-go requirement
    Section 3 amends section 252 of the Deficit Control Act to 
extend pay-as-you-go [PAYGO] requirements that expired at the 
end of fiscal year 2002 through fiscal year 2009. PAYGO applies 
to legislation passed prior to this date. Under this PAYGO, a 
law or laws that increases direct spending must be fully offset 
by reducing direct spending by the same amount in the 
applicable fiscal year. PAYGO is enforced by a session-by-
session basis by automatic reductions in certain entitlement 
programs through a process known as sequestration.
Section 4. Definitions
    Subsection (a) amends section 250(c) of the Deficit Control 
Act by adding two definitions. First, it defines an ``advance 
appropriation'' as any appropriation that first becomes 
available in any fiscal year following the year for which the 
bill including it is making general appropriations. Second, it 
provides a definition of an ``emergency'' as:
    ``An emergency requirement if the underlying situation 
poses a threat to life, property, or national security and is--
          (i) sudden, quickly coming into being, and not 
        building up over time;
          (ii) an urgent, pressing, and compelling need 
        requiring immediate action;
          (iii) subject to subparagraph (B), unforeseen, 
        unpredictable, and unanticipated; and
          (iv) not permanent, temporary in nature.''
    This definition is adapted from OMB Circular No. A-11-
Preparation and Submission of Budget Estimates.
    Subsection (b) amends section 251(b)(2) of the Deficit 
Control Act to provide an adjustment in the discretionary 
spending limit for 2005 for supplemental appropriations related 
to the war on terrorism. If the Congress passes, and the 
President signs, a bill providing supplemental appropriations 
for ``contingency operations relate to the global war on 
terrorism,'' the Director of the Office of Management and 
Budget is directed to increase the appropriations limit to 
accommodate this spending. Hence, though the spending will be 
above the level of the spending limit enacted into law, the 
adjustment will raise the cap, and the measure will not trigger 
an across-the-board spending reduction (or sequester). The bill 
is expected to provide appropriations for the ongoing 
operations in Iraq and Afghanistan. Both the Congress and the 
President must agree that the spending designated under this 
section meets these terms for an adjustment to occur. This 
designation exemption from budget controls for appropriations 
related to the war on terrorism is in addition to the exemption 
given to emergency spending.
    Subsection (c) amends section 250(c)(4)(A) of the Deficit 
Control Act to define the term ``general purpose discretionary 
category.'' It indicates that any joint statement of managers 
on a conference report to accompany the ``Spending Control Act 
of 2004'' would identify the accounts to be included in this 
category.
Section 5. Projections under section 257
    Section 5 amends section 257 of the Deficit Control Act to 
make a revision in the calculation of the baseline, which is 
prepared by both the Office of Management and Budget [OMB] and 
the Congressional Budget Office [CBO]. Those offices must 
follow section 257 of the Deficit Control Act in making budget 
projections. Under current law, the baseline includes emergency 
spending as if it continues and increases at the inflation rate 
(as determined by OMB and CBO pursuant to 257). Since emergency 
spending, by the definition included in the ``Spending Control 
Act'', is considered to be a one-time spending event, there is 
no need to assume spending designated as such in a given year 
continues into the future. The baseline will also not include 
spending that has been designated as supplemental 
appropriations related to the global war on terrorism if they 
are not enacted as part of the regular appropriations process.
Section 6. Exception for outlay components of expiring receipts 
        legislation
    Section 6 amends the Deficit Control Act to exempt certain 
spending provisions that may be enacted into law from the PAYGO 
sequestration process. Under the provisions of the ``Spending 
Control Act,'' increases in direct spending not offset would 
cause a sequester. This exemption would allow a law that makes 
permanent the Economic Growth and Tax Relief Reconciliation Act 
of 2001 and also makes permanent certain sections of the Jobs 
and Growth Tax Relief Reconciliation Act of 2003 [JGTRRA] to 
include an increase in outlays without causing a PAYGO 
sequester. The specific provisions of JGTRRA are the sections 
providing for accelerated phase-ins of the child tax credit, 
the 10 and 15-percent tax bracket provisions, marriage-penalty 
relief, capital gains tax provisions and small business 
deductions. As part of a bill to make these tax provisions 
permanent, Congress may include refundable tax credits which 
are categorized as direct spending and hence would cause 
outlays to rise.
Section 7. Reports
    Section 7 amends section 254 of the Deficit Control Act to 
require certain reports related to discretionary and mandatory 
sequestration be extended for years through fiscal year 2009.
Section 8. Expiration date
    Section 8 amends section 275(b) of the Deficit Control Act 
to revise the expiration dates to extend the statutory budget 
controls through fiscal year 2009. It allows for pay-as-you-go 
balances to allow a sequester through fiscal year 2013, in 
order to reflect the out-year effects of spending and tax bills 
passed prior to fiscal year 2009. The intent of this provision 
is to discourage the enactment of laws with significant costs 
beyond fiscal year 2009.
Section 8. Technical corrections to Deficit Control Act
    Section 8 amends various sections in the Deficit Control 
Act to correct punctuation, spelling, and designations.

                           Committee Hearings

                   TASK FORCE HEARINGS-105TH CONGRESS

    On February 5, 1998, the Budget Committee created a Task 
Force on Budget Process Reform to address budget process 
issues. The Task Force was authorized pursuant to a colloquy 
between the Honorable John R. Kasich, chairman of the Budget 
Committee, and the Honorable David L. Hobson, then a Budget 
Committee member. the Honorable Jim Nussle was appointed as 
Task Force chairman, and the Honorable Benjamin L. Cardin as 
ranking minority member. The other members of the Task Force 
were Representatives George P. Radanovich, John E. Sununu, Kay 
Granger, David Minge, and Alan B. Mollohan.
    On April 1, the Task Force held a hearing on baselines and 
budgetary projections. The witnesses included Timothy J. Penny, 
a former Member of Congress and current co-chairman of the 
Committee for a Responsible Federal Budget; Paul N. Van de 
Water, Assistant Director for Budget Analysis, Congressional 
Budget Office [CBO]; and Timothy J. Muris, Foundation 
Professor, George Mason University School of Law.
    On June 18, 1998, Task Force Chairman Nussle invited House 
Members to testify on their ideas for reforming the budget 
process. Representatives Cox, Barton, Sabo, Stenholm, and 
Castle testified before the Task Force. In addition, 
Representatives Radanovich, Goss, Sam Johnson, and Livingston 
submitted prepared statements for the record.
    A hearing, concerning emergencies, was held on June 23. The 
hearing featured James L. Witt, the Director of the Federal 
Emergency Management Agency [FEMA]. Director Witt was followed 
by a panel of experts on the budgetary treatment of 
emergencies: James L. Blum and Theresa A. Gullo of CBO, and 
Keith Bea of the Congressional Research Service [CRS].

                FULL COMMITTEE HEARINGS--106TH CONGRESS

    The full House Budget Committee held a hearing on the 
Comprehensive Budget Process Reform Act of 1999. Three panels 
of witnesses testified: the Honorable David Minge testified in 
support of the bill during the first panel. Following the 
Members' testimony, Jacob J. Lew, Director of the Office of 
Management and Budget [OMB], presented the Clinton 
Administration's view. The third panel began with a statement 
by Carol Cox Wait, President of the Committee for a Responsible 
Federal Budget. CBO Director Dan L. Crippen discussed how the 
budget resolution and automatic continuing resolution would 
change the budget process. Dr. Rudolph G. Penner, a senior 
fellow at the Urban Institute and a former Director of CBO, 
generally supported the bill, particularly the joint resolution 
and the insurance provisions. Robert Greenstein, Executive 
Director of the Center on Budget and Policy Priorities, opposed 
most elements of the bill other than the subtitle on accrual 
budgeting. The Honorable Porter Goss, chairman of the Rules 
Committee's Subcommittee on Legislative and Budget Process, 
submitted a written statement for the hearing in which he 
disputed the contention that the budget process wasn't broken 
and focused on procedural elements of the bill that bring more 
accountability into the budget process.

                FULL COMMITTEE HEARINGS--107TH CONGRESS

    The full House Budget Committee held a hearing on July 7, 
2001 that was entitled ``Federal Budget Process Structural 
Reform.'' The hearing had three panels: The first panel 
included the Honorable Bill Frenzel, former ranking member, 
House Budget Committee; the Honorable Robert L. Livingston, 
former chairman, House Appropriations Committee; Robert D. 
Reischauer, President, Urban Institute, former Director, 
Congressional Budget Office. Panel II: The Honorable 
Christopher Cox (R-CA), Republican Policy Committee Chairman; 
The Honorable David R. Obey (D-WI), ranking member, House 
Appropriations Committee. Panel III: Barry B. Anderson, Deputy 
Director, Congressional Budget Office; Susan J. Irving, 
Director for Federal Budget Analysis, General Accounting 
Office.
    The full House Budget Committee held a hearing on April 25, 
2002, entitled ``Predictablility and Control: Twin Reasons for 
Restoring Budget Disciplines.'' The hearing had two panels: The 
first included Thomas J. Donohue, President and CEO, U.S. 
Chamber of Commerce; Honorable Bill Frenzel, former ranking 
member, House Budget Committee. The second panel included Susan 
J. Irving, Director for Federal Budget Analysis, U.S. General 
Accounting Office; Barry B. Anderson, Deputy Director, 
Congressional Budget Office; Richard Kogan, Senior Fellow, 
Center on Budget and Policy Priorities.

               Summary of Amendments Adopted in Committee

                AMENDMENT IN THE NATURE OF A SUBSTITUTE

    During the Budget Committee's markup of H.R. 3973, the 
Spending Control Act of 2004, on March 17, 2004, Chairman Jim 
Nussle offered an amendment in the nature of a substitute to 
the bill, which is the base text of the legislation reported by 
the committee. The amendment made technical and conforming 
changes to the legislation as introduced. It also made the 
following substantive change:
     The amendment in the nature of a substitute 
amended section 4(b) of H.R. 3973 to expand the exemption for 
the fiscal year 2005 supplemental which will provide funds for 
contingency operations related to the global war on terrorism. 
The amendment expanded the exemption to apply to all future 
supplementals which may provide budget authority for that 
purpose.

                      AMENDMENTS TO THE SUBSTITUTE

    There were no amendments adopted to the amendment in the 
nature of a substitute.

                             Rollcall Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee Report to include for 
each recorded vote on a motion to report the measure or matter, 
and on any amendments offered to the measure or matter, the 
total number of votes for and against and the names of the 
Members voting for and against.
    The Chairman of the Committee, Mr. Nussle, offered an 
amendment in the nature of a substitute to H.R. 3973, the 
Spending Control Act of 2004.
    1. A perfecting amendment was offered by Mr. Thompson to 
the amendment in the nature of a substitute to H.R. 3973. The 
amendment extended pay-as-you-go treatment to measures 
increasing or reducing revenue.

----------------------------------------------------------------------------------------------------------------
        Representatives             Yes       No      Present     Reprentatives       Yes       No      Present
----------------------------------------------------------------------------------------------------------------
Nussle.........................  ........        X   .........  Spratt...........        X   ........  .........
Shays..........................  ........        X   .........  Moran............        X   ........  .........
Gutknecht......................  ........        X   .........  Hooley...........        X   ........  .........
Thornberry.....................  ........        X   .........  Baldwin..........        X   ........  .........
Ryun...........................  ........        X   .........  Moore............        X   ........  .........
Toomey.........................  ........        X   .........  Lewis............        X   ........  .........
Hastings.......................  ........        X   .........  Neal.............        X   ........  .........
Portman........................  ........        X   .........  DeLauro..........        X   ........  .........
Schrock........................  ........        X   .........  Edwards..........        X   ........  .........
Brown..........................  ........        X   .........  Scott............        X   ........  .........
Crenshaw.......................  ........        X   .........  Ford.............        X   ........  .........
Putnam.........................  ........        X   .........  Capps............        X   ........  .........
Wicker.........................  ........        X   .........  Thompson.........        X   ........  .........
Hulshof........................  ........        X   .........  Baird............        X   ........  .........
Tancredo.......................  ........        X   .........  Cooper...........  ........  ........  .........
Vitter.........................  ........        X   .........  Emanuel..........        X   ........  .........
Bonner.........................  ........        X   .........  Davis............        X   ........  .........
Franks.........................  ........        X   .........  Majette..........        X   ........  .........
Garrett........................  ........        X   .........  Kind.............        X   ........  .........
Barrett........................  ........        X   .........
McCotter.......................  ........        X   .........
Diaz-Balart....................  ........        X   .........
Hensarling.....................  ........        X   .........
Brown-Waite....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The amendment was not agreed to by a vote of 18 ayes and 24 
noes.
    2. An amendment was offered by Mr. Spratt to amend the 
Congressional Budget Act of 1974 to create a point of order 
against consideration of any reconciliation bill that increases 
the deficit in any fiscal year covered by a budget resolution 
providing for such reconciliation.
    The amendment was not agreed to by voice vote.
    3. Mr. Shays moved that the committee adopt the amendment 
in the nature of a substitute.

----------------------------------------------------------------------------------------------------------------
        Representatives             Yes       No      Present    Representatives      Yes       No      Present
----------------------------------------------------------------------------------------------------------------
Nussle.........................        X   ........  .........  Spratt...........  ........        X   .........
Shays..........................        X   ........  .........  Moran............  ........        X   .........
Gutknecht......................        X   ........  .........  Hooley...........  ........        X   .........
Thornberry.....................        X   ........  .........  Baldwin..........  ........        X   .........
Ryun...........................        X   ........  .........  Moore............  ........        X   .........
Toomey.........................        X   ........  .........  Lewis............  ........        X   .........
Hastings.......................        X   ........  .........  Neal.............  ........        X   .........
Portman........................        X   ........  .........  DeLauro..........  ........        X   .........
Schrock........................        X   ........  .........  Edwards..........  ........        X   .........
Brown..........................        X   ........  .........  Scott............  ........        X   .........
Crenshaw.......................        X   ........  .........  Ford.............  ........        X   .........
Putnam.........................        X   ........  .........  Capps............  ........        X   .........
Wicker.........................        X   ........  .........  Thompson.........  ........        X   .........
Hulshof........................        X   ........  .........  Baird............  ........        X   .........
Tancredo.......................        X   ........  .........  Cooper...........  ........        X   .........
Vitter.........................        X   ........  .........  Emanuel..........  ........        X   .........
Bonner.........................        X   ........  .........  Davis............  ........        X   .........
Franks.........................        X   ........  .........  Majette..........  ........        X   .........
Garrett........................        X   ........  .........  Kind.............  ........        X   .........
Barrett........................        X   ........  .........  .................
McCotter.......................        X   ........  .........  .................
Diaz-Balart....................        X   ........  .........  .................
Hensarling.....................        X   ........  .........  .................
Brown-Waite....................        X   ........  .........  .................
----------------------------------------------------------------------------------------------------------------

    The motion to adopt the amendment in the nature of a 
substitute was agreed to by a vote of 24 ayes and 18 noes.
    4. Mr. Shays moved that the Spending Control Act of 2003 be 
reported to the House with a favorable recommendation.
    The motion was agreed to by voice vote.
    Mr. Shays asked for unanimous consent that the Chairman be 
authorized to make a motion to go to conference pursuant to 
clause 1 of House rule XXII, and that the staff be authorized 
to make any necessary technical and conforming corrections in 
the Spending Control Act of 2004, and any committee amendments, 
prior to filing the bill.
    There was no objection to the unanimous consent requests.
  Other Matters Required To Be Discussed Under the Rules of the House

              APPLICATION OF LAW TO THE LEGISLATIVE BRANCH

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. This bill reauthorizes and amends the Budget 
Enforcement Act of 1990 and extends the direct spending limits 
under the Act. The bill does not prevent legislative branch 
employees from receiving the benefits of this legislation.

                       UNFUNDED MANDATE STATEMENT

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This bill reauthorizes and amends the Budget 
Enforcement Act of 1990 and extends the direct spending limits 
under the Act. As such, the bill does not contain any unfunded 
mandates.

  STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS OF THE COMMITTEE

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the body of this report.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 18, which grants Congress the 
general legislative power to make all laws necessary and proper 
for carrying into execution the enumerated powers of Congress.

                           COMMITTEE ESTIMATE

    Clauses 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 3973. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 18, 2004.
Hon. Jim Nussle,
Chairman, Committee on the Budget,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3973, the Spending 
Control Act of 2004.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Jeff Holland.
            Sincerely,
                                      Elizabeth M. Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 3973--Spending Control Act of 2004

    The Spending Control Act of 2004 would amend the Balanced 
Budget and Emergency Deficit Control Act of 1985 to restore 
certain budget enforcement procedures that expired at the end 
of fiscal year 2002. The bill would establish limits on 
discretionary spending for fiscal years 2005 through 2009 and 
reinstate pay-as-you-go requirements for mandatory spending 
(but not for revenues) through 2009, both enforceable by 
automatic spending cuts if the limits are not adhered to. In 
addition to restoring expired procedures, the legislation would 
add some new definitions, prohibit the extension of emergency 
funding in future baseline projections, except refundable tax 
credits from the new pay-as-you-go procedures, and make a 
number of technical corrections.
    The Spending Control Act would have no direct effects on 
federal spending or receipts but would establish budget 
enforcement procedures that could affect the budget. H.R. 3973 
contains no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and would impose no 
costs on state, local, or tribal governments.
    The CBO staff contact is Jeff Holland. This estimate was 
approved by Robert A. Sunshine, Assistant Director for Budget 
Analysis.

          STATEMENT OF GENERAL PERFORMANCE GOAL AND OBJECTIVES

    In accordance with Clause (3)(c)(4) of House Rule XIII, the 
goals of H.R. 3973 are to extend and amend the Balanced Budget 
and Emergency Control Act as amended by the Budget Enforcement 
Act of 1990. Its purpose is to strengthen budget controls, to 
reduce budget deficits, and to ensure responsible decision 
making in the federal budget making process. The Committee 
expects the Office of Management and Budget to comply with H.R. 
3973 and implement the changes to the law in accordance with 
these stated goals.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

       BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL ACT OF 1985




           *       *       *       *       *       *       *
  PART C--EMERGENCY POWERS TO ELIMINATE DEFICITS IN EXCESS OF MAXIMUM 
                             DEFICIT AMOUNT


SEC. 250. TABLE OF CONTENTS; STATEMENT OF BUDGET ENFORCEMENT THROUGH 
                    SEQUESTRATION; DEFINITIONS.

  (a) Table of Contents.--

Sec. 250. Table of contents; budget enforcement statement; definitions.
     * * * * * * *
[SEC. 256. GENERAL AND SPECIAL SEQUESTRATION RULES.]
Sec. 256. General and special sequestration rules.
     * * * * * * *
  (c) Definitions.--
  As used in this part:
          (1) * * *

           *       *       *       *       *       *       *

          (4)(A) The term ``category'' means the subsets of 
        discretionary appropriations in section 251(c). 
        [Discretionary appropriations in each of the categories 
        shall be those designated in the joint explanatory 
        statement accompanying the conference report on the 
        Balanced Budget Act of 1997.] The general purpose 
        discretionary category shall consist of accounts 
        designated in the joint explanatory statement of 
        managers accompanying the conference report on the 
        Spending Control Act of 2004. New accounts or 
        activities shall be categorized only after consultation 
        with the committees on Appropriations and the Budget of 
        the House of Representatives and the Senate and that 
        consultation shall, to the extent practicable, include 
        written communication to such committees that affords 
        such committees the opportunity to comment before 
        official action is taken with respect to new accounts 
        or activities.

           *       *       *       *       *       *       *

                  (F) The term ``Federal and State Land and 
                Water Conservation Fund sub-category'' means 
                discretionary appropriations for activities in 
                the accounts described in subparagraph (E)(i)-
                (E)(iv) or portions thereof.
                  (G) The term ``State and Other Conservation 
                sub-category'' means discretionary 
                appropriations for activities in the accounts 
                described in subparagraph (E)(v)-(E)(ix), with 
                the exception of Urban and Community Forestry 
                as described in subparagraph (E)(ix), or 
                portions thereof.
                  (H) The term ``Urban and Historic 
                Preservation sub-category'' means discretionary 
                appropriations for activities in the accounts 
                described in subparagraph (E)(ix)-(E)(xii), 
                with the exception of Forest Legacy and Smart 
                Growth Partnerships as described in 
                subparagraph (E)(ix), or portions thereof.
                  (I) The term ``Payments in Lieu of Taxes sub-
                category'' means discretionary appropriations 
                for activities in the account described in 
                subparagraph (E)(xiii) or portions thereof.
                  (J) The term ``Federal Deferred Maintenance 
                sub-category'' means discretionary 
                appropriations for activities in the account 
                described in subparagraph (E)(xiv) or portions 
                thereof.
                  (K) The term ``Coastal Assistance sub-
                category'' means discretionary appropriations 
                for activities in the accounts described in 
                subparagraph (E)(xv)-(E)(xvii) or portions 
                thereof.

           *       *       *       *       *       *       *

          (18) The term ``deposit insurance'' refers to the 
        expenses of the Federal deposit insurance agencies, and 
        other Federal agencies supervising insured depository 
        institutions, resulting from full funding of, and 
        continuation of, the deposit insurance guarantee 
        commitment in effect under current estimates.

           *       *       *       *       *       *       *

          (20) The term ``advance appropriation'' means 
        appropriations that first become available one fiscal 
        year or more beyond the fiscal year for which an 
        appropriation Act making such funds available is 
        enacted.
          (21)(A) Except as provided by subparagraph (B), the 
        term ``emergency requirement'' means any provision that 
        provides new budget authority and resulting outlays for 
        a situation that poses a threat to life, property, or 
        national security and is--
                  (i) sudden, quickly coming into being, and 
                not building up over time;
                  (ii) an urgent, pressing, and compelling need 
                requiring immediate action;
                  (iii) subject to subparagraph (B), 
                unforeseen, unpredictable, and unanticipated; 
                and
                  (iv) not permanent, temporary in nature.
          (B) An emergency that is part of an aggregate level 
        of anticipated emergencies, particularly when normally 
        estimated in advance, is not unforeseen.

SEC. 251. ENFORCING DISCRETIONARY SPENDING LIMITS.

  (a) * * *
  (b) Adjustments to Discretionary Spending Limits.--
          (1) Preview Report.--
                  (A) Concepts and definitions.--When the 
                President submits the budget under section 1105 
                of title 31, United States Code, OMB shall 
                calculate and the budget shall include 
                adjustments to discretionary spending limits 
                (and those limits as cumulatively adjusted) for 
                the budget year and each outyear to reflect 
                changes in concepts and definitions. Such 
                changes shall equal the baseline levels of new 
                budget authority and outlays using up-to-date 
                concepts and definitions minus those levels 
                using the concepts and definitions in effect 
                before such changes. Such changes may only be 
                made after consultation with the [committees] 
                Committees on Appropriations and the Budget of 
                the House of Representatives and the Senate and 
                that consultation shall include written 
                communication to such committees that affords 
                such committees the opportunity to comment 
                before official action is taken with respect to 
                such changes.

           *       *       *       *       *       *       *

          (C)(i) In addition to the adjustment required by 
        subparagraph (B), when the President submits the budget 
        under section 1105 of title 31, United States Code, for 
        fiscal [years] year 2000, 2001, 2002, or 2003, OMB 
        shall calculate and the budget shall include for the 
        budget year and each outyear an adjustment to the 
        limits on outlays for the highway category and the mass 
        transit category equal to--
                  (I) * * *

           *       *       *       *       *       *       *

          (D)(i) * * *
          (ii) When the President submits the budget under 
        section 1105 of title 31, United States Code, for 
        fiscal [years] year 2000, 2001, 2002, or 2003, OMB 
        shall adjust the estimates made in clause (i) by the 
        adjustments by subparagraphs (B) and (C).

           *       *       *       *       *       *       *

          (2) Sequestration reports.--When OMB submits a 
        sequestration report under section 254(e), (f), or (g) 
        for a fiscal year, OMB shall calculate, and the 
        sequestration report and subsequent budgets submitted 
        by the President under section 1105(a) of title 31, 
        United States Code, shall include adjustments to 
        discretionary spending limits (and those limits as 
        adjusted) for the fiscal year and each succeeding year, 
        as follows:
                  (A) * * *

           *       *       *       *       *       *       *

                  (I) Contingency operations related to global 
                war on terrorism.--If supplemental 
                appropriations for discretionary accounts are 
                enacted for contingency operations related to 
                the global war on terrorism that, pursuant to 
                this subparagraph, the President designates as 
                a contingency operation related to the global 
                war on terrorism and the Congress so designates 
                in statute, the adjustment shall be the total 
                of such appropriations in discretionary 
                accounts so designated and the outlays flowing 
                in all fiscal years from such appropriations.

           *       *       *       *       *       *       *

  (c) Discretionary Spending Limit.--As used in this part, the 
term ``discretionary spending limit'' means--
          (1) * * *
          (2) with respect to fiscal year 2005--
                  (A) for the general purpose discretionary 
                category: $____ in new budget authority and 
                $____ in outlays; and
                  (B) for the conservation spending category: 
                $2,240,000,000, in new budget authority and 
                $2,192,000,000 in outlays;
          (3) with respect to fiscal year 2006--
                  (A) for the general purpose discretionary 
                category: $____ in new budget authority and 
                $____ in outlays; and
                  (B) for the conservation spending category: 
                $2,400,000,000, in new budget authority and 
                $2,352,000,000 in outlays;
          (4) with respect to fiscal year 2007 for the general 
        purpose discretionary category: $____ in new budget 
        authority and $____ in outlays;
          (5) with respect to fiscal year 2008 for the general 
        purpose discretionary category: $____ in new budget 
        authority and $____ in outlays; and
          (6) with respect to fiscal year 2009 for the general 
        purpose discretionary category: $____ in new budget 
        authority and $____ in outlays;
          [(4)] (7) with respect to each fiscal year 2002 
        through 2006 for the Federal and State Land and Water 
        Conservation Fund sub-category of the conservation 
        spending category: $540,000,000 in new budget authority 
        and the outlays flowing therefrom;
          [(5)] (8) with respect to each fiscal year 2002 
        through 2006 for the State and Other Conservation sub-
        category of the conservation spending category: 
        $300,000,000 in new budget authority and the outlays 
        flowing therefrom;
          [(6)] (9) with respect to each fiscal year 2002 
        through 2006 for the Urban and Historic Preservation 
        sub-category of the conservation spending category: 
        $160,000,000 in new budget authority and the outlays 
        flowing therefrom;
          [(7)] (10) with respect to each fiscal year 2002 
        through 2006 for the Payments in Lieu of Taxes sub-
        category of the conservation spending category: 
        $50,000,000 in new budget authority and the outlays 
        flowing therefrom;
          [(8)] (11) with respect to each fiscal year 2002 
        through 2006 for the Federal Deferred Maintenance sub-
        category of the conservation spending category: 
        $150,000,000 in new budget authority and the outlays 
        flowing therefrom;
          [(9)] (12) with respect to fiscal year 2002 for the 
        Coastal Assistance sub-category of the conservation 
        spending category: $440,000,000 in new budget authority 
        and the outlays flowing therefrom; with respect to 
        fiscal year 2003 for the Coastal Assistance sub-
        category of the conservation spending category: 
        $480,000,000 in new budget authority and the outlays 
        flowing therefrom; with respect to fiscal year 2004 for 
        the Coastal Assistance sub-category of the conservation 
        spending category: $520,000,000 in new budget authority 
        and the outlays flowing therefrom; with respect to 
        fiscal year 2005 for the Coastal Assistance sub-
        category of the conservation spending category: 
        $560,000,000 in new budget authority and the outlays 
        flowing therefrom; and with respect to fiscal year 2006 
        for the Coastal Assistance sub-category of the 
        conservation spending category: $600,000,000 in new 
        budget authority and the outlays flowing therefrom;
as adjusted in strict conformance with subsection (b).
  (d) Advance Appropriations.--In any of fiscal years 2005 
through 2009, discretionary advance appropriations provided in 
appropriation Acts in excess of $____ shall be counted against 
the discretionary spending limits for the fiscal year for which 
the appropriation Act containing the advance appropriation is 
enacted.

SEC. 252. ENFORCING PAY-AS-YOU-GO.

  [(a) Purpose.--The purpose of this section is to assure that 
any legislation enacted before October 1, 2002, affecting 
direct spending or receipts that increases the deficit will 
trigger an offsetting sequestration.]
  (a) Purpose.--The purpose of this section is to assure that 
any legislation that is enacted before October 1, 2009, that 
causes a net increase in direct spending will trigger an 
offsetting sequestration.
  (b) Sequestration.--
          (1) Timing.--Not later than 15 calendar days after 
        the date Congress adjourns to end a session and on the 
        same day as a sequestration (if any) under section 251 
        or 253, there shall be a sequestration to offset the 
        amount of [any net deficit increase caused by all 
        direct spending and receipts legislation enacted before 
        October 1, 2002,] any net increase in direct spending 
        enacted before October 1, 2009, as calculated under 
        paragraph (2).
          (2) [Calculation of deficit increase.--] Calculation 
        of direct spending increase.--OMB shall calculate the 
        amount of [deficit] direct spending increase or 
        decrease by adding--
                  (A) all OMB estimates for the budget year of 
                direct spending [and receipts] legislation 
                transmitted under subsection (d);
                  (B) the estimated amount of savings in direct 
                spending programs applicable to the budget year 
                resulting from the prior year's sequestration 
                under this section or section 253, if any, as 
                published in OMB's final sequestration report 
                for that prior year; and
                  (C) any net deficit increase or decrease in 
                the current year resulting from all OMB 
                estimates for the current year of direct 
                spending [and receipts] legislation transmitted 
                under subsection (d) that were not reflected in 
                the final OMB sequestration report for the 
                current year.
  (c) [Eliminating a Deficit Increase.--]Eliminating a Direct 
Spending Increase.--(1) The amount required to be sequestered 
in a fiscal year under subsection (b) shall be obtained from 
non-exempt direct spending accounts from actions taken in the 
following order:
          (A) * * *

           *       *       *       *       *       *       *

          (C) Third.--(i) If additional reductions in direct 
        spending accounts are required to be made, each 
        remaining non-exempt direct spending account shall be 
        reduced by the uniform percentage necessary to make the 
        reductions in direct spending required by [paragraph 
        (1)] subsection (b); except that the medicare programs 
        specified in section 256(d) shall not be reduced by 
        more than 4 percent and the uniform percentage 
        applicable to all other direct spending programs under 
        this paragraph shall be increased (if necessary) to a 
        level sufficient to achieve the required reduction in 
        direct spending.

           *       *       *       *       *       *       *

  (d) Estimates.--
          (1) CBO estimates.--As soon as practicable after 
        Congress completes action on any direct spending [or 
        receipts] legislation, CBO shall provide an estimate to 
        OMB of that legislation.
          (2) OMB estimates.--Not later than 7 calendar days 
        (excluding Saturdays, Sundays, and legal holidays) 
        after the date of enactment of any direct spending [or 
        receipts] legislation, OMB shall transmit a report to 
        the House of Representatives and to the Senate 
        containing--
                  (A) * * *

           *       *       *       *       *       *       *

          (4) Scope of estimates.--The estimates under this 
        section shall include the amount of change in outlays 
        [or receipts] for the current year (if applicable), the 
        budget year, and each outyear excluding any amounts 
        resulting from--
                  (A) full funding of, and continuation of, the 
                deposit insurance guarantee commitment in 
                effect under current estimates; [and]
                  (B) emergency provisions as designated under 
                subsection (e)[.]; and
                  (C) extending provisions in the Economic 
                Growth and Tax Relief Reconciliation Act of 
                2001 or provisions in sections 101 through 104, 
                section 202, or sections 301 and 302 of the 
                Jobs and Growth Tax Relief Reconciliation Act 
                of 2003.

           *       *       *       *       *       *       *

  (3) Section 252(e) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended by striking ``or 
receipts'' and by striking ``, outlays, and receipts'' and 
inserting ``and outlays''.
  (e) Emergency Legislation.--If a provision of direct spending 
[or receipts] legislation is enacted that the President 
designates as an emergency requirement and that the Congress so 
designates in statute, the amounts of new budget authority[, 
outlays, and receipts] and outlays in all fiscal years 
resulting from that provision shall be designated as an 
emergency requirement in the reports required under subsection 
(d). This subsection shall not apply to direct spending 
provisions to cover agricultural crop disaster assistance.

           *       *       *       *       *       *       *


SEC. 254. REPORTS AND ORDERS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Sequestration Preview Reports.--
          (1) * * *
          (2) Discretionary sequestration report.--The preview 
        reports shall set forth estimates for the current year 
        and each subsequent year through [2002] 2009 of the 
        applicable discretionary spending limits for each 
        category and an explanation of any adjustments in such 
        limits under section 251.
          (3) Pay-as-you-go sequestration reports.--The preview 
        reports shall set forth, for the current year and the 
        budget year, estimates for each of the following:
                  (A) The amount of [net deficit increase or 
                decrease] net increase or decrease in direct 
                spending, if any, calculated under [subsection] 
                section 252(b).
                  (B) A list identifying each law enacted and 
                sequestration implemented after the date of 
                enactment of this section included in the 
                calculation of the [amount of deficit increase 
                or decrease] increase or decrease in direct 
                spending and specifying the budgetary effect of 
                each such law.
                  (C) The sequestration percentage or (if the 
                required sequestration percentage is greater 
                than the maximum allowable percentage for 
                medicare) percentages necessary to eliminate [a 
                deficit increase] an increase in direct 
                spending under section 252(c).

           *       *       *       *       *       *       *

  (f) Final Sequestration Reports.--
          (1) * * *
          (2) Discretionary sequestration reports.--The final 
        reports shall set forth estimates for each of the 
        following:
                  (A) For the current year and each subsequent 
                year through [2002] 2009 the applicable 
                discretionary spending limits for each category 
                and an explanation of any adjustments in such 
                limits under section 251.

           *       *       *       *       *       *       *

          (4) Explanation of differences.--The OMB report shall 
        explain any differences between OMB and CBO estimates 
        of the amount of any net deficit change calculated 
        under [subsection] section 252(b), any excess deficit, 
        any breach, and any required sequestration percentage. 
        The OMB report shall also explain differences in the 
        amount of [sequesterable] sequestrable resources for 
        any budget account to be reduced if such difference is 
        greater than $5,000,000.

           *       *       *       *       *       *       *


SEC. 255. EXEMPT PROGRAMS AND ACTIVITIES.

  (a) * * *

           *       *       *       *       *       *       *

  (g) Other Programs and Activities.--
          (1)(A) * * *
          (B) The following Federal retirement and disability 
        accounts and activities shall be exempt from reduction 
        under any order issued under this part:
                  Black Lung Disability Trust Fund (20-8144-0-
                7-601);

           *       *       *       *       *       *       *

                  Railroad supplemental annuity pension fund 
                (60-8012-0-7-602);

           *       *       *       *       *       *       *

          (2) Prior legal obligations of the Government in the 
        following budget accounts and activities shall be 
        exempt from any order issued under this part:
                  Biomass energy development (20-0114-0-1-271);

           *       *       *       *       *       *       *

                  Rail service assistance (69-0122-0-1-401); 
                and
                  Department of Veterans Affairs, Servicemen's 
                group life insurance fund (36-4009-0-3-701).
  (h) Low-Income Programs.--The following programs shall be 
exempt from reduction under any order issued under this part:
          Block grants to States for temporary assistance for 
        needy families;

           *       *       *       *       *       *       *

          Supplemental Security Income Program (75-0406-0-1-
        609); [and]
          Special supplemental nutrition program for women, 
        infants, and children (WIC) (12-3510-0-1-605); and
          Family support payments to States (75-1501-0-1-
        609)[;].

           *       *       *       *       *       *       *


SEC. 256. GENERAL AND SPECIAL SEQUESTRATION RULES.

  (a) * * *

           *       *       *       *       *       *       *

  (k) Effects of Sequestration.--The effects of sequestration 
shall be as follows:
          (1) Budgetary resources sequestered from any account 
        shall be permanently cancelled, except as provided in 
        paragraph [(5)] (6).

           *       *       *       *       *       *       *


SEC. 257. THE BASELINE.

  (a) * * *
  (b) Direct Spending and Receipts.--For the budget year and 
each outyear, the baseline shall be calculated using the 
following assumptions:
          (1) * * *
          (2) Exceptions.--(A)(i) No program established by a 
        law enacted on or before the date of enactment of the 
        Balanced Budget Act of 1997 with estimated current year 
        outlays greater than $50,000,000 shall be assumed to 
        expire in the budget year or the outyears. The scoring 
        of new programs with estimated outlays greater than 
        $50,000,000 a year shall be based on scoring by the 
        Committees on Budget or OMB, as applicable. OMB, CBO, 
        and the Budget Committees shall consult on the scoring 
        of such programs where there are [differenes] 
        differences between CBO and OMB.

           *       *       *       *       *       *       *

  (c) Discretionary Appropriations.--For the budget year and 
each outyear, the baseline shall be calculated using the 
following assumptions regarding all amounts other than those 
covered by subsection (b):
          (1) * * *

           *       *       *       *       *       *       *

          (7) Emergencies.--New budgetary resources designated 
        under section 251(b)(2)(A) or 251(b)(2)(I) shall not be 
        assumed beyond the fiscal year for which they have been 
        enacted.

           *       *       *       *       *       *       *


SEC. 275. EFFECTIVE DATES.

  (a) * * *
  (b) Expiration.--Sections 251, 253, 258B, and 271(b) of this 
Act, and sections 1105(f) and 1106(c) of title 31, United 
States Code, shall expire September 30, [2002] 2009. The 
remaining sections of part C of this title shall expire 
September 30, [2006] 2013.

           *       *       *       *       *       *       *


                      VIEWS OF COMMITTEE MEETINGS

    Clause 2(l) of rule XI requires each committee to afford a 
2-day opportunity for members of the committee to file 
additional, minority, or dissenting views and to include the 
views in its report. The following views were submitted:

MINORITY VIEWS OF REPS. JOHN M. SPRATT, JAMES P. MORAN, DARLENE HOOLEY, 
 TAMMY BALDWIN, DENNIS MOORE, HAROLD E. FORD, JR., JOHN LEWIS, RICHARD 
 E. NEAL, ROSA L. DeLAURO, CHET EDWARDS, ROBERT C. SCOTT, LOIS CAPPS, 
  MIKE THOMPSON, BRIAN BAIRD, JIM COOPER, RAHM EMANUEL, ARTUR DAVIS, 
                      DENISE L. MAJETTE, RON KIND

    Democrats support strong and effective budget enforcement 
rules. Indeed, Congressional Democrats wrote and passed the 
budget enforcement rules that led to balanced budgets in the 
1990s. Those rules turned record deficits into record surpluses 
in large part because they subjected all parts of the budget--
discretionary and mandatory spending, as well as revenues--to 
budget discipline. Any successful path out of the current 
deficits will put everyone at the table and everything on the 
table. Unfortunately, this bill does not meet that standard.
    The bill proposes a deeply flawed modification of the Pay-
As-You-Go (PAYGO) provisions that were adopted under the Budget 
Enforcement Act of 1990 (BEA), which expired in 2002. While the 
original PAYGO rules were effective in reducing deficits, the 
modified PAYGO rules contained in this bill would hurt, not 
help, the budget bottom line. The original PAYGO rules limited 
mandatory spending and tax cuts alike. This bill, however, 
totally exempts tax cuts from PAYGO budget disciplines. The 
proposed PAYGO rules would allow unlimited new tax cuts of 
unlimited cost--an unmistakable invitation to drive the budget 
even deeper into the red.
    Creating a loophole in the PAYGO rules for tax cuts would 
not only result in larger deficits, it would also result in a 
more complicated tax code. Because the bill subjects spending 
proposals--but not tax cuts--to budgetary limits, it would 
result in the creation of targeted tax breaks to accomplish 
policy objectives that otherwise would be handled on the 
mandatory side of the ledger.
    While this bill's PAYGO rules would allow for an unlimited 
amount of most tax cuts--regardless of their effect on the 
deficit--they simultaneously would restrict new proposals to 
increase refundable tax credits. Such tax credits provide tax 
relief to low- and moderate-income Americans who pay payroll 
taxes but whose incomes are so low that they do not owe income 
taxes. Because refundable tax credits are scored as outlays, 
this bill's PAYGO rules would subject virtually all of them to 
the same limitations as new spending proposals. As a result, 
the policy process would become more tilted toward those who 
need help the least.
    In exempting tax cuts from the PAYGO budgetary restraint, 
this bill mirrors the approach of the Bush Administration. This 
bill is sharply at odds, however, with the views of Federal 
Reserve Chairman Alan Greenspan, who recently testified that--
in order to be effective--PAYGO rules should apply to both 
mandatory spending and taxes. It also marks a departure from 
the bipartisan approach adopted recently in the Senate, which 
approved the Feingold amendment toits budget resolution, 
creating a Senate PAYGO procedure for both tax cuts and mandatory 
spending increases.
    The bill also extends discretionary spending caps, which 
were first established under BEA and which expired in 2002. 
Democrats believe that a set of discretionary spending caps--
arrived at through bipartisan negotiation--is an important part 
of an effective budget enforcement system. Here again, though, 
the proposal embodied in the bill does not pass muster.
    The bill establishes binding discretionary spending caps 
for the next 5 years. The bill does not, however, indicate the 
level of the discretionary caps, providing only blanks for 
budget authority and outlays. The Majority has indicated that 
those levels will be added later (likely through a manager's 
amendment), perhaps at the level of discretionary spending 
provided in the budget resolution. Establishing caps at or near 
the levels contained in the House Republican budget resolution 
would not, however, take our budget in right direction.
    If the caps were set at levels consistent with those in the 
House Republican budget resolution; steep cuts in domestic 
discretionary programs would be required, unless funding for 
national defense and homeland security were cut below the 
budget resolution levels. The House Republican budget 
resolution cuts domestic non-homeland security funding for 2005 
by $10.5 billion below the amount needed to maintain services 
at the 2004 level. Over the 5-year period covered by the 
discretionary spending caps (2005-2009), the House Republican 
budget is $113.4 billion below the amount needed to maintain 
services at the 2004 level. Clearly, if implemented as 
envisioned, the discretionary caps being contemplated would 
produce unacceptable cuts to domestic programs--cuts that could 
fall on education, health, environmental protection, and other 
priorities.
    Alternatively, Congress might simply seek to circumvent the 
unrealistically low caps. In 1997, unrealistically austere 
spending caps were established as part of the Balanced Budget 
Act. In the end, these caps were evaded, and therefore provided 
no meaningful budgetary restraint. By contrast, the more 
realistic discretionary spending caps established in 1990 and 
1993 worked effectively.
    If discretionary spending caps are to work effectively, 
they must be established as part of a bipartisan negotiation 
that also includes a balanced PAYGO provision encompassing both 
mandatory spending and revenues. This balanced approach worked 
in the 1990s, and it should serve as the model for efforts to 
reform the budget process today.
    Democrats are deeply concerned about the rapid 
deterioration of the budget over the past 3 years--from a 10-
year projected surplus of $5.6 trillion to a 10-year projected 
deficit of $2.9 trillion. Democrats also support strong budget 
enforcement rules that would help guide the budget back toward 
balance. Unfortunately, the unbalanced approach contained in 
this bill would place important priorities at risk while 
failing to protect the budget against additional deficits and 
debt.

                                   John M. Spratt, Jr.
                                   Jim Moran.
                                   Darlene Hooley.
                                   Tammy Baldwin.
                                   John Lewis.
                                   Richard E. Neal.
                                   Rosa L. DeLauro.
                                   Chet Edwards.
                                   Bobby Scott.
                                   Dennis Moore.
                                   Harold Ford.
                                   Lois Capps.
                                   Brian Baird.
                                   Jim Cooper.
                                   Mike Thompson.
                                   Rahm Emanuel.
                                   Artur Davis.
                                   Denise Majette.
                                   Ron Kind.

                                
