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                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

_______________________________________________________________________


 
                         SEQUESTER REPLACEMENT
                              ACT OF 2012

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 4966

 A BILL TO AMEND THE BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL ACT 
OF 1985 TO REPLACE THE SEQUESTER ESTABLISHED BY THE BUDGET CONTROL ACT 
                                OF 2011

                             together with

                     MINORITY AND DISSENTING VIEWS

            



  May 9, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                            -------------

                    U.S. GOVERNMENT PRINTING OFFICE

                          WASHINGTON : 2012

19-006



                        COMMITTEE ON THE BUDGET

                     PAUL RYAN, Wisconsin, Chairman
SCOTT GARRETT, New Jersey            CHRIS VAN HOLLEN, Maryland,
MICHAEL K. SIMPSON, Idaho              Ranking Minority Member
JOHN CAMPBELL, California            ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California              MARCY KAPTUR, Ohio
W. TODD AKIN, Missouri               LLOYD DOGGETT, Texas
TOM COLE, Oklahoma                   EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   BETTY McCOLLUM, Minnesota
TOM McCLINTOCK, California           JOHN A. YARMUTH, Kentucky
JASON CHAFFETZ, Utah                 BILL PASCRELL, Jr., New Jersey
MARLIN A. STUTZMAN, Indiana          MICHAEL M. HONDA, California
JAMES LANKFORD, Oklahoma             TIM RYAN, Ohio
DIANE BLACK, Tennessee               DEBBIE WASSERMAN SCHULTZ, Florida
REID J. RIBBLE, Wisconsin            GWEN MOORE, Wisconsin
BILL FLORES, Texas                   KATHY CASTOR, Florida
MICK MULVANEY, South Carolina        HEATH SHULER, North Carolina
TIM HUELSKAMP, Kansas                KAREN BASS, California
TODD C. YOUNG, Indiana               SUZANNE BONAMICI, Oregon
JUSTIN AMASH, Michigan
TODD ROKITA, Indiana
FRANK C. GUINTA, New Hampshire
ROB WOODALL, Georgia

                           Professional Staff

                     Austin Smythe, Staff Director
                Thomas S. Kahn, Minority Staff Director
                            C O N T E N T S

                              ----------                              
                                                                   Page
Introduction.....................................................     3
    The Sequester................................................     3
    Why it is Necessary to Replace the Sequester.................     4
    The Path to Prosperity Approach: Reprioritize Savings Through 
      Reconciliation.............................................     6
    Sequester Replacement Act of 2012............................     6
Summary of Proposed Changes......................................     7
Legislative History..............................................     8
Section by Section...............................................    11
Hearings.........................................................    12
Votes of the Committee...........................................    13
Committee Oversight Findings.....................................    16
Performance Goals and Objectives.................................    16
Constitutional Authority Statement...............................    16
Committee Cost Estimate..........................................    17
Advisory Committee Statement.....................................    18
Applicability to the Legislative Branch..........................    18
Federal Mandates Statement.......................................    18
Advisory on Earmarks.............................................    18
Changes in Existing Law Made by the Bill as Reported.............    18
Views of Committee Members.......................................    20
Appendix: H.R. 4966, Sequester Replacement Act of 2012...........    37
112th Congress                                           Rept. 112-469,
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

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



 
                   SEQUESTER REPLACEMENT ACT OF 2012

                                _______
                                

  May 9, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Ryan of Wisconsin, from the Committee on the Budget, submitted the 
                               following

                              R E P O R T

                             together with

                     MINORITY AND DISSENTING VIEWS

                        [To accompany H.R. 4966]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Budget, to whom was referred the bill 
(H.R. 4966) to amend the Balanced Budget and Emergency Deficit 
Control Act of 1985 to replace the sequester established by the 
Budget Control Act of 2011, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.
    The amendment is as follows:
    In the amendment made by section 4(b), strike 
``251(c)(2)(A)'' each place it appears and insert 
``251(c)(2)''.
                              Introduction

                              ----------                              


    The Path to Prosperity budget that passed the U.S. House of 
Representatives on March 29, 2012 set in motion a process to 
reprioritize certain across-the-board spending reductions 
(enforced by a sequester) enacted as part of the Budget Control 
Act of 2011 [BCA].
    The budget resolution called for enactment of two pieces of 
legislation to replace a $98 billion sequester of discretionary 
programs on January 2, 2013. First, it called on six committees 
to achieve at least $78 billion of these savings through 
reforms to mandatory spending programs. Second, it proposed to 
achieve $19 billion in discretionary savings by lowering the 
discretionary cap from $1.047 trillion to $1.028 trillion for 
fiscal year 2013.
    On April 27, 2012 Chairman Ryan introduced H.R. 4966, the 
Sequester Replacement Act of 2012 [SRA]. In combination with 
reconciliation legislation that the Budget Committee plans to 
report, this bill will replace the arbitrary and harmful 
sequester and provide for an orderly process for the enactment 
of appropriations legislation and long-overdue reforms in 
mandatory spending.
    This reconciliation legislation is designed to produce $78 
billion in deficit reduction. In fact, this reconciliation 
legislation far exceeds that goal, achieving over $300 billion 
in mandatory savings over a 10-year period.
    This second piece of legislation, the SRA addresses the 
sequester and implements the budget resolution's $19 billion in 
savings from discretionary spending.
    The SRA lowers the fiscal year 2013 discretionary cap from 
$1,047.0 billion down to $1,027.9 billion by providing for a 
$19.1 billion reduction in the discretionary spending cap for 
fiscal year 2013 on Jan. 2, 2013, reflecting the level of 
discretionary spending called for in the House-passed budget 
resolution. The SRA provides that the bill only takes effect 
once the reconciliation bill has been enacted into law, 
guaranteeing that no room will be granted under the caps unless 
the savings are made permanent.
    Additionally the SRA clarifies that the Department of 
Veterans Affairs is exempt from any sequester under the BCA. 
The SRA replaces the fiscal year 2013 discretionary sequester 
and the defense mandatory sequester with the savings from the 
lower discretionary cap and the reconciliation bill.

                             The Sequester

    On January 2, 2013, unless the BCA is amended, there will 
be a sequester (across the board cut) from non-exempt programs 
of $54.7 billion from defense programs and $54.7 billion from 
non-defense programs. Because defense programs are primarily 
funded through annual appropriations, $54.6 billion of the 
defense sequester will come from discretionary programs, i.e., 
military personnel, operations and maintenance, military 
construction, procurement, and research and development. 
Approximately $19 million will come from defense direct 
spending programs. The President has the authority to exempt 
military personnel from the sequester, but the rest of the 
defense budget must still generate these savings. If the 
President chooses to exempt military personnel, the rest of DOD 
spending would be reduced by an estimated 13%.
    The sequester will reduce non-defense discretionary 
programs by $43 billion and non-defense direct spending 
programs by $11.7 billion. The BCA limited the reduction in 
Medicare spending to 2 percent ($6.3 billion) with other non-
defense discretionary and mandatory programs making up the 
difference. In addition, the law exempts from sequester many 
means-tested entitlement programs, e.g., Medicaid, resulting in 
the brunt of the non-defense direct spending sequester falling 
on agriculture programs.
    After fiscal year 2013, the BCA achieves the budget 
authority reductions in a different way. For discretionary 
spending, the BCA lowers the annual caps on discretionary 
spending by the amounts necessary to meet the goal. By the 
Congressional Budget Office's [CBO] current calculation this 
results in an average reduction of $90.4 billion in the 
discretionary cap in each year from 2014 to 2021. Unless these 
lowered caps are breached in the annual appropriations process, 
there would be no discretionary sequesters after fiscal year 
2013.
    For direct spending, the BCA continues to impose sequesters 
each year, which CBO estimates will average $19.0 billion from 
fiscal years 2014-21.
    The Office of Management and Budget [OMB] will determine 
the exact amounts that will come from discretionary and direct 
spending at the start of each calendar year based on the 
relative proportions of discretionary and direct spending in 
the baseline. To date OMB has refused to provide an official 
estimate of the spending reductions that would occur under 
current law.

              Why it is Necessary to Replace the Sequester

    Intended as a mechanism to force action, there is 
bipartisan agreement that the sequester going into place would 
undercut key responsibilities of the federal government.
    As the Administration makes clear in its own budget, ``By 
design, the sequester is not good policy and is meant to force 
Congress to take action: it would lead to significant cuts to 
critical domestic programs such as education and research and 
cuts to defense programs that could undermine our national 
security. * * * [C]uts of this magnitude done in an across the 
board fashion would be devastating both to defense and non-
defense programs.''\1\ At a committee hearing on replacing the 
sequester, a witness from OMB testified that ``If allowed to 
occur, the sequester would be highly destructive to national 
security and domestic priorities, and core government 
functions. The Administration believes that taking action to 
avoid the sequester in full in a balanced and fiscally 
responsible manner must be the primary focus of Congress's 
deliberations in the coming months.''\2.
---------------------------------------------------------------------------
    \1\``Fiscal Year 2013 Budget of the U.S. Government,'' Office of 
Management and Budget, February 2012. http://www.whitehouse.gov/sites/
default/files/omb/budget/fy2013/assets/cutting.pdf
    \2\Testimony of Danny Werfel, Controller of the Office of 
Management and Budget, Committee on the Budget, U.S. House of 
Representatives, April 25, 2012.
---------------------------------------------------------------------------
    Of particular concern is the impact sequestration, if 
allowed to occur, would have on our national security.
    The sequestration cuts would be on top of the savings in 
discretionary defense spending that are already being 
implemented pursuant to the debt limit agreement last August.
    The House Armed Services Committee has analyzed the impact 
of the sequestration, and found that if left in place, 
sequestration would cut the military to its smallest size since 
before the Second World War--all while we are still a nation at 
war in Afghanistan, facing increased threats from Iran and 
North Korea, unrest in the Middle East, and a rising China.
    Secretary Panetta and the professional military leadership 
have also looked at the impact of sequestration and reached 
similar conclusions:
    Secretary Panetta stated, ``If the maximum sequestration is 
triggered, the total cut will rise to about $1 trillion 
compared with the FY 2012 plan. The impacts of these cuts would 
be devastating for the Department * * * Facing such large 
reductions, we would have to reduce the size of the military 
sharply. Rough estimates suggest after ten years of these cuts, 
we would have the smallest ground force since 1940, the 
smallest number of ships since 1915, and the smallest Air Force 
in its history.''\3.
\\---------------------------------------------------------------------------
    \3\Leon Panetta, U.S. Secretary of Defense, ``Letter to Senator 
John McCain,'' November 14, 2011. http://armedservices.house.gov/
index.cfm/files/serve?File_id=ae72f319-e34f-4f78-8c88-b8e7c9dee61f
---------------------------------------------------------------------------
    General Dempsey, Chairman of the Joint Chiefs of Staff, 
stated, ``[S]equestration leaves me three places to go to find 
the additional money: operations, maintenance, and training. 
That's the definition of a hollow force.''\4.
\\---------------------------------------------------------------------------
    \4\Testimony of Service Chiefs before House Armed Services 
Committee, February 14, 2012. http://armed-services.senate.gov/
Transcripts/2012/02%20February/12-02%20-%202-14-12.pdf
---------------------------------------------------------------------------
    The individual branch service chiefs echoed General 
Dempsey:
     ``Cuts of this magnitude would be catastrophic to 
the military * * * My assessment is that the nation would incur 
an unacceptable level of strategic and operational risk.''--
General Ray T. Odierno, Chief Of Staff, United States Army
     ``A severe and irreversible impact on the Navy's 
future,''--Admiral Jonathan W. Greenert, Chief of Naval 
Operations
     ``A Marine Corps below the end strength that's 
necessary to support even one major contingency,''--General 
James F. Amos, Commandant of the Marine Corps
     ``Even the most thoroughly deliberated strategy 
may not be able to overcome dire consequences,''--General 
Norton A. Schwartz, Chief of Staff, United States Air Force
    According to an analysis by the House Appropriations 
Committee, the sequester will also have a significant impact on 
non-defense discretionary programs as well, including:
     Automatically reducing Head Start by $650 million, 
resulting in 75,000 fewer slots for children in the program;
     Automatically reducing the National Institutes of 
Health (NIH) by $2.4 billion, an amount equal to nearly half of 
total NIH spending on cancer this year; and
     A reduction of approximately 1,870 Border Patrol 
Agents (a reduction of nearly 9 percent of the total number of 
agents).
    Leaders of both parties agree that sequester savings should 
be reprioritized. On August 4, 2011, then-director of the 
Office of Management and Budget (now White House Chief of 
Staff) Jack Lew wrote that the sequester was not intended to be 
implemented: ``Make no mistake: the sequester is not meant to 
be policy. Rather, it is meant to be an unpalatable option that 
all parties want to avoid.''\5.
\\---------------------------------------------------------------------------
    \5\Jack Lew, ``Security Spending in the Deficit Agreement,'' August 
4, 2011. http://www.whitehouse.gov/blog/2011/08/04/security-spending-
deficit-agreement (accessed March 19, 2012).
---------------------------------------------------------------------------

                    The Path to Prosperity Approach:
              Reprioritize Savings Through Reconciliation

    The Path to Prosperity budget that passed the U.S. House of 
Representatives in April of 2012 set in motion a process to 
reprioritize certain across the board spending reductions 
enacted as part of the BCA. It achieves this outcome through 
enactment of two pieces of legislation. The first piece of 
legislation will be generated through the reconciliation 
process, which is triggered by the budget resolution and gives 
expedited consideration to bills enacting the spending, 
revenue, and debt policies contained in the budget resolution.
    To trigger these expedited procedures, The Path to 
Prosperity included reconciliation instructions calling on six 
House committees to achieve specified amounts of savings in 
programs within their jurisdictions. The Sequester Replacement 
Reconciliation Act consists of the legislation they have 
reported to achieve the same level of spending reductions 
enacted in the BCA, but without the haphazard cuts--especially 
to national security--that an across the board approach would 
entail.
    Those six House Committees have advanced legislation that 
will:
    1. Stop Fraud, by Ensuring that Individuals are Actually 
Eligible for the Taxpayer Benefits They Receive;
    2. Eliminate Government Slush Funds and Stop Bailouts;
    3. Control Runaway, Unchecked Spending;
    4. Restrain Spending on Government Bureaucracies; and
    5. Reduce Waste and Duplicative Programs.
    The savings from these reforms, which would be enacted 
through the SRRA, will replace the arbitrary discretionary 
sequester cuts and lay the groundwork for further efforts to 
avert the spending-driven economic crisis before us.

                 The Sequester Replacement Act of 2012

    Chairman Ryan introduced the SRA as called for by section 
202 of the budget resolution in order to prioritize the 
spending reductions enacted as part of the BCA. These spending 
reductions are replaced but only on the enactment of other 
reductions which are included in the SRRA. By targeting fraud, 
eliminating slush funds, restraining runaway spending, 
reforming bureaucracies, and ending wasteful and duplicative 
programs, the SRRA provides a responsible way to reprioritize 
all of the spending reduction enacted as part of the BCA. 
With--and only with--the enactment of this targeted, carefully 
prioritized spending reduction, Congress can move to the second 
part of this task: replacing the across the board sequester 
before it does any damage.
    The SRA would achieve this task by amending the BCA to 
replace the discretionary sequester for fiscal year 2013 with 
the spending reductions enacted through the Reconciliation Act. 
To safeguard against an end-run around the Reconciliation Act, 
the SRA stipulates that it would only take effect upon 
enactment of the reconciliation bill.
    The SRA takes additional steps to protect the U.S. military 
and veterans and to lock in spending savings for the American 
taxpayer:
     It clarifies that Department of Veterans Affairs' 
programs are not subject to sequester.
     It lowers the BCA's discretionary caps to levels 
set in the Path to Prosperity budget.
     It closes a potential loophole that would 
otherwise allow Congress to enact large direct spending 
increases by counting SRRA savings as an offset.
     It eliminates the fiscal year 2013 sequester of 
mandatory spending on national defense.
    With passage of the SRRA and the SRA, the House will have 
taken the responsible step of offsetting the cost 
(approximately $78 billion) of replacing the automatic across 
the board discretionary spending cuts that are scheduled to 
occur on January 2, 2013 through sequestration. The additional 
savings achieved through reconciliation beyond the $78 billion 
(over $180 billion in the next ten years) would further reduce 
the deficit. The SRA reduces the total level of discretionary 
spending limits for fiscal year 2013 from $1,047 billion to 
$1,028 billion which will save $19 billion for that fiscal 
year. And this approach provides a blueprint for replacing the 
rest of the sequester with responsible, targeted spending 
reduction in the years ahead.

                      Summary of Proposed Changes

    This bill is designed to amend the provisions of the BCA to 
avert an impending sequestration, which will be implemented on 
January 3, 2013.
    The reconciliation bill the Budget Committee will report 
reduces the deficit by more than $300 billion over the next 
decade, this is approximately four times the savings of the 
portion of the fiscal year 2013 sequester that is being 
eliminated. As a companion to the reconciliation bill and in 
response to the directive in section 202 of the budget 
resolution (H. Con. Res. 112), the Sequester Replacement Act of 
2012:
     Provides that the bill only takes effect upon 
enactment of the reconciliation bill, ensuring that there will 
be no relief from the sequester unless the Reconciliation Act's 
savings are enacted.
     Exempts the Department of Veterans Affairs from 
any sequesters under the BCA.
     Re-sets the fiscal year 2013 discretionary cap at 
$1,047.0 billion and provides for a $19.1 billion reduction in 
the discretionary spending cap for fiscal year 2013 on Jan. 2, 
2013, achieving the level of discretionary spending called for 
in the House-passed budget resolution ($1,027.9 billion).
     Makes technical and conforming changes to the 
operation of section 314 of the Congressional Budget Act of 
1974 and provides for the appropriate treatment of the 
reconciliation legislation on the Statutory Pay-Go-As-You-Go 
scorecard.
     Replaces the fiscal year 2013 discretionary 
sequester and the defense mandatory sequester with the savings 
from the lower discretionary cap and the reconciliation bill.

                          Legislative History

    The ``sequestration'' procedure was first established 
pursuant to the Balanced Budget and Emergency Deficit Control 
Act of 1985 [BBEDCA], initially intended to reduce deficits 
established by annual maximum deficit limits. Sequestration 
involves automatic across-the-board spending reductions 
required to be ordered by the President under certain 
circumstances. The orders under the terms of BBDECA occur 
within 15 days after the end of a session of Congress.
    The Budget Enforcement Act of 1990 [BEA] significantly 
revised BBEDCA (the BEA is included as Title XIII of Public Law 
101-508, the Omnibus Budget Reconciliation Act of 1990). It 
replaced the maximum spending limits with annual limits on 
discretionary spending and controls over increases in direct 
spending or decreases in revenues, termed ``pay-as-you go 
(PAYGO).'' Though the original BEA was scheduled to expire at 
the end of fiscal year 1995, it was extended by the Omnibus 
Budget Reconciliation Act of 1993, and again by the Balanced 
Budget Act of 1997 [BBA], in each case for five years.
    The discretionary spending limits expired on September 30, 
2002. The PAYGO requirement, which applied 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 Pay-As-You-Go 
Scorecard to zero.
    The Committee on the Budget of the House reported 
legislation to modify the discretionary spending limits for 
fiscal year 2002 on December 13, 2001 (House Report 107-338, 
Interim Budget Control and Enforcement Act of 2001, to 
accompany H.R. 3084). Though the committee approved the measure 
by voice vote, the House did not consider it. It was instead 
included in the conference report on the Department of Defense 
and emergency Supplemental Appropriations measure signed into 
law on January 10, 2002 (Public Law 107-117). The law revised 
the discretionary spending limits and levels in the budget 
resolution to increase spending to respond to the September 
11th terrorist attacks and was passed on a bipartisan basis.
    On March 19, 2004, the Committee on the Budget of the House 
reported the Spending Control Act of 2004 (H.R.3973; House 
Report 108-442). This measure would have reestablished, though 
2009, the discretionary spending limits. The limits were set 
for budget authority and outlays--though the legislation 
reported did not specify the five-year limits, which were to be 
entered later. The bill also extended the pay-as-you-go 
procedure, but applied it only for direct spending. This 
specific bill was not considered on the floor of the House.
    On June 25, 2004, the House considered another bill titled 
the Spending Control Act, H.R. 4663, which failed of passage by 
a recorded vote of 146-268 (Roll Call Number 318--108th 
Congress). This bill was similar to the Spending Control Act of 
2004 reported by the Committee on the Budget on March 19, 2004, 
but the discretionary spending limits were reduced from five 
years to two: Instead of spending limits through fiscal year 
2009, they were set only for fiscal years 2005 and 2006. The 
spending-only pay-as-you-go procedures would have remained in 
force through fiscal year 2009 as in the March-reported 
Spending Control Act of 2004.
    The Committee on the Budget of the Senate reported S. 3521, 
the Stop Over Spending Act of 2006. This measure was an omnibus 
budget process bill including a number of different enforcement 
reforms. Included among these was extension of the 
discretionary spending limits for three years--through fiscal 
year 2007. It did not include pay-as-you-go provisions but did 
institute maximum deficit amounts, similar to the original 
BBEDCA. These limits were set as a percentage of gross domestic 
product, frozen after fiscal year 2012.
    No further significant congressional action was taken on 
re-establishing statutory controls on spending and revenue 
until 2010, when on February 10 of that year, the Statutory 
Pay-As-You-Go Act of 2010 was signed as part of Public Law 111-
139, which raised the statutory limit on the public debt.
    While it was similar to the expired pay-as-you-go law, and 
included references to certain sections of the BBEDCA, it did 
not bring that law back into force. It did amend certain 
sections of that Act such as the sequestrable base. It did not 
establish new discretionary spending limits for any period of 
time.
    Enacted on August 2, 2012, the BCA authorized an increase 
in the public debt limit. Added to this increase were statutory 
controls on spending, primarily in the form of making BBEDCA 
permanent and re-establishing the discretionary spending limits 
from fiscal year 2012 through fiscal year 2021. These 
discretionary spending limits for fiscal years 2012 and 2013 
were divided into security and non-security categories. The 
remaining years were set as a single discretionary general 
category. These initial spending limits have been supplanted, 
though, since the BCA also included additional procedures that 
had the effect of altering the caps as set out in the statute. 
The Congressional Budget Office estimated that the 
discretionary spending caps of the BCA would reduce the 
deficit, including savings from debt service, by $917 billion 
over the 10 fiscal years covering 2012 through 2012.\6.
\\---------------------------------------------------------------------------
    \6\Congressional Budget Office letter to the Honorable John Boehner 
and the Honorable Harry Reid regarding CBO Analysis of the Budget 
Control Act as posted on the House Committee on Rules website on August 
1, 2011. http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/123xx/
doc12357/budgetcontrolactaug1.pdf
---------------------------------------------------------------------------
    The BCA also established a Joint Select Committee on 
Deficit Reduction which was tasked with reporting a bill to 
reduce the federal deficit by an additional $1.5 trillion over 
a 10-year period ending in fiscal year 2021. Legislation from 
the Joint Committee would have been considered under procedures 
limiting amendment and debate. Under the terms of the BCA, if 
legislation from the Joint Committee reducing the deficit by at 
least $1.2 trillion were not enacted, then a procedure would be 
set in motion to reduce spending by adjusting the discretionary 
caps downward and calculating an amount of reductions in direct 
spending necessary to achieve the $1.2 trillion (or a portion 
thereof were legislation from the Joint Committee achieving 
some deficit reduction was enacted).
    The Joint Committee was unable to report any proposal 
reducing the deficit by any amount and no legislation to that 
purpose was enacted by the required January 15, 2012 deadline. 
On this date, not only did the Joint Committee cease to exist, 
the automatic spending reduction process was triggered.
    The process that began on January 15, 2012 had the 
following ramifications: The statutory discretionary caps were 
replaced by new caps with new definitions of security and 
nonsecurity--now effectively defense and nondefense, though the 
previous terms are still used. These categories have replaced 
the discretionary general category through 2021.
    The process has two components: sequestration and 
discretionary spending limits reduction. In order to achieve 
the $1.2 trillion in deficit reduction, spending reductions 
will occur absent a change in law. OMB is charged with 
calculating the amount in spending reduction required to 
achieve the specified deficit reduction.
    Since the Joint Committee didn't achieve any deficit 
reduction, the calculation begins with a spending reduction of 
the full $1.2 trillion from fiscal year 2013 through fiscal 
year 2021. According to the BCA formula, that number is reduced 
by 18 percent to account for the reduced cost of debt service 
attributable to the lower level of spending. The remaining 
amount is divided by nine to account for each of fiscal years 
2013 through 2021. This amount is then divided by two so that 
it is evenly distributed between reductions in defense and 
nondefense accounts.
    The spending reductions are further divided between direct 
spending and discretionary spending within the defense and 
nondefense accounts.
    The implementation of the spending reductions is distinct 
from the calculation of the amounts. Once the amount is 
calculated, the BCA requires reductions through 1) 
sequestration and 2) reductions to the revised discretionary 
spending limits.
    The sequestration order affects both discretionary and 
mandatory spending for fiscal year 2013. This means that 
discretionary amounts appropriated for fiscal year 2013 are to 
be sequestered by the calculated amount no matter how much is 
appropriated--it is not sequestered as a function of the 
discretionary spending limit for that fiscal year. In addition, 
for all fiscal years 2013 through 2021, a direct spending 
sequester of nonexempt accounts is ordered.
    This is distinct from the spending reductions for the 
discretionary spending limits for fiscal year 2014 through 
fiscal year 2021--these reductions occur through revising the 
spending limits downward for each of those fiscal years.

                                           DISCRETIONARY SPENDING CAPS
                                        [Billions of $ budget authority]
----------------------------------------------------------------------------------------------------------------
                                   2013     2014     2015     2016     2017     2018     2019     2020     2021
----------------------------------------------------------------------------------------------------------------
Pre-Sequester Cap..............  1,047    1,066    1,086    1,107    1,131    1,156    1,182    1,208    1,234
  Defense......................    546      556      566      577      590      603      616      630      644
  Non-Defense..................    501      510      520      530      541      553      566      578      590
Reductions.....................    -98      -93      -92      -91      -91      -90      -89      -88      -88
  Defense......................    -55      -55      -55      -55      -55      -55      -55      -55      -55
  Non-Defense..................    -43      -38      -38      -37      -36      -36      -35      -33      -33
Post-Sequester Cap.............    949      973      994    1,016    1,040    1,066    1,093    1,120    1,146
  Defense......................    491      501      511      522      535      548      561      575      589
  Non-Defense..................    458      472      482      493      505      517      531      545      557
----------------------------------------------------------------------------------------------------------------
Source: CBO March 2012 Baseline

    The spending reductions under the BCA process begin on 
January 2, 2013 and will occur for each year through fiscal 
year 2021 as a matter of law unless changed by statute.

                           Section by Section

                         SECTION 1. SHORT TITLE

    This section provides for the short title of the bill: 
``Sequester Replacement Act of 2012.''

                 SECTION 2. CONTINGENT EFFECTIVE DATE.

    This section requires enactment of the reconciliation bill 
required by section 201 of H. Con. Res. 112 (112th Congress), 
the concurrent resolution on the budget for fiscal year 2013, 
before the Sequester Replacement Act would have any force or 
effect.

        SECTION 3. PROTECTING VETERANS PROGRAMS FROM SEQUESTER.

    This section repeals section 256(e)(2)(E) of the Balanced 
Budget and Emergency Deficit Control Act of 1985 [BBEDCA]. That 
subparagraph provides for a special rule related to Veterans 
Medical care and how it would be treated under an across the 
board cut in spending ordered under the Statutory Pay-As-You-Go 
Act of 2010 or the Balanced Budget and Emergency Deficit 
Control Act of 1985. However, under current law, all programs 
administered by the Department of Veterans Affairs are exempt. 
This section clarifies that the latter provision prevails 
should any ambiguity arise.

       SECTION 4. ACHIEVING $19 BILLION IN DISCRETIONARY SAVINGS.

    Subsection (a) amends paragraph (2) of section 251(c) of 
the Balanced Budget and Emergency Deficit Control Act of 1985 
(BBEDCA) to replace the discretionary spending limit in that 
paragraph so that it would consolidate the security and non-
security categories in current law to one total discretionary 
category. The level of the new spending limit with respect to 
fiscal year 2013 is $1.047 billion in new budget authority. 
This eliminates the applicability of section 251A(2)(A) of 
BBEDCA which replaced the previous security and non-security 
categories in section 251(c) on January 15, 2012.
    Subsection (b) amends section 251A(7)(A) of the Balanced 
Budget and Emergency Deficit Control Act of 1985. This 
provision would require that, on January 2, 2013, the new 
discretionary category will be adjusted downward by 
$19,104,000,000 in budget authority. It also provides for an 
additional supplemental sequestration report for fiscal year 
2013, to be issued on January 15, 2013, to ensure that the 
lower discretionary spending limit would be observed and any 
spending above that limit reduced through across the board 
spending reductions.

 SECTION 5. CONFORMING AMENDMENTS TO SECTION 314 OF THE CONGRESSIONAL 
              BUDGET AND IMPOUNDMENT CONTROL ACT OF 1974.

    This section amends section 314(a) of the Congressional 
Budget Act of 1974 to return the language to the form prior to 
the enactment of the Budget Control Act of 2011. The change 
merely conforms the matter to be adjusted under the terms of 
that section in the same way it had been for many years prior 
and clarifies what the matter is to be adjusted.

                SECTION 6. TREATMENT FOR PAYGO PURPOSES.

    This section specifies that the budgetary effects of this 
Act and any amendment made by it, and the budgetary effects of 
the Act provided for by section 201 of H. Con. Res. 112 (112th 
Congress), shall not be entered on either PAYGO scorecard 
maintained pursuant to section 4(d) of the Statutory Pay-As-
You-Go Act of 2010.

   SECTION 7. ELIMINATION OF THE FISCAL YEAR 2013 SEQUESTRATION FOR 
                        DEFENSE DIRECT SPENDING.

    Under current law, on January 2, 2013, a sequestration 
order will be issued by the President under the Balanced Budget 
and Emergency Deficit Control Act of 1985 to carry out 
reductions to direct spending for the defense function (050) 
for fiscal year 2013. This section renders that order as it 
pertains to defense direct spending ineffective.

                                Hearings

    On April 25, 2012, the Committee on the Budget of the House 
held a hearing on the Budget Control Act of 2011 and how the 
application of an across-the-board cut in both direct spending 
and discretionary spending is to occur on January 2, 2013 by 
Presidential order.
    Those testifying were Daniel I. Werfel, Controller, Office 
of Federal Financial Management at the Office of Management and 
Budget, and Susan A. Poling, Deputy General Counsel at the 
Government Accountability Office. The Office of Management and 
Budget is the lead agency responsible for implementing any 
sequester. At the hearing, Mr. Werfel declined to provide 
specific information in response to Members' questions relating 
to what the administration's specific proposal is to avoid the 
sequester and how the administration would implement the 
sequester if legislation is not enacted by January 2, 2013. The 
Chairman of the Committee on the Budget wrote to Acting OMB 
Director Zients on April 26, requesting additional information 
by May 4 on how the administration would execute the sequester 
required by the Budget Control Act. To date, Acting Director 
Zients has not responded.

                         Votes of the Committee

    Clause 3(b) of House Rule XIII requires each committee 
report to accompany any bill or resolution of a public 
character to include the total number of votes cast for and 
against each roll call vote, on a motion to report and any 
amendments offered to the measure or matter, together with the 
names of those voting for and against.
    Listed below are the actions taken in the Committee on the 
Budget of the House of Representatives on the Sequester 
Replacement Act of 2012.
    On May 7, 2012, the committee met in open session, a quorum 
being present.
    Chairman Ryan asked unanimous consent to be authorized, 
consistent with clause 4 of House Rule XVI, to declare a recess 
at any time during the committee meeting.
    There was no objection to the unanimous consent request.
    Chairman Ryan asked unanimous consent to dispense with the 
first reading of the bill and the bill be considered as read 
and open to amendment at any point.
    There was no objection to the unanimous consent request.
    The committee adopted and ordered reported the Sequester 
Replacement Act of 2012.
    The committee took the following votes:

                   AMENDMENT OFFERED BY CHAIRMAN RYAN

    1. This amendment proposed making a technical correction to 
a citation in section 4(b) by striking ``251(c)(2)(A)'' and 
inserting ``251(c)(2)(A)''.
    The amendment was adopted by voice vote.

                  AMENDMENT OFFERED BY MR. VAN HOLLEN

    1. This amendment proposed replacing the $1.2 trillion 
sequester with an increase in taxes on domestic oil companies, 
U.S. businesses with international operations, and individuals 
with annual income greater than $1,000,000. The amendment 
proposes to reduce spending by eliminating unspecified waste 
and duplicative programs; eliminating direct payments to 
farmers; reforming the Federal Flood Insurance Program; and 
selling unspecified federal property. The amendment also 
proposes to increase spending on education, science, 
infrastructure, and the Internal Revenue Service to close the 
``tax gap.''
    The amendment was not agreed to by a roll call vote of 11 
ayes and 22 noes.

                           ROLLCALL VOTE NO. 1
------------------------------------------------------------------------
 Name &                      Answer    Name &                    Answer
 State     Aye       No     Present     State     Aye     No     Present
------------------------------------------------------------------------
RYAN                 X                VAN          X
 (WI)                                  HOLLEN
 (Chair                                (MD)
 man)                                  (Rankin
                                       g)
------------------------------------------------------------------------
GARRETT              X                SCHWARTZ     X
 (NJ)                                  (PA)
------------------------------------------------------------------------
SIMPSON              X                KAPTUR       X
 (ID)                                  (OH)
------------------------------------------------------------------------
CAMPBEL              X                DOGGETT      X
 L (CA)                                (TX)
------------------------------------------------------------------------
CALVERT              X                BLUMENAU     X
 (CA)                                  ER (OR)
------------------------------------------------------------------------
AKIN                 X                McCOLLUM     X
 (MO)                                  (MN)
------------------------------------------------------------------------
COLE                 X                YARMUTH      X
 (OK)                                  (KY)
------------------------------------------------------------------------
PRICE                X                PASCRELL
 (GA)                                  (NJ)
------------------------------------------------------------------------
McCLINT              X                HONDA
 OCK                                   (CA)
 (CA)
------------------------------------------------------------------------
CHAFFET              X                RYAN         X
 Z (UT)                                (OH)
------------------------------------------------------------------------
STUTZMA              X                WASSERMA
 N (IN)                                N
                                       SCHULTZ
                                       (FL)
------------------------------------------------------------------------
LANKFOR              X                MOORE
 D (OK)                                (WI)
------------------------------------------------------------------------
BLACK                X                CASTOR       X
 (TN)                                  (FL)
------------------------------------------------------------------------
RIBBLE               X                SHULER
 (WI)                                  (NC)
------------------------------------------------------------------------
FLORES               X                BASS         X
 (TX)                                  (CA)
------------------------------------------------------------------------
MULVANE              X                BONAMICI     X
 Y (SC)                                (OR)
------------------------------------------------------------------------
HUELSKA              X                ........
 MP
 (KS)
------------------------------------------------------------------------
YOUNG                X                ........
 (IN)
------------------------------------------------------------------------
AMASH                X     .........
 (MI)
------------------------------------------------------------------------
ROKITA               X     .........
 (IN)
------------------------------------------------------------------------
GUINTA               X     .........
 (NH)
------------------------------------------------------------------------
WOODALL              X
 (GA)
------------------------------------------------------------------------

            AMENDMENT OFFERED BY MS. MCCOLLUM AND MR. SHULER

    2. This amendment proposed turning off the FY 2013 
sequester for Medicare and increasing revenues by eliminating 
certain deductions for domestic oil and gas companies.
    The amendment was not agreed to by a roll call vote of 11 
ayes and 22 noes.

                           ROLLCALL VOTE NO. 2
------------------------------------------------------------------------
 Name &                      Answer    Name &                    Answer
 State     Aye       No     Present     State     Aye     No     Present
------------------------------------------------------------------------
RYAN                 X                VAN          X
 (WI)                                  HOLLEN
 (Chair                                (MD)
 man)                                  (Rankin
                                       g)
------------------------------------------------------------------------
GARRETT              X                SCHWARTZ     X
 (NJ)                                  (PA)
------------------------------------------------------------------------
SIMPSON              X                KAPTUR       X
 (ID)                                  (OH)
------------------------------------------------------------------------
CAMPBEL              X                DOGGETT      X
 L (CA)                                (TX)
------------------------------------------------------------------------
CALVERT              X                BLUMENAU     X
 (CA)                                  ER (OR)
------------------------------------------------------------------------
AKIN                 X                McCOLLUM     X
 (MO)                                  (MN)
------------------------------------------------------------------------
COLE                 X                YARMUTH      X
 (OK)                                  (KY)
------------------------------------------------------------------------
PRICE                X                PASCRELL
 (GA)                                  (NJ)
------------------------------------------------------------------------
McCLINT              X                HONDA
 OCK                                   (CA)
 (CA)
------------------------------------------------------------------------
CHAFFET              X                RYAN         X
 Z (UT)                                (OH)
------------------------------------------------------------------------
STUTZMA              X                WASSERMA     X
 N (IN)                                N
                                       SCHULTZ
                                       (FL)
------------------------------------------------------------------------
LANKFOR              X                MOORE
 D (OK)                                (WI)
------------------------------------------------------------------------
BLACK                X                CASTOR       X
 (TN)                                  (FL)
------------------------------------------------------------------------
RIBBLE               X                SHULER
 (WI)                                  (NC)
------------------------------------------------------------------------
FLORES               X                BASS
 (TX)                                  (CA)
------------------------------------------------------------------------
MULVANE              X                BONAMICI     X
 Y (SC)                                (OR)
------------------------------------------------------------------------
HUELSKA              X                ........
 MP
 (KS)
------------------------------------------------------------------------
YOUNG                X                ........
 (IN)
------------------------------------------------------------------------
AMASH                X     .........
 (MI)
------------------------------------------------------------------------
ROKITA               X     .........
 (IN)
------------------------------------------------------------------------
GUINTA               X     .........
 (NH)
------------------------------------------------------------------------
WOODALL              X
 (GA)
------------------------------------------------------------------------

    3. Mr. Garrett made a motion that the committee report the 
bill as amended and that the bill do pass.
    The motion was agreed to by a roll call vote of 21 ayes and 
13 noes.

                           ROLLCALL VOTE NO. 3
------------------------------------------------------------------------
 Name &                      Answer    Name &                    Answer
 State     Aye       No     Present     State     Aye     No     Present
------------------------------------------------------------------------
RYAN        X                         VAN                  X
 (WI)                                  HOLLEN
 (Chair                                (MD)
 man)                                  (Rankin
                                       g)
------------------------------------------------------------------------
GARRETT     X                         SCHWARTZ             X
 (NJ)                                  (PA)
------------------------------------------------------------------------
SIMPSON     X                         KAPTUR               X
 (ID)                                  (OH)
------------------------------------------------------------------------
CAMPBEL     X                         DOGGETT              X
 L (CA)                                (TX)
------------------------------------------------------------------------
CALVERT     X                         BLUMENAU             X
 (CA)                                  ER (OR)
------------------------------------------------------------------------
AKIN        X                         McCOLLUM             X
 (MO)                                  (MN)
------------------------------------------------------------------------
COLE        X                         YARMUTH              X
 (OK)                                  (KY)
------------------------------------------------------------------------
PRICE       X                         PASCRELL
 (GA)                                  (NJ)
------------------------------------------------------------------------
McCLINT     X                         HONDA
 OCK                                   (CA)
 (CA)
------------------------------------------------------------------------
CHAFFET     X                         RYAN                 X
 Z (UT)                                (OH)
------------------------------------------------------------------------
STUTZMA     X                         WASSERMA             X
 N (IN)                                N
                                       SCHULTZ
                                       (FL)
------------------------------------------------------------------------
LANKFOR     X                         MOORE
 D (OK)                                (WI)
------------------------------------------------------------------------
BLACK       X                         CASTOR               X
 (TN)                                  (FL)
------------------------------------------------------------------------
RIBBLE      X                         SHULER
 (WI)                                  (NC)
------------------------------------------------------------------------
FLORES      X                         BASS                 X
 (TX)                                  (CA)
------------------------------------------------------------------------
MULVANE     X                         BONAMICI             X
 Y (SC)                                (OR)
------------------------------------------------------------------------
HUELSKA     X                         ........
 MP
 (KS)
------------------------------------------------------------------------
YOUNG       X                         ........
 (IN)
------------------------------------------------------------------------
AMASH                X                ........
 (MI)
------------------------------------------------------------------------
ROKITA      X                         ........
 (IN)
------------------------------------------------------------------------
GUINTA      X                         ........
 (NH)
------------------------------------------------------------------------
WOODALL     X
 (GA)
------------------------------------------------------------------------

    Mr. Garrett made a motion that, pursuant to clause 1 of 
rule XXII, the Chairman be authorized to offer such motions as 
may be necessary in the House to go to conference with the 
Senate, and staff be authorized to make any necessary technical 
and conforming changes to the bill.
    The motion was agreed to without objection.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee on the Budget's 
oversight findings and recommendations are reflected in the 
body of this report.

                    Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goals and objectives of this legislation are to 
provide both the President and the Congress improved tools to 
reconsider spending.

                   Constitutional Authority Statement

    Pursuant to clause 7 of rule XII of the Rules of the House 
of Representatives, the committee finds the constitutional 
authority for this legislation in Article I, section 9, clause 
7.

                        Committee Cost Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the committee report incorporates the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to sections 402 and 423 of the 
Congressional Budget Act of 1974.
                       Congressional Budget Office,
                                             U.S. Congress,
                                       Washington, DC, May 8, 2012.
Hon. Paul Ryan, Chairman,
Committee on the Budget, U.S. House of Representatives, Washington, DC 
        20515.
    Dear Mr. Chairman: The Congressional Budget Office has prepared the 
enclosed cost estimate for H.R. 4966, the Sequester Replacement Act of 
2012.
    If you wish further details on this estimate, we will be pleased to 
provide them. The CBO staff contact is Avi Lerner, who can be reached 
at 226-2880.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
Enclosure.
    cc: Hon. Chris Van Hollen, Ranking Member.
                                 ______
                                 
               congressional budget office cost estimate
                              may 8, 2012

              H.R. 4966: Sequester Replacement Act of 2012

As ordered reported by the House Committee on the Budget on May 7, 2012

    H.R. 4966 would eliminate certain automatic spending reductions 
scheduled to take effect in January 2013, as well as reduce the overall 
limit on discretionary budget authority for fiscal year 2013. Because 
the provisions of the bill are contingent on enactment of 
reconciliation legislation as specified in section 201 of H. Con. Res. 
112, the budget resolution for fiscal year 2013 as passed by the House, 
CBO estimates that enacting H.R. 4966, by itself, would have no impact 
on the federal budget.
    However, if the contingency in H.R. 4966 is met, CBO estimates that 
enacting the bill would increase direct spending by about $72 billion 
over the 2013-2022 period, relative to the current baseline projections 
that assume automatic spending reductions under the Budget Control Act 
of 2011 go into effect as currently scheduled. That total reflects the 
cost of avoiding sequestration (cancellation of budgetary resources) 
from unobligated balances for defense programs and from advance 
appropriations for 2013 for nondefense programs other than those under 
the Department of Veterans Affairs. At this point in time, no other 
appropriations have been provided for fiscal year 2013. If additional 
discretionary appropriations are enacted for 2013, more resources would 
be available to be sequestered, and reversing the specified automatic 
reductions would result in an increase of up to $97 billion in direct 
spending over the 2013-2022 period, CBO estimates (instead of the $72 
billion figure cited above).
    Those estimates reflect the proposed elimination of the scheduled 
January 2013 reductions under the Budget Control Act in spending for 
discretionary programs and in mandatory defense spending. Under H.R. 
4966, the scheduled reductions in mandatory nondefense spending would 
remain in effect.
    H.R. 4966 would also remove the separate limits on defense and 
nondefense discretionary budget authority for 2013. Furthermore, the 
act would specify a cap on total discretionary budget authority that is 
$19.1 billion lower than the total funding level of $1,047 billion that 
could be provided under current law; however, because any effect of 
that adjustment would be subject to future appropriation actions, there 
would be no impact on direct spending from that change in the cap on 
2013 funding.
    H.R. 4966 contains no intergovernmental or private-sector mandates 
as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Avi Lerner. The estimate 
was approved by Theresa Gullo, Deputy Assistant Director for Budget 
Analysis.

                      Advisory Committee Statement

    No advisory committee within the meaning of section 5(b) of 
the Federal Advisory Committee Act was created by this 
legislation.

                Applicability to the Legislative Branch

    The committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

                       Federal Mandates Statement

    The committee adopted the estimate of Federal mandates 
prepared by the Director of the Congressional Budget Office 
pursuant to section 423 of the Unfunded Mandates Reform Act 
(Public Law 104-4).

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 3521 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.

         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 italics, 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. 251. ENFORCING DISCRETIONARY SPENDING LIMITS.

    (a) * * *

           *       *       *       *       *       *       *

    (c) Discretionary Spending Limit.--As used in this part, 
the term ``discretionary spending limit'' means--
            (1) * * *
            [(2) with respect to fiscal year 2013--
                    [(A) for the security category, 
                $686,000,000,000 in new budget authority; and
                    [(B) for the nonsecurity category, 
                $361,000,000,000 in new budget authority;]
            (2) with respect to fiscal year 2013, for the 
        discretionary category, $1,047,000,000,000 in new 
        budget authority;

           *       *       *       *       *       *       *

as adjusted in strict conformance with subsection (b).

SEC. 251A. ENFORCEMENT OF BUDGET GOAL.

    Unless a joint committee bill achieving an amount greater 
than $1,200,000,000,000 in deficit reduction as provided in 
section 401(b)(3)(B)(i)(II) of the Budget Control Act of 2011 
is enacted by January 15, 2012, the discretionary spending 
limits listed in section 251(c) shall be revised, and 
discretionary appropriations and direct spending shall be 
reduced, as follows:
            (1) * * *

           *       *       *       *       *       *       *

            (7) Implementing discretionary reductions.--
                    [(A) Fiscal year 2013.--On January 2, 2013, 
                for fiscal year 2013, OMB shall calculate and 
                the President shall order a sequestration, 
                effective upon issuance and under the 
                procedures set forth in section 253(f), to 
                reduce each account within the security 
                category or nonsecurity category by a dollar 
                amount calculated by multiplying the baseline 
                level of budgetary resources in that account at 
                that time by a uniform percentage necessary to 
                achieve--
                            [(i) for the revised security 
                        category, an amount equal to the 
                        defense function discretionary 
                        reduction calculated pursuant to 
                        paragraph (5); and
                            [(ii) for the revised nonsecurity 
                        category, an amount equal to the 
                        nondefense function discretionary 
                        reduction calculated pursuant to 
                        paragraph (6).]
                    (A) Fiscal year 2013.--
                            (i) Fiscal year 2013 adjustment.--
                        On January 2, 2013, the discretionary 
                        category set forth in section 251(c)(2) 
                        shall be decreased by $19,104,000,000 
                        in budget authority.
                            (ii) Supplemental sequestration 
                        order.--On January 15, 2013, OMB shall 
                        issue a supplemental sequestration 
                        report for fiscal year 2013 and take 
                        the form of a final sequestration 
                        report as set forth in section 
                        254(f)(2) and using the procedures set 
                        forth in section 253(f), to eliminate 
                        any discretionary spending breach of 
                        the spending limit set forth in section 
                        251(c)(2) as adjusted by clause (i), 
                        and the President shall order a 
                        sequestration, if any, as required by 
                        such report.

           *       *       *       *       *       *       *


SEC. 256. GENERAL AND SPECIAL SEQUESTRATION RULES.

    (b) * * *

           *       *       *       *       *       *       *

    (e) Community and Migrant Health Centers, Indian Health 
Services and Facilities, and Veterans' Medical Care.--
            (1) * * *
            (2) The accounts referred to in paragraph (1) are 
        as follows:
                    (A) * * *

           *       *       *       *       *       *       *

                    [(E) Veterans' medical care (36-0160-0-1-
                703).]

           *       *       *       *       *       *       *

                              ----------                              


                    CONGRESSIONAL BUDGET ACT OF 1974



           *       *       *       *       *       *       *
TITLE III--CONGRESSIONAL BUDGET PROCESS

           *       *       *       *       *       *       *


                              ADJUSTMENTS

    Sec. 314. [(a) Adjustments.--After the reporting of a bill 
or joint resolution or the offering of an amendment thereto or 
the submission of a conference report thereon, the chairman of 
the Committee on the Budget of the House of Representatives or 
the Senate may make appropriate budgetary adjustments of new 
budget authority and the outlays flowing therefrom in the same 
amount as required by section 251(b) of the Balanced Budget and 
Emergency Deficit Control Act of 1985.]
    (a) Adjustments.--
            (1) In general.--The chair of the Committee on the 
        Budget of the House of Representatives or the Senate 
        may make adjustments as set forth in paragraph (2) for 
        a bill or joint resolution, amendment thereto or 
        conference report thereon, by the amount of new budget 
        authority and outlays flowing therefrom in the same 
        amount as required by section 251(b) of the Balanced 
        Budget and Emergency Deficit Control Act of 1985.
            (2) Matters to be adjusted.--The chair of the 
        Committee on the Budget of the House of Representatives 
        or the Senate may make the adjustments referred to in 
        paragraph (1) to--
                    (A) the allocations made pursuant to the 
                appropriate concurrent resolution on the budget 
                pursuant to section 302(a);
                    (B) the budgetary aggregates as set forth 
                in the appropriate concurrent resolution on the 
                budget; and
                    (C) the discretionary spending limits, if 
                any, set forth in the appropriate concurrent 
                resolution on the budget.

           *       *       *       *       *       *       *


                       Views of Committee Members

    Clause 2(l) of rule XI requires each committee to provide 
two days to Members of the committee to file Minority, 
additional, supplemental, or dissenting views and to include 
such views in the report on legislation considered by the 
committee. The following views were submitted:

                             MINORITY VIEWS

      REPUBLICANS REJECT A BALANCED APPROACH TO DEFICIT REDUCTION

    Democrats and Republicans agree on the importance of 
reducing the deficit, but we disagree on how to do it. 
Democrats remain focused on creating more jobs now to support 
the fragile economy while pursuing a plan to reduce the deficit 
in a balanced way. That's why this Spring, House Democrats 
offered a budget that preserves the Medicare guarantee, helps 
create more jobs now, makes us stronger through investments 
that build long-term growth, abides by the tight spending caps 
established last summer--which save nearly $1 trillion over ten 
years--and reduces the deficit through shared responsibility. 
In contrast, the House-passed Republican budget resolution for 
fiscal year 2013 reflects the Majority's unbalanced approach to 
deficit reduction: it provides costly additional tax breaks for 
millionaires while finding savings by ending the Medicare 
guarantee for seniors, slashing investments that strengthen our 
economy, and shredding the social safety net. Because 
Republicans reject a balanced approach and refuse to ask 
millionaires to contribute one cent to deficit reduction, their 
budget hits everyone and everything else.
    House Republicans are attempting to use the fast-track 
procedures provided under budget reconciliation to hasten 
consideration of some of their budget resolution's harmful 
priorities. Their resolution directed six committees to make 
recommendations for legislative changes that reduce the deficit 
by $261.5 billion over the 2012-2022 period. The results are 
shown in the table below.

                                          [Cuts in billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                               Budget Resolution Target            Reconciliation Measure\2.
\\                Committee                -----------------------------------------------------------------------
                                           2012-2013   2012-2017   2012-2022   2012-2013   2012-2017   2012-2022
----------------------------------------------------------------------------------------------------------------
Agriculture\1\..........................       7.710      19.700      33.200       7.779      20.443      35.830
Energy & Commerce.......................       3.750      28.430      96.760       3.870      47.970     115.480
Financial Services\1\\3\................       3.490      16.700      29.800       4.386      19.740      36.006
Judiciary...............................       0.100      11.200      39.700       0.108      13.575      48.623
Oversight & Government Reform...........       2.200      30.100      78.900       2.269      30.785      83.301
Ways & Means............................       1.200      23.000      53.000       1.360      24.830      68.258
      Gross Reconciliation Savings......      18.450     129.130     331.360      19.764     156.470     382.577
        Remove overlap..................      -0.100     -12.800     -69.900      -0.108     -14.429     -49.556
                                         -----------------------------------------------------------------------
      Net Total Reconciliation Savings..      18.350     116.330     261.460      19.664     142.913    337.943
----------------------------------------------------------------------------------------------------------------
*The rule ``deeming'' the House-passed budget resolution as the concurrent budget resolution shifted $490
  million from Agriculture to Financial Services. The 2012-2013 Agriculture target was originally $8.2 billion,
  while the Financial Services target was $3.0 billion. The 2012-2017 and 2012-2022 amounts, as well as the
  totals, were not changed.
\2\Assuming July 1 enactment, as reported by the Budget Committee on May 7, 2012.
\3\The Financial Services score includes $4.9 billion from floor insurance savings, per scoring direction from
  the Budget Committee.

    In addition, the Sequester Replacement Act of 2012, which 
the Budget Committee marked up on May 7, formalizes the plan 
laid out in the Republican budget resolution. The bill 
eliminates most of the roughly $100 billion across-the-board 
sequester of spending--50 percent from defense and 50 percent 
from non-defense programs--scheduled for 2013. The bill leaves 
in place only the non-defense sequester of mandatory programs, 
which will affect programs such as Medicare. In place of the 
rest of the 2013 sequester, the bill uses both the multi-year 
savings from the permanent mandatory spending cuts included in 
the reconciliation package, and the savings from lowering the 
discretionary spending cap for fiscal year 2013 by $19 billion 
below the level set in the bipartisan Budget Control Act of 
2011 (BCA).
    Sequestration is a meat-ax approach to deficit reduction 
that does not make sense for our country. It was included in 
the BCA as a last resort intended to pressure Congress to 
develop a bipartisan alternative to achieve long-term deficit 
reduction. But because House Republicans continue to resist the 
balanced approach to deficit reduction that has been 
recommended by every bipartisan group that has looked at the 
budget challenge, on January 2, 2013, this ``Sword of 
Damocles'' will go into effect. The sequestration would impose 
indiscriminate cuts of almost $1 trillion over the next ten 
years--50 percent from defense and 50 percent from non-defense 
programs.
    Unfortunately, instead of looking for a balanced solution, 
the Republican reconciliation package targets programs that 
help the less powerful while protecting the tax breaks of 
powerful special interests. In fact, the reconciliation package 
makes deep cuts to food and nutrition programs for low-income 
families and Medicaid--both programs that would have been 
entirely exempt from any sequestration cuts.
    This unbalanced approach to deficit reduction--focused only 
on cutting investments rather than also closing tax loopholes--
is the wrong choice for America.

       DEMOCRATS OFFERED BETTER, BALANCED DEFICIT REDUCTION PLANS

    The deep spending cuts coming through the Republican 
reconciliation instructions and the sequestration of spending 
scheduled under the BCA are neither the right nor only ways to 
reduce the deficit. In fact, Democrats have proposed to achieve 
greater deficit reduction from targeted, balanced policy 
choices, rather than the slash-and-burn approach taken by an 
across-the-board sequester or the deep cuts made in the 
Republican reconciliation proposal. The President provided 
Congress with specific policies to reduce the deficit last fall 
and in his 2013 budget. This spring, the House Democratic 
budget would have replaced meat-ax spending cuts under 
sequestration with a combination of mandatory spending cuts and 
revenues from eliminating tax loopholes and asking millionaires 
to return to the same top tax rate they paid during the Clinton 
Administration, a time of strong economic growth and fiscal 
responsibility.
    Finally, in the Budget Committee mark-up this week, 
Democrats offered amendments to replace the Republican plans 
for deficit reduction in 2013 and beyond with a balanced 
approach that includes both spending cuts and revenues. 
Democrats offered an amendment that would have replaced both 
the reconciliation cuts and the entire multi-year sequester 
with at least $1.2 trillion of deficit reduction through a 
balanced approach. The deficit reduction would come through 
legislation that increases revenues without increasing the tax 
burden on middle-income Americans, that decreases spending 
while maintaining the Medicare guarantee and protecting Social 
Security and the social safety net for vulnerable Americans, 
and that promotes economic growth and jobs. In addition, 
Democrats offered a targeted amendment to replace the remaining 
2013 sequester of Medicare with greater deficit reduction from 
ending a tax break for the ``Big 5'' oil and gas companies. 
Republicans defeated both of these amendments on party-line 
votes.

  Part I of Mark-up: Sequester Replacement Reconciliation Act of 2012

    The Republican reconciliation package includes many cuts to 
vital services that will affect Americans in many harmful ways. 
Budget Committee Democrats offered motions to achieve similar 
savings by cutting tax breaks and subsidies to special 
interests.
     Rejecting the elimination of the Social Services 
Block Grant while ending taxpayer subsidies to ``Big Oil.'' The 
Social Services Block Grant gives states and localities the 
flexibility to target funding for essential services. Overall, 
it helps 23 million children, seniors, and disabled Americans 
become self-sufficient and economically independent. It 
provides states with flexible funds that support a range of 
services, such as providing Meals on Wheels, preventing child 
abuse and neglect for at-risk children, and helping low-income 
parents return to work by providing child care and related 
assistance. During the Budget Committee reconciliation mark-up 
this week, Democrats offered a motion to preserve the Social 
Services Block Grant and to replace cuts with even greater 
savings from repealing tax breaks for the ``Big 5'' oil 
companies. This motion was defeated on a party-line vote.
     Protecting food and nutrition support for 
struggling children and families while cutting taxpayer direct 
payments to agricultural Interests. The Republican proposal 
cuts the Supplemental Nutrition Assistance Program (SNAP), 
which helps struggling households purchase adequate food and 
nutrition. The legislation reduces assistance to every single 
household receiving SNAP benefits almost immediately and cuts 
1.8 million people off of food assistance entirely. In 
addition, nearly 300,000 children will lose free school meals, 
on top of losing the benefits that provide food at home. During 
the Budget Committee reconciliation mark-up this week, 
Democrats offered a motion to preserve the food and nutrition 
assistance, and instead reduce the deficit through reform of 
agricultural commodity payments and risk management programs. 
This motion was defeated on a party-line vote.
     Protecting health care coverage for at least 
300,000 low-income children and lowering the deficit by 
eliminating certain tax subsidies for Big Oil. The Republican 
proposal allows states to cut their support for Medicaid and 
the Children's Health Insurance Program (CHIP) by covering 
fewer people, and repeals bonuses to states for enrolling 
additional low-income children in the program. The first 
provision will result in a sharp increase in the number of 
uninsured Americans--100,000 children and adults in 2013 and at 
least 300,000 children in 2015, according to CBO. The second 
provision eliminates incentives for states to increase their 
enrollment of children, also likely increasing the number of 
uninsured children. Further, the legislation eliminates funding 
for state insurance exchanges that will take effect in 2014 to 
help uninsured people find affordable coverage. States will 
either have to raise their own funds for these exchanges or 
rely on the federal government to run their exchange. During 
the Budget Committee reconciliation mark-up this week, 
Democrats offered a motion to preserve the Medicaid and CHIP 
payments, and to replace the proposed deficit reduction with 
savings from ending a wasteful tax break that encourages the 
``Big 5'' oil and gas companies to produce oil in foreign 
countries rather than here at home. This motion was defeated on 
a party-line vote.
     Protecting the health of women and children 
through the Prevention and Public Health Fund while closing tax 
loopholes that reward corporations that ship American jobs 
overseas. The Republican proposal repeals the Prevention and 
Public Health Fund. The ACA appropriated funding to support 
such programs as cancer screenings, immunizations, research on 
prevention, and education and outreach. The goal of the fund is 
to provide an expanded and sustained investment in these 
programs to improve overall health and help restrain the rate 
of growth in private- and public-sector health care costs. Some 
of the funding to be cut is allocated for women's health, 
including breast cancer and cervical cancer screening. During 
the Budget Committee mark-up, Democrats offered a motion to 
reject the Republican recommendation, and instead close 
loopholes in the U.S. international corporate tax system that 
encourage companies to ship jobs overseas. This motion was 
defeated on a party-line vote.

 Analysis of Republican Committee Proposals Included in Reconciliation


          AGRICULTURE COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Agriculture Committee recommended reconciliation 
legislation cutting $36 billion from SNAP (formerly known as 
Food Stamps). The Committee chose to target all its cuts to 
food and nutrition assistance to low-income Americans, largely 
families with children, the disabled, and elderly, rather than 
look for savings from any other programs supporting the 
agriculture sector. All together, the recommendations make 
changes to the SNAP program that will reduce benefits to all 47 
million people currently receiving SNAP and entirely eliminate 
benefits to almost 2 million people. The Republican plan makes 
the following cuts:
      Almost immediately sunsets the Recovery Act SNAP 
enhancement. The enhancement is currently due to end on October 
31, 2013. This enhancement has been shortened twice already, 
most recently to provide an offset for the Child Nutrition 
Reauthorization Act in 2010. This saves $6.0 billion under the 
directed scoring ordered by the Committee (see below for more 
details), and $4.4 billion without it.
      Makes it more difficult to apply for and receive 
SNAP benefits. The bill limits categorical eligibility--a 
process that allows households who qualify for certain programs 
to automatically be eligible for SNAP--to those receiving cash 
assistance from Temporary Assistance for Needy Families, 
Supplemental Security Income, or a state general assistance 
program. This change not only stops households from receiving 
SNAP benefits, it removes nearly 300,000 children from the 
child nutrition program. The bill also eliminates the state 
option to apply a Standard Utility Allowance in determining 
SNAP benefits for anyone receiving LIHEAP benefits. Together 
these provisions reduce SNAP by $25 billion while taking an 
additional $0.5 billion from child nutrition.
      Eliminates federal match for SNAP's employment 
and training program. Republicans say that this is one of many 
job training programs funded by the federal government and is 
duplicative. However, many job programs are oversubscribed and 
this one is geared to a very vulnerable population. Total 
savings over the 11 years are $3.1 billion.
      Ends the state bonus program. The program 
provides additional funds to states that meet certain 
administrative targets. Elimination saves $0.5 billion.
      Removes automatic indexing from SNAP's nutrition 
education and obesity prevention program. Over time, this 
change gradually reduces the program's purchasing power. This 
saves $0.5 billion over 11 years.

      ENERGY AND COMMERCE COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Energy and Commerce Committee reported reconciliation 
legislation that cuts $115 billion from health expenditures. 
All of the cuts come from repeal of certain provisions of the 
Affordable Care Act (ACA), cuts to Medicaid, and medical 
malpractice reform, over which it shares jurisdiction with the 
Judiciary Committee.

Title I--Repeals and defunds parts of the ACA

    The recommendation impedes implementation of the ACA that 
is already benefitting millions of Americans. Overall, the 
changes cut $26.3 billion over the next decade.
      Repeals the Prevention and Public Health Fund. 
Repealing this fund and rescinding unobligated funding reduces 
spending on prevention and public health by $11.9 billion. The 
ACA appropriated a total of $5 billion for 2010 through 2014 
and $2 billion for each subsequent year to support such 
programs as cancer screenings, immunizations, research on 
prevention, and education and outreach. The goal of the fund is 
to provide an expanded and sustained investment in these 
programs to improve overall health and help restrain the rate 
of growth in private- and public-sector health care costs. Some 
of the funding to be cut is allocated for women's health, 
including breast cancer and cervical cancer screening. The 
Middle Class Tax Relief and Job Creation Act of 2012 (the first 
payroll tax cut extension bill) already reduced funding for 
this fund by $5.0 billion.
      Repeals funding for state health insurance 
exchanges. The proposal strikes the mandatory funding for state 
exchanges and rescinds unobligated funds, cutting $13.5 
billion. Starting in 2014, these exchanges will allow 
individuals and small businesses to compare health plans, 
determine if they are eligible for tax credits for private 
insurance or health programs like the CHIP, and enroll in a 
health plan that meets their needs. As a result of this 
proposal, states will either have to raise their own funds to 
pay for setting up an exchange or rely on the federal 
government to run their exchange.
      Defunds the Consumer Operated and Oriented Plan 
(CO-OP) program. The proposal reduces spending by $0.9 billion 
by rescinding all unobligated funds for the CO-OP program, 
which provides subsidized loans to qualified non-profit health 
insurance plans.

Title II--Cuts Medicaid and CHIP

    The recommendation cuts Medicaid spending and reduces the 
deficit by $22.7 billion over the next decade, harming hundreds 
of thousands of low-income Americans, including at least 
300,000 children.
      Repeals states' Medicaid and CHIP Maintenance of 
Effort (MOE) requirements. The ACA requires states to maintain 
their current Medicaid eligibility standards until 2014 (and 
CHIP eligibility standards until 2019), when nationwide 
Medicaid eligibility standards take effect and state-based 
health insurance exchanges will begin operating. Repealing the 
MOE provision would increase the number of Americans who are 
uninsured, as states scale back eligibility for low-income 
children, parents, seniors, and people with serious 
disabilities. CBO estimates that the provision will increase 
the number of uninsured children and adults by 100,000 in 2013 
and increase the number of uninsured children by at least 
300,000 in 2015. Repealing the MOE reduces the deficit by $0.6 
billion.
      Repeals CHIP performance bonus payments for 
states that provide more low-income children with health care 
coverage. The bonus payments, currently slated to end in 2013, 
help states with the additional coverage-related costs in 
Medicaid as well as CHIP; the more children a state enrolls 
above the target, the larger the federal bonus payment. 
Eliminating the bonuses reduces spending by $0.4 billion.
      Rebases the Disproportionate Share Hospital (DSH) 
allotment for uncompensated care to maintain the 2021 level of 
reductions for an additional year, which reduces spending by 
$4.2 billion. Current law includes annual aggregate DSH 
allotment reductions for 2014 through 2021, to reflect the 
expected reduction in uncompensated care that will result from 
the ACA.
      Repeals increased federal Medicaid funding cap 
and match for territories. The proposal replaces the ACA's 
increased Medicaid federal match and cap for the territories 
with the levels in place prior to the ACA, reducing spending by 
$6.3 billion, or 64 percent.
      Reduces the state provider tax threshold to 5.5 
percent, down from the current threshold of no higher than 6.0 
percent of the net patient service revenues. States can use 
these revenues from health care provider taxes to help finance 
the state share of Medicaid expenditures. This proposal reduces 
spending by $11.3 billion.

Title III--Medical Malpractice

    Jurisdiction over medical malpractice is shared by the 
Energy and Commerce and the Judiciary Committees. The medical 
malpractice proposal approved by Energy and Commerce differs in 
a few respects from the version approved by Judiciary. The 
Energy and Commerce version generates $66.5 billion in on-
budget savings over ten years ($56 billion in reduced spending 
and $10.5 billion in increased revenues). The Judiciary version 
saves about $18 billion less. The Energy and Commerce version 
saves more because it includes a provision to allow evidence of 
income from collateral sources (such as life insurance payouts 
and health insurance) at trial. Like the Judiciary bill, it 
caps non-economic damages at $250,000, imposes a strict statute 
of limitations on filing lawsuits, places restrictions on 
punitive damages, replaces joint-and-several liability with a 
``fair-share'' rule, provides a safe harbor from punitive 
damages for products that meet FDA applicable safety 
requirements, limits contingency fee payments, and applies the 
legislation's provisions beyond medical malpractice to ``any 
health care liability claim.'' Both the Judiciary and Energy 
and Commerce bills override applicable state laws in all 50 
states.

        WAYS AND MEANS COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Ways and Means Committee recommended reconciliation 
changes that save $68 billion. Instead of cutting tax loopholes 
that encourage the outsourcing of jobs overseas, eliminating 
egregious tax breaks, or eliminating additional tax breaks for 
millionaires, the Committee chose instead to raise taxes on 
families with children, eliminate valuable social services that 
help to support child protection services and home-based 
services, including Meals on Wheels, and make it harder to 
purchase health insurance for those returning to work. Ways and 
means Democrats attempted to offer the Buffett Rule as a 
substitute for the cuts, but were ruled out of order. The 
Republican proposal makes the following changes:
      Eliminates the Social Services Block Grant, which 
gives states and localities the flexibility to target funding 
for essential services. Overall, the Block Grant helps 23 
million children, seniors, and disabled Americans become self-
sufficient and economically independent through services funded 
in whole, or in part, by the program. It provides home-based 
services, such as Meals on Wheels, for 1.7 million seniors. It 
helps prevent child abuse and neglect, providing child 
protective services for 1.8 million at-risk children. It 
supports low-income parents returning to work by providing 
child care and related assistance for 4.4 million children. It 
also provides services for nearly 1 million disabled 
individuals, including respite care and transportation. Ending 
the program saves $16.7 billion.
      Attacks the ACA so another 350,000 Americans go 
without health care coverage. Under the ACA, Americans whose 
incomes are low but who are ineligible for Medicaid and do not 
have employer-sponsored coverage can receive a subsidy to help 
them afford private coverage. For them to receive real-time 
assistance, the tax credit is paid in advance (and directly to 
the insurer) based on prior-year income. However, if their 
incomes increase later in the year, they are responsible for 
repaying some or all of this subsidy through a process called 
``true up.'' The ACA sensibly limits true-up payments to 
encourage participation and avoid penalizing individuals and 
families whose circumstances change mid-year. Congress already 
raised the true-up limit twice. The Republican proposal 
requires these families to repay everything even if they got 
the subsidy they were eligible for at the time, saving $43.9 
billion. The Joint Committee on Taxation estimates that, as a 
result, 350,000 people will forgo purchasing health insurance--
mostly healthier people who are willing to take the risk. That 
will leave these families at risk and drive up premiums for the 
remaining less-healthy people purchasing health coverage 
through insurance exchanges.
     Denies refundable child tax credit to taxpayers 
filing with Individual Taxpayer Identification Numbers (ITINs). 
This provision requires a taxpayer to include his or her Social 
Security number on tax returns to claim the refundable child 
tax credit, saving $7.6 billion. This measure ends refundable 
child tax credits for more than 3 million children in 2013 
alone in families with an average income of about $20,000.

      FINANCIAL SERVICES COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Financial Services Committee recommended cuts that save 
$31.1 billion, assuming a July 1 enactment date, as the 
Republicans requested (in its score, CBO noted that the 
proposal would also increase the net income to the National 
Flood Insurance Program by $4.9 billion). The reconciliation 
instruction called for a total of $29.8 billion in net savings. 
Each of the five components to the Committee's proposal is 
controversial or raises scoring issues.
     Repeals regulators' authority to shut down a 
failing large financial firm when that failure would threaten 
the financial stability of the U.S. This proposal relies on a 
budget gimmick to generate savings. The Dodd-Frank legislation 
designed this authority to pay for itself over time, with any 
initial up-front costs being recouped by selling assets and 
imposing an assessment, after the resolution, on financial 
institutions with more than $50 billion in assets. Thus, some 
of the offsetting recoveries are estimated to come outside the 
scoring window. Repealing the authority entirely eliminates the 
appearance of costs in the ten-year window, and therefore shows 
savings of $22.6 billion. But repealing the authority will 
prevent regulators from managing the orderly wind down of a 
failing firm--that inability could result in the disorderly 
collapse of large financial institutions--making future 
bailouts more likely and making it more likely that taxpayers 
will again be stuck with the bill.
     Eliminates the Home Affordable Modification 
Program (HAMP). Dismantling HAMP eliminates virtually the only 
federal assistance that helps homeowners who are struggling 
with foreclosure and need loan modifications. Its elimination 
saves $2.8 billion.
     Jeopardizes consumers' rights and protections by 
eliminating direct spending for the new Consumer Financial 
Protection Bureau (CFPB) and making it subject to 
appropriations, thereby further violating the discretionary 
spending caps in the BCA. This latest attack on the CFPB will 
likely lessen consumer protection while adding to the pressure 
of keeping to a low discretionary spending cap. The proposal 
scores $5.4 billion in savings from eliminating direct spending 
for the CFPB, and makes the CFPB the only banking regulator to 
be subject to appropriations. If the Budget Committee Chairman 
exercises his authority to modify the discretionary caps to 
reflect the shift of the CFPB spending from the mandatory to 
the discretionary category, then there are no savings. If he 
does not adjust the discretionary cap, then he is effectively 
further lowering the discretionary cap by requiring more items 
to be funded under the same limit. Republicans may use that 
argument to further their efforts to slash spending for the 
CFPB.
     Elimination of the Office of Financial Research. 
This office supports the Financial Stability Oversight Council 
by collecting information on financial markets and conducting 
research on financial stability issues. It is authorized to 
collect fees from financial institutions with more than $50 
billion in assets to offset its expenses. Eliminating the 
office saves slightly over $250 million. Because the office's 
fees also support the activities of the Financial Stability 
Oversight Council, new appropriations of about $10 million per 
year will be necessary to fund those activities, putting more 
pressure on the discretionary spending cap.
     Reforms the flood insurance program. The estimate 
of $4.9 billion in savings relies on the provision in the 
budget resolution directing CBO to treat the change in the 
program's net income as if were deposited in the General Fund. 
The provisions are the same as those in H.R. 1309, which passed 
the House in July 2011.

           JUDICIARY COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Judiciary Committee recommended medical malpractice 
legislation that is substantively identical to the medical 
malpractice provisions in H.R. 5 that the House passed in 
March. CBO scores this legislation as saving a net total of 
$48.6 billion, for total deficit reduction that exceeds the 
Committee's instruction to find $39.7 billion in savings. The 
legislation caps noneconomic damages at $250,000 and makes it 
more difficult to recover punitive damages, replaces joint and 
several liability for losses with a ``fair share'' rule, 
imposes a strict statute of limitations for filing lawsuits, 
provides a safe harbor from punitive damages for products that 
meet FDA applicable safety requirements, and puts limits on 
contingency fee payments. The provisions of the bill apply to 
not only medical malpractice, but also to any ``health care 
liability claims''--providing new protections for insurance 
companies, drug and device manufacturers, and nursing homes. 
Like the Energy and Commerce proposal on medical malpractice, 
the Judiciary legislation also overrides applicable state laws 
in all 50 states.

       OVERSIGHT AND GOVERNMENT REFORM COMMITTEE RECONCILIATION 
                            RECOMMENDATIONS

    The Committee on Oversight and Government Reform passed on 
a party-line vote reconciliation recommendations that generate 
$83 billion by requiring all federal employees, including 
postal workers, to pay more for their retirement benefits. 
Consequently, each federal employee will, in effect, have their 
pay cut an average of more than $30,000 over the next ten 
years. These new cuts to federal employee pay come on top of 
$60 billion in cuts resulting from the two-year pay freeze and 
$15 billion in cuts resulting from increasing retirement 
contributions on new federal employee enacted in H.R. 3630, the 
Middle Class Tax Relief Act of 2012. Under the bill, most 
existing employees under the Civil Service Retirement System 
(CSRS) and the Federal Employee Retirement System (FERS) will 
face a 5 percentage point increase in their retirement 
contributions, which will be phased in over five years. The 
increase for new FERS employees is smaller--2.7 percentage 
points--because their contributions were already increased by 
2.3 percentage points as part of the Middle Class Tax Relief 
Act of 2012, which will go into full effect starting 2013. (The 
table below shows all changes in employee contributions.)

               [Contribution changes by employee category]
------------------------------------------------------------------------
                                                Contribution Rate
                                        --------------------------------
              Beneficiary                            Proposed
                                          Current    Increase   Proposed
                                             %          %       Final  %
------------------------------------------------------------------------
Existing:
    Federal Employees (CSRS)...........        7          5         12
    Federal LEO Employees (CSRS).......        7.5        5         12.5
    Members of Congress (CSRS).........        8          8.5       16.5
    Congressional Staff (CSRS).........        7.5        7.5       15
    Federal Employees (FERS)...........        0.8        5          5.8
    Federal LEO Employees (FERS).......        1.3        5          6.3
    Members of Congress (FERS).........        1.3        8.5        9.8
    Congressional Staff (FERS).........        1.3        7.5        8.8
Newly Hired:
    Federal Employees (FERS+)..........        3.1        2.7        5.8
    Federal LEO Employees (FERS+)......        3.6        2.7        6.3
    Newly Elected Members (FERS+)......        3.1        2.7        5.8
    Congressional Staff (FERS+)........        3.1        2.7        5.8
------------------------------------------------------------------------

    The proposal requires larger contributions from the 
paychecks of current legislative employees than from other 
federal employees. Current Members of Congress will have to pay 
an additional 8.5 percent of their salaries for their 
retirement benefit and current Congressional staff will have to 
pay an additional 7.5 percent, increases that are also phased 
in over five years. After full phase-in of the increases, most 
FERS employees will pay 5.8 percent (6.3 percent if a law 
enforcement employee) of their salaries toward their retirement 
benefit, up from 0.8 percent (1.3 percent if law enforcement) 
they pay this year. Current Members of Congress will pay 9.8 
percent and congressional staff will pay 8.8 percent, up from 
1.3 percent.
    The bill also eliminates the FERS annuity supplement for 
new employees, except those subject to mandatory retirement, 
starting in 2013. However, any significant savings resulting 
from this provision will not be realized until beyond the 10-
year budget window.

         Part II of Mark-up: Sequester Replacement Act of 2012

    In the second part of the reconciliation mark-up, the 
Budget Committee marked up H.R. 4966, Chairman Ryan's Sequester 
Replacement Act of 2012. When that legislation is combined with 
the reconciliation cuts considered during the first part of the 
mark-up, it fulfills the Majority's plan to repeal and replace 
the sequester scheduled for 2013 under the BCA, as envisioned 
by the Republican budget resolution. The Majority's complete 
reconciliation package makes no changes to the BCA that affect 
the discretionary requirements for 2014 and beyond. As a 
result, the sequester of funding for both defense and non-
defense remains in place for those years.
    Instead of the BCA's roughly $100 billion across-the-board 
sequester of spending for 2013--50 percent from defense and 50 
percent from non-defense programs--H.R. 4966 cancels the entire 
defense sequester and the sequester of non-defense 
discretionary spending under existing law. However, certain 
non-defense mandatory programs--including Medicare--will still 
be subject to sequester for 2013. In addition, it establishes a 
temporary discretionary cap of $1.047 trillion for 2013--the 
level set by the BCA--without any firewall between defense and 
non-defense spending. Effective in January 2013, the bill 
reduces that cap by $19 billion, limiting regular discretionary 
spending to $1.028 trillion. Any discretionary spending above 
that level would trigger a sequester.

REPUBLICAN APPROACH TO REPLACING THE SEQUESTER IS UNFAIR AND UNBALANCED

    The Majority's legislation is another example of their 
refusal to take a fair and balanced approach to reducing the 
deficit. Every bipartisan commission has recommended and the 
majority of Americans agree that we should take a balanced, 
bipartisan approach to reducing the deficit that both increases 
revenue and decreases spending. However, 98 percent of the 
Majority's Representatives have signed a pledge that they will 
not reduce the deficit by a single penny by cutting tax breaks 
for the wealthy.
    Instead, the Republican budget resolution and this 
reconciliation mark-up took a lopsided approach to replacing 
the sequester and reducing the deficit that shreds the social 
safety net for vulnerable Americans, and that fails to protect 
Medicare from sequester for even one year. Rather than asking 
big corporations and wealthy special interests to give up tax 
breaks they do not need, the Majority passed a plan that asks 
hundreds of thousands of low-income children, women, seniors, 
and other Americans to give up vital assistance that helps them 
make it from day to day.
    Two particularly egregious examples of their misguided 
choices are basic nutrition assistance and health care 
coverage. Although the Deficit Control Act of 1985 protects 
nutrition assistance and health care coverage for lower-income 
children and their families from sequester, the Republican 
reconciliation package that replaces the sequester for just one 
year specifically cuts funding for this important safety net 
assistance. Furthermore, the Majority made these harmful 
choices while protecting subsidies for agricultural businesses, 
big oil companies, and tax breaks for the wealthiest Americans. 
The Republican approach is not the fair and balanced approach 
to deficit reduction that most Americans want.

 DEMOCRATIC AMENDMENTS WOULD HAVE MADE THE RIGHT CHOICES FOR AMERICAN 
          FAMILIES AND REPLACED THE SEQUESTER FOR ALL 10 YEARS

    During the Budget Committee's mark-up of H.R. 4966, 
Democrats offered two amendments to change the Majority's 
legislation so that it makes the right choices for American 
families by taking a fair and balanced approach to reducing the 
deficit. Democrats offered an amendment that would have 
replaced the sequester for the entire 10-year period called for 
under the BCA--not just one year, as the Republican plan does. 
The amendment would have replaced the sequester with balanced 
legislation that (1) cuts spending while maintaining the 
Medicare guarantee and protecting Social Security and a strong 
social safety net; (2) increases revenues without increasing 
the tax burden on middle-income Americans; and (3) grows jobs 
and the economy by, among other things, making strategic 
investments in education, science, research, and critical 
infrastructure necessary to compete in the global economy. This 
amendment was defeated on a party-line vote.
    Democrats also offered an amendment to exempt Medicare from 
the 2013 sequester. This amendment would have prevented across-
the-board payment cuts to doctors, hospitals, nursing homes, 
home health aides, and others that provide critical care to 
Medicare beneficiaries. The Democratic amendment would have 
paid for protecting Medicare from sequester by eliminating a 
wasteful tax break for big oil and gas companies. This 
amendment was defeated on a party-line vote.

 Democratic Motions and Amendments Offered in Budget Committee Mark-Up


 Motion #1: Protecting Health Care Coverage for At Least 
        300,000 Low-Income Children and Lowering the Deficit by 
        Eliminating Certain Tax Subsidies for Big Oil

    A motion by Rep. Castor that the Committee on the Budget 
direct its Chairman to request on behalf of the Committee that 
the rule for consideration of the Sequester Replacement 
Reconciliation Act of 2012 make in order an amendment that 
would strike from Title II of the bill section 213, which 
repeals the maintenance of effort requirements for children in 
the Children's Health Insurance Program (CHIP) and children and 
adults in Medicaid; and section 215, which repeals CHIP 
performance bonus payments; and replaces them with a provision 
that increases revenue by eliminating a wasteful tax break that 
encourages big oil companies to produce oil in foreign 
countries rather than here at home.

 Motion #2: Protecting the Health of Women and Children While 
        Closing Tax Loopholes that Reward Corporations that Ship 
        American Jobs Overseas

    A motion by Rep. Schwartz and Rep. Wasserman Schultz that 
the Committee on the Budget direct its Chairman to request on 
behalf of the Committee that the rule for consideration of the 
Sequester Replacement Reconciliation Act of 2012 make in order 
an amendment that would strike from Title II of the bill 
section 202, which repeals the Prevention and Public Health 
Fund under the Affordable Care Act, and replace that section 
with changes in law to reduce the deficit by closing loopholes 
in the U.S. international corporate tax system that encourage 
companies to ship jobs overseas.

 Motion #3: Rejecting the Elimination of the Social Services 
        Block Grant While Ending Taxpayer Subsidies to Big Oil

    A motion by Rep. Doggett and Rep. Bonamici that the 
Committee on the Budget direct its Chairman to request on 
behalf of the Committee that the rule for consideration of the 
Sequester Replacement Reconciliation Act of 2012 make in order 
an amendment that strikes Subtitle C of Title VI--the 
elimination of the Social Services Block Grant--of the bill, 
and replaces that section with changes in law that reduce the 
deficit by repealing the tax subsidies for the ``Big 5'' major 
integrated oil companies.

 Motion #4: Protect Food and Nutrition Support for Struggling 
        Children and Families While Cutting Taxpayer Direct Payments to 
        Agricultural Interests

    A motion by Rep. Blumenauer and Rep. Yarmuth that the 
Committee on the Budget direct its Chairman to request on 
behalf of the Committee that the rule for consideration of the 
Sequester Replacement Reconciliation Act of 2012 make in order 
an amendment that (1) would strike Title 1, which reduces 
spending in the Supplemental Nutrition Assistance Program, and 
(2) replaces it with changes in law to reduce the deficit by 
reforming agricultural commodity and crop insurance programs.

 Amendment #1: Taking a Fair and Balanced Approach to Reducing 
        the Deficit and Replacing the Sequester

    An amendment by Rep. Van Hollen that replaces the sequester 
for the entire 10-year period called for under the Budget 
Control Act with balanced, bipartisan legislation that:
         increases revenues without increasing the 
        tax burden on middle-income Americans,
         decreases spending while maintaining the 
        Medicare guarantee and protecting Social Security and 
        the social safety net for vulnerable Americans, and
         promotes economic growth and jobs.

Amendment #2: Prevent Cuts to Medicare

    An amendment by Rep. McCollum and Rep. Tim Ryan (OH) that 
exempts Medicare from the 2013 sequester, preventing across-
the-board payment cuts to doctors, hospitals, nursing homes, 
home health aides, and others that provide critical care to 
Medicare beneficiaries. The amendment pays for protecting 
Medicare from sequester by eliminating wasteful tax breaks for 
big oil and gas companies.
                                   Chris Van Hollen.
                                   Bill Pascrell, Jr.
                                   Marcy Kaptur.
                                   Kathy Castor.
                                   Karen Bass.
                                   Betty McCollum.
                                   Tim Ryan.
                                   Allyson Y. Schwartz.
                                   Suzanne Bonamici.
                                   Gwen Moore.
                                   Debbie Wasserman Schultz.
                                   John Yarmuth.
                                   Lloyd Doggett.
                                   Michael M. Honda.
                                   Earl Blumenauer.
                                   Heath Shuler.

                            DISSENTING VIEWS

    Chairman Ryan, Ranking Member Van Hollen, thank you for 
giving me the opportunity to address these issues of great 
importance to my district, as well as millions of communities 
across this country. It is imperative that we use this 
opportunity to discuss what should be the priorities of this 
Congress: achieving economic growth through job creation, 
expanding our middle class, and protecting our social safety-
net. However, the path that the Tea Party majority and Chairman 
Ryan have put before us today rejects these priorities, and 
seeks to double down the the failed policies that already 
brought us massive income inequality, a weakened production 
base and a shrinking middle class. In short, the majority's 
choice is to cut $75 billion from programs that directly 
benefit seniors, the middle class and poor, in order to protect 
special interests and millionaires.
    As a Member of the Committee on Ways and Means, I fought 
against that committee's unfair reconciliation legislation that 
inordinately placed the burdens of increased defense spending 
and tax cuts for the very wealthy on seniors, the disabled and 
middle class families. The Democratic minority put forth 
multiple amendments that sought to ask those who have so much 
already, to contribute a little more so we could avoid cuts to 
important programs.
    Unfortunately, the majority rejected these amendments, and 
instead favored a path that took $47 billion in tax credits 
that middle class families could use to purchase health 
insurance. By removing the incentive to enter the healthcare 
exchanges, not only does a middle class individual's tax 
liability increase, but so do the general costs for the rest of 
us who will have to shoulder the health costs of these 
uninsured Americans. Additionally, we already made appropriate 
adjustments to the caps on repayment in December of 2010, and 
they were reasonable, unlike these changes that are being 
considered today.
    The majority also choose to limit the ability of families 
to use the Child Tax Credit for some U.S. citizens, as well as 
all but eliminate the Social Service Block Grant. In my home 
state of New Jersey, there are almost three-hundred thousand 
children living in poverty, and almost forty percent of their 
families use an Individual Taxpayer Identification Number 
(ITIN) to help bear the cost of raising these children. Denying 
the Child Tax Credit to ITIN filers will take an average of 
$1,800 out of the pockets of families who earn an average of 
$21,000 a year. And by eliminating the Social Service block 
grant for 2013, they prioritized oil companies and millionaires 
over 23 million Americans, including the disabled and seniors, 
who rely on programs ranging from transportation assistance to 
Meals on Wheels.
    Other committees have also enacted devastating cuts that 
unfairly place the burden on the middle class, seniors, and our 
most vulnerable citizens. The Agriculture Committee cut $33.2 
billion from the Supplemental Nutrition Assistance Program 
(SNAP) over ten years, money that goes to making sure children 
and families who are struggling financially have access to 
healthy food. The Energy and Commerce Committee made $25 
billion in cuts to the Medicaid program in the form of 
disproportionate share hospital (DSH) payment rebasing in 2022, 
and changes to Medicaid eligibility rules, a slight decrease in 
state provider taxes and the repeal of the Prevention and 
Public Health Fund. This is an attack on public health efforts 
and hospitals who treat low income patients.
    There are other fair and balanced methods to reducing our 
debt and deficit. This is why I support the Democratic 
proposals that ask large oil and gas companies, millionaires 
and companies that ship jobs overseas, to pay just a little 
more to ensure that millions of seniors, middle class families 
and our most vulnerable citizens are not left alone to bear the 
burden of deficit reduction. Plain and simple, the majority is 
choosing millionaires over women and children's access to 
healthcare. They are choosing corporate welfare for outsourcing 
jobs over helping the next generation of workers afford 
college. And they are choosing oil and gas companies over 
ensuring that our most vulnerable citizens, including seniors 
and children, have access to important nutrition and healthcare 
programs.
    Once again we find ourselves debating extreme attempts by 
Tea Party Republicans to hurt middle and lower income 
Americans, while protecting special interests, under the guise 
of deficit reduction. Not only will these choices fail to 
produce economic growth and job creation, they do not reflect 
the morals of our country. I reject the cynicisms that the 
Republican majority has in the American people, because I 
believe that together we can protect seniors and our most 
vulnerable citizens, and lay the foundation for an economy that 
provides future generations with the prosperity we have sought 
for ourselves.
                                         Bill Pascrell, Jr.
                       Appendix: Legislative Text

                              ----------                              


    The following legislative text incorporates both amendments 
adopted in the Committee on the Budget and technical 
corrections.

                               H.R. 4966

To amend the Balanced Budget and Emergency Deficit Control Act of 1985 
to replace the sequester established by the Budget Control Act of 2011.

                    IN THE HOUSE OF REPRESENTATIVES

                             April 27, 2012

Mr. Ryan of Wisconsin introduced the following bill; which was 
        referred to the Committee on the Budget, and in 
        addition to the Committee on Rules, for a period to be 
        subsequently determined by the Speaker, in each case 
        for consideration of such provisions as fall within the 
        jurisdiction of the committee concerned

 A BILL To amend the Balanced Budget and Emergency Deficit Control Act 
of 1985 to replace the sequester established by the Budget Control Act 
                                of 2011.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sequester Replacement Act of 
2012''.

SEC. 2. CONTINGENT EFFECTIVE DATE.

    This Act and the amendments made by it shall take effect 
upon the enactment of the Act provided for in section 201 of H. 
Con. Res. 112 (112th Congress) and this Act and the amendments 
made by it shall have no force or effect if such Act provided 
for in such section is not enacted.

SEC. 3. PROTECTING VETERANS PROGRAMS FROM SEQUESTER.

    Section 256(e)(2)(E) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is repealed.

SEC. 4. ACHIEVING $19 BILLION IN DISCRETIONARY SAVINGS.

    (a) Revised 2013 Discretionary Spending Limit.--Paragraph 
(2) of section 251(c) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended to read as follows:
            ``(2) with respect to fiscal year 2013, for the 
        discretionary category, $1,047,000,000,000 in new 
        budget authority;''.
    (b) Discretionary Savings.--Section 251A(7)(A) of the 
Balanced Budget and Emergency Deficit Control Act of 1985 is 
amended to read as follows:
                    ``(A) Fiscal year 2013.--
                            ``(i) Fiscal year 2013 
                        adjustment.--On January 2, 2013, the 
                        discretionary category set forth in 
                        section 251(c)(2) shall be decreased by 
                        $19,104,000,000 in budget authority.
                            ``(ii) Supplemental sequestration 
                        order.--On January 15, 2013, OMB shall 
                        issue a supplemental sequestration 
                        report for fiscal year 2013 and take 
                        the form of a final sequestration 
                        report as set forth in section 
                        254(f)(2) and using the procedures set 
                        forth in section 253(f), to eliminate 
                        any discretionary spending breach of 
                        the spending limit set forth in section 
                        251(c)(2) as adjusted by clause (i), 
                        and the President shall order a 
                        sequestration, if any, as required by 
                        such report.''.

SEC. 5. CONFORMING AMENDMENTS TO SECTION 314 OF THE CONGRESSIONAL 
                    BUDGET AND IMPOUNDMENT CONTROL ACT OF 1974.

    Section 314(a) of the Congressional Budget Act of 1974 is 
amended to read as follows:
    ``(a) Adjustments.--
            ``(1) In general.--The chair of the Committee on 
        the Budget of the House of Representatives or the 
        Senate may make adjustments as set forth in paragraph 
        (2) for a bill or joint resolution, amendment thereto 
        or conference report thereon, by the amount of new 
        budget authority and outlays flowing therefrom in the 
        same amount as required by section 251(b) of the 
        Balanced Budget and Emergency Deficit Control Act of 
        1985.
            ``(2) Matters to be adjusted.--The chair of the 
        Committee on the Budget of the House of Representatives 
        or the Senate may make the adjustments referred to in 
        paragraph (1) to--
                    ``(A) the allocations made pursuant to the 
                appropriate concurrent resolution on the budget 
                pursuant to section 302(a);
                    ``(B) the budgetary aggregates as set forth 
                in the appropriate concurrent resolution on the 
                budget; and
                    ``(C) the discretionary spending limits, if 
                any, set forth in the appropriate concurrent 
                resolution on the budget.''.

SEC. 6. TREATMENT FOR PAYGO PURPOSES.

    The budgetary effects of this Act and any amendment made by 
it, and the budgetary effects of the Act provided for by 
section 201 of H. Con. Res. 112 (112th Congress), shall not be 
entered on either PAYGO scorecard maintained pursuant to 
section 4(d) of the Statutory Pay-As-You-Go Act of 2010.

SEC. 7. ELIMINATION OF THE FISCAL YEAR 2013 SEQUESTRATION FOR DEFENSE 
                    DIRECT SPENDING.

    Any sequestration order issued by the President under the 
Balanced Budget and Emergency Deficit Control Act of 1985 to 
carry out reductions to direct spending for the defense 
function (050) for fiscal year 2013 pursuant to section 251A of 
such Act shall have no force or effect.