REPUBLICAN CONTRACT WITH AMERICA As Republican Members of the House of Representatives and as citizens seeking to join that body we propose not just to change its policies, but even more important, to restore the bonds of trust between the people and their elected representatives. That is why, in this era of official evasion and posturing, we offer instead a detailed agenda for national renewal, a written commitment with no fine print. This year's election offers the chance, after four decades of one-party control, to bring to the House a new majority that will transform the way Congress works. That historic change would be the end of government that is too big, too intrusive, and too easy with the public's money. It can be the beginning of a Congress that respects the values and shares the faith of the American family. Like Lincoln, our first Republican president, we intend to act "with firmness in the right, as God gives us to see the right." To restore accountability to Congress. To end its cycle of scandal and disgrace. To make us all proud again of the way free people govern themselves. On the first day of the 104th Congress, the new Republican majority will immediately pass the following major reforms, aimed at restoring the faith and trust of the American people in their government: FIRST, require all laws that apply to the rest of the country also apply equally to the Congress; SECOND, select a major, independent auditing firm to conduct a comprehensive audit of Congress for waste, fraud or abuse; THIRD, cut the number of House committees, and cut committee staff by one-third; FOURTH, limit the terms of all committee chairs; FIFTH, ban the casting of proxy votes in committee; SIXTH, require committee meetings to be open to the public; SEVENTH, require a three-fifths majority vote to pass a tax increase; EIGHTH, guarantee an honest accounting of our Federal Budget by implementing zero base-line budgeting. Thereafter, within the first 100 days of the 104th Congress, we shall bring to the House Floor the following bills, each to be given full and open debate, each to be given a clear and fair vote and each to be immediately available this day for public inspection and scrutiny. 1. THE FISCAL RESPONSIBILITY ACT A balanced budget/tax limitation amendment and a legislative line-item veto to restore fiscal responsibility to an out-of-control Congress, requiring them to live under the same budget constraints as families and businesses. 2. THE TAKING BACK OUR STREETS ACT An anti-crime package including stronger truth-in-sentencing, "good faith" exclusionary rule exemptions, effective death penalty provisions, and cuts in social spending from this summer's "crime" bill to fund prison construction and additional law enforcement to keep people secure in their neighborhoods and kids safe in their schools. 3. THE PERSONAL RESPONSIBILITY ACT Discourage illegitimacy and teen pregnancy by prohibiting welfare to minor mothers and denying increased AFDC for additional children while on welfare, cut spending for welfare programs, and enact a tough two-years-and-out provision with work requirements to promote individual responsibility. 4. THE FAMILY REINFORCEMENT ACT Child support enforcement, tax incentives for adoption, strengthening rights of parents in their children's education, stronger child pornography laws, and an elderly dependent care tax credit to reinforce the central role of families in American society. 5. THE AMERICAN DREAM RESTORATION ACT A S500 per child tax credit, begin repeal of the marriage tax penalty, and creation of American Dream Savings Accounts to provide middle class tax relief. 6. THE NATIONAL SECURITY RESTORATION ACT No U.S. troops under U.N. command and restoration of the essential parts of our national security funding to strengthen our national defense and maintain our credibility around the world. 7. THE SENIOR CITIZENS FAIRNESS ACT Raise the Social Security earnings limit which currently forces seniors out of the work force, repeal the 1993 tax hikes on Social Security benefits and provide tax incentives for private long-term care insurance to let Older Americans keep more of what they have earned over the years. 8. THE JOB CREATION AND WAGE ENHANCEMENT ACT Small business incentives, capital gains cut and indexation, neutral cost recovery, risk assessment/cost-benefit analysis, strengthening the Regulatory Flexibility Act and unfunded mandate reform to create jobs and raise worker wages. 9. THE COMMON SENSE LEGAL REFORM ACT "Loser pays" laws, reasonable limits on punitive damages and reform of product liability laws to stem the endless tide of litigation. 10. THE CITIZEN LEGISLATURE ACT A first-ever vote on term limits to replace career politicians with citizen legislators. Further, we will instruct the House Budget Committee to report to the floor and we will work to enact additional budget savings, beyond the budget cuts specifically included in the legislation described above, to ensure that the Federal budget deficit will be less than it would have been without the enactment of these bills. Respecting the judgment of our fellow citizens as we seek their mandate for reform, we hereby pledge our names to this Contract with America. *************************** For more information, call 1-800-742-2662, effective Wednesday, September 28, 1994. ---- REPUBLICAN CONTRACT WITH AMERICA The following are 10 bills to be considered during the first 100 days of a Republican-led 104th Congress. The Fiscal Responsibility Act Highlights: The bill contains two budgetary reforms: a constitutional balanced budget amendment and a permanent line-item veto. Supporters of a balanced budget amendment argue that Congress has shown itself both unwilling and incapable of balancing the federal budget. A constitutional amendment is necessary to force lawmakers to do what, on their own, they cannot: get a handle on out-of-control spending. Opponents of the idea argue it will transfer budget decision-making to the courts, will result in massive cuts in Social Security and usurp Congress' constitutional authority to control government purse strings. Proponents of the line-item veto maintain that given our current deficit situation, the president should have the authority to single out unnecessary and wasteful spending provisions in bills passed by Congress. Many critics assert, however, that the line- item veto will give too much power to the executive branch to control federal spending -- a responsibility clearly given to the legislative branch in the U.S. Constitution. Background: The Impetus Perpetual annual deficits, compounded by the fact that the federal government has not ended a fiscal year in surplus since 1969, has led many economists, former presidents, Members of Congress and the public-at-large to call for more stringent and binding budget mechanisms -- mechanisms that Congress will not be able to routinely waive or ignore. Many Americans have become disillusioned with a Congress that has consistently found ways to circumvent the few budgetary restraints it has set for itself: In 1985, Congress passed the Balanced Budget and Emergency Deficit Control Act (P.L. 99-177; popularly known as Gramm- Rudman-Hollings) to establish steadily-declining deficit targets, supposedly bringing a balanced budget in FY 1991. In September 1987, faced with a projected budget deficit of $183 billion for FY 1988 (far exceeding the $108 billion target), Congress revised the law (P.L. 100-119) and adopted higher deficit levels supposedly bringing a balanced budget in FY 1993. In 1990, and again in 1993, Congress revised and extended these targets -- postponing a balanced budget indefinitely. Congressional budget rules allow the House to automatically raise the ceiling on the federal debt without a separate vote -- protecting members from the difficult decision of increasing the federal debt. These and other actions demonstrate to many that Congress has neither the will nor the desire to cut wasteful government spending and enact a balanced budget. The BBA's Recent History In addition to the line-item veto, one of the more rigorous proposals that has garnered significant popular and congressional support is the balanced budget amendment. A June 11,1992 Investors' Business Daily article cited a Washington Post/ABC News poll finding that 75 percent of Americans favor a balanced budget amendment. However, Congress has been considering balanced budget amendments since 1936 with little success. The closest Congress ever came to passing one was in 1986 when the Senate defeated a balanced budget resolution by one vote. The House last considered a balanced budget amendment in March 1994. At that time, four different versions of the amendment were debated. The first, a Stenholm/Smith (OR) resolution, would have amended the U.S. Constitution to require that total outlays for any fiscal year not exceed total receipts for that year unless three-fifths of the House and three-fifths of the Senate vote to incur a deficit. The authors made an exception for any fiscal year in which a declaration of war is in effect or the U.S. is engaged in a military conflict that poses a threat to national security. Their proposal also required (1) a three- fifths roll call vote in each chamber to increase the public debt limit and (2) that a majority of the membership of each chamber approve a tax increase. On final passage, it failed 271-153 -- 12 votes shy of the two-thirds margin. The House also rejected a Kyl substitute giving the president the line-item veto, limiting outlays to 19 percent of GDP for a given fiscal year, and requiring a three-fifths vote in both chambers to waive the requirement, and a Wise/Pomeroy/Price substitute allowing a majority of the House and Senate to waive the balanced budget requirement in times of war, military conflict or economic recession and exempting Social Security. Although the House adopted a Barton/Tauzin amendment requiring three-fifths roll- call votes of the total membership of the House and Senate or a declaration of war to waive the balanced budget amendment, and a three-fifths vote to increase the debt limit or raise taxes, it was not considered to be finally adopted since the substitutes were considered under king-of-the-hill procedures (i.e., the last amendment adopted in committee of the whole is reported back the House for a vote on final passage). Because the Stenholm/Smith (OR) amendment was considered and passed after passage of the Barton/Tauzin amendment, only the former was considered to have been adopted in the Committee of the Whole. Only the Stenholm/Smith (OR) version was reported back to the House, where it failed to receive the necessary two-thirds vote. A few weeks prior to House consideration of the BBA, the Senate debated a similar resolution, rejecting it on March 1, 1994 by a vote of 63-37 -- four votes short of the required two-thirds margin. That measure (S.J.Res. 41), sponsored by Senator Simon, would have made the balanced budget requirement effective two years after its ratification or in 2002, whichever came later. During consideration, the Senate also rejected an alternative resolution offered by Senator Reid (1) ensuring that courts cannot impose tax hikes if Congress fails to balance the budget, (2) exempting Social Security, (3) allowing Congress to waive the balanced budget requirement in times of economic recession, and (4) permitting the government to borrow for infrastructure needs. It was defeated 22-78. Amendments to the Constitution As stipulated in the U.S. Constitution, amendments to our founding document must be approved by two-thirds of those present and voting in both the House and Senate and three-fourths (38) of the 50 state legislatures. The Constitution has been amended 27 times, including amendments protecting the free exercise of religion; protecting the right to keep and bear arms; protecting against unreasonable searches and seizures; guaranteeing the right to a speedy and public trial; protecting against cruel and unusual punishment; abolishing slavery; guaranteeing equal protection under the law to all; giving Congress the power to tax; prohibiting the manufacture, sale or transportation of alcohol and then later repealing this prohibition; and giving women the right to vote. The most recent constitutional amendment -- prohibiting a congressional pay raise from taking effect during the Congress in which it was adopted -- was ratified on May 7, 1992. Line-Item Veto A rescission bill rescinds or cancels, in whole or part, budget authority previously granted by Congress to reduce spending or because budget authority is no longer needed. Under current law, rescissions proposed by the president must be transmitted in a special message to Congress. Under the 1974 Impoundment Control Act (ICA; P.L. 93-344), Congress must complete action on a rescission bill within 45 days of continuous session after receipt of the proposal or else the budget authority must be made available for obligation. Budget rules governing rescissions stipulate that if the Appropriations Committee does not act on rescissions submitted by the president within 25 days of continuous session, one-fifth of the members of the House can call for discharge of the bill from committee. (House rules for other bills require a waiting period of 30 days and that a majority of members sign a discharge petition.) The Impoundment Control Act of 1974 was the congressional response to the Nixon Administration's fondness for rescinding or deferring budget authority previously approved by Congress. This confrontation intensified in the 92nd and 93rd Congresses as President Nixon used the impoundment tool to reorder national priorities and alter programs supported by lawmakers. In the ICA, Congress required the president to inform it of all proposed rescissions and deferrals and submit specific information regarding each proposal. The original provisions of the ICA allowed a deferral to take effect unless either the House or the Senate took action to disapprove it -- effectively providing for a one-house veto. This procedure was invalidated by the 1983 Supreme Court decision in I.N.S. v. Chadha. In 1986, a federal district court ruled that the president's deferral authority under ICA was no longer available, since it was inextricably linked to the one-house veto provision in the law. The lower court decision was upheld by the appeals court in 1987. Congress responded to these rulings with the Balanced Budget Affirmation Act (P.L. 100-119), which did away with policy-based deferrals and amended the ICA to comply with the court's decision. The current debate on presidential authority arises out of the fact that presidents can veto appropriations bills in their entirety but not in part. Supporters of the line-item veto argue that the president should be able to selectively weed out wasteful pork-barrel spending in an otherwise good bill. This Congress, over 20 line-item veto bills have been introduced. The House also has twice passed so-called "expedited rescissions" legislation (H.R. 1578 and H.R. 4600), which require presidential rescissions to be approved by Congress under accelerated committee and floor procedures. Another version of the line-item veto, considered as an amendment to these bills, is the "enhanced rescission" proposal, which forces Congress to pass a disapproval bill to block proposed presidential cuts. A constitutional line- item veto or a stand-alone legislative line-item veto has never been considered by the House -- all line-item veto proposals have been considered as amendments to other bills, and have either failed or been dropped from the final version of the legislation. Forty-three of the nation's governors have a line-item veto authority of some sort. Provisions: Balanced Budget Amendment The bill amends the U.S. Constitution to require that total outlays for any fiscal year do not exceed total receipts for that year. The resolution defines "receipts" as all receipts except those derived from borrowing, and "outlays" as all outlays except principal payments on the debt. It requires that the president submit, and Congress pass, a balanced budget each fiscal year unless three-fifths of the whole House and three-fifths of the whole Senate vote to incur a deficit. The resolution waives the balanced budget requirement for any fiscal year in which a declaration of war is in effect or the U.S. is engaged in an "imminent and serious threat to national security." A joint resolution indicating this situation must be adopted by a majority of the total membership of each house and must be signed by the president. The bill stipulates that the federal public debt will be limited to its level on the first day of the second fiscal year beginning after ratification of the BBA. The limit may only be increased by a three-fifths roll call vote in each chamber. Tax increases must also be approved by a three-fifths majority of the membership of each house. Finally, the bill mandates that all associated votes must be roll call votes, and that the balanced budget requirement will take effect in FY 2002 or the second fiscal year after it is ratified, whichever is later. Line-Item Veto The bill gives the president a permanent legislative line-item veto. Under this procedure, the president could strike any appropriation or targeted tax provision (a provision that provides special treatment to a particular taxpayer or limited class of taxpayers) in any bill. The president is required to submit his rescission proposal within 20 calendar days (not including weekends or holidays) after Congress finally passes a bill or resolution and must submit a separate rescission proposal for each piece of legislation. The president's proposed rescissions are to take effect unless Congress disapproves them in an up or down vote within 20 days after receipt of the proposal. If the president vetoes the disapproval bill, Congress would have to override it by a two-thirds vote. The bill also sets forth the procedures for Senate consideration of a proposed rescission, including limiting debate time on a disapproval bill to 10 hours. Finally, The bill limits a disapproval bill to only those matters relating to the proposed rescissions transmitted by the president and stipulates that a disapproval bill is unamendable. These provisions, however, are made in accordance with House rules and may be waived by the Rules Committee at any point. This bill is identical to the Michel/Solomon amendment offered during House consideration of H.R. 4600, the Expedited Rescissions Act of 1994. The amendment was rejected 205-218 on July 14, 1994 (Roll Call #327). * * * Taking Back Our Streets Act Highlights: The bill embodies the Republican approach to fighting crime: making punishments severe enough to deter criminals from committing crimes, making sure that the criminal justice system is fair and impartial for all, and making sure that local law enforcement officials (who are on the streets every day), and not Washington bureaucrats direct the distribution of federal law enforcement funds. The bill sets mandatory sentences for crimes involving the use of firearms, authorizes $10.5 billion for state prison construction grants, establishes truth-in-sentencing guidelines, reforms the habeas corpus appeals process, allows police officers who in good faith seized incriminating evidence in violation of the "exclusionary rule" to use the evidence in court, requires that convicted criminals make restitution to their victims, and authorizes $10 billion for local law enforcement spending. Finally, in addressing one of the most pressing problems in our country today, the bill streamlines the current alien deportation system, while still allowing convicted aliens the right to judicial review and appeal. Bill sponsors argue that this legislation strikes at the heart of our violent crime problem by deterring criminals from committing crimes in the first place, and making sure that if they do commit a crime, they serve the sentence they are given and are not able to abuse the appeals process. Supporters contend that this bill fixes a number of problems created by the recently-enacted omnibus crime bill, as well as serious problems left unaddressed by that legislation. Critics maintain that the measure concentrates too much on punishment and not enough on prevention; the way to stop crime, they argue, is not to keep filling our jails, but to keep at-risk youth from going there in the first place. Background: Crime in America: Putting the Debate in Context Statistics paint a grim picture, illustrating clearly that the U.S. has failed to get a handle on its growing crime problem. One expert has estimated that a 20 year old black male has a greater chance of being murdered on the streets than a soldier in World War II stood of dying in combat. According to the FBI, the rate of violent crime in the U.S. is worse than in any other western-developed country, with a murder occurring every 21 minutes, a rape every five minutes, a robbery every 46 seconds and an aggravated assault every 29 seconds. Violent crime or property crime victimizes one in four U.S. households. Every year, nearly five million people are victims of violent crime such as murder, rape, robbery or assault, and 19 million Americans are victims of property crimes such as arson or burglary. Juvenile crime has increased by 60 percent between 1981 and 1990 (compared to an increase of five percent among adults) and the number of inmates convicted of drug offenses rose 14 percent from 1983 to 1989. On all fronts, the problem has reached epidemic proportions. This crime crisis is particularly severe among minorities and the poor. The U.S. homicide rate for black males between the ages of 15 and 24 is 283 times that of male homicide rates in 17 other nations. And homicide is now the leading cause of death for blacks aged 15 to 34. Poor households are victimized more often than upper income households. In 1992, households with incomes of less than $7,500 experienced crime at a rate of 136.7 per 1,000 compared to the rate of 83.3 per 1,000 for households with incomes between $30,000 and $49,000. While the problem is severe, statistics illustrate that a small percentage of criminals commit the vast majority of violent crimes. Just seven percent of criminals commit two-thirds of all violent crime, including three fourths of rapes and robberies, and virtually all murders. A 1991 study done by the Bureau of Alcohol, Tobacco and Firearms indicated that 471 armed criminals had a total of 3,088 felony convictions -- an average of 6.55 felonies each. To make matters worse, many of these criminals either are never caught, or, if found guilty, do not serve their entire prison sentence. Every year, over 60,000 criminals convicted of a violent crime never go to prison -- for every 100 crimes reported only three criminals go to prison. The Bureau of Justice Statistics has found that only 45.4 percent of court- ordered confinement is served on average, and 51 percent of violent offenders sent to prison are released in two years or less. These numbers are even more telling in light of the fact that at least 30 percent of the murders in this country are committed by people on probation, parole or bail. Faced with prison overcrowding, 17 states have begun emergency release programs. Overall, the risk of punishment has declined in the past 40 years while the annual number of serious crimes committed has skyrocketed. All this has led to public calls for "truth-in-sentencing" laws (requiring criminals to serve a significant percentage of their sentences without a chance of parole) and "three strikes, you're out" laws (requiring life in prison for recidivists convicted of their third violent felony). Opponents of strict sentencing laws like these argue that "locking people up" does not address the problem of why crimes are committed in the first place. Evidence suggests, however, that there is a strong correlation between increased incarceration and decreased crime rates: from 1990- 1991, states with the greatest increases in criminal incarceration rates experienced, on average, a 12.7 percent decrease in crime, while the 10 states with the weakest incarceration rates experienced an average 6.9 percent increase in crime. Recent Legislation Just a few weeks ago, President Clinton signed P.L. 103-322, the Omnibus Crime Control Act of 1994 after nearly one year of congressional hearings, mark-ups, floor votes, conference wranglings, a delayed recess, and weekend votes. Many members spoke out against the legislation, arguing that it did little to address the fundamental crime problem in our country. Relying on expensive "Great Society-esque" programs, the bill attempted to do what all other big government social programs have failed to do: make individuals responsible for their actions and instill a sense of right and wrong in those with a propensity to commit a crime. Criticism focused not only on what the bill contained, but what it lacked. Republicans argued that is should have included reform of the habeas corpus process (the process by which inmates challenge the constitutionality of their sentences), a good faith exemption for the exclusionary rule, tough language against sexual predators, more money for state prison construction, and stronger requirements that states enact truth-in-sentencing laws to be eligible for grant assistance. After a crazy weekend session at the end of August, the conference agreement was finally approved by the House 235-195 (Roll Call #416). When all was said and done, the compromise authorized a total of $30 billion over six years, including $5.4 billion for prevention programs, $7.9 billion for new prison construction and $8.8 billion for new police officers. It also included the so-called "three strikes, you're out" provision, applied the death penalty to over 50 new crimes, increased penalties for repeat federal sex offenders, and banned at least 150 semiautomatic weapons. The final version did not include the controversial Racial Justice Act (which allows defendants to introduce in their defense statistical evidence that blacks receive death sentences more often than whites) or any reform of the habeas corpus process. In addition to passing the first omnibus crime bill in four years, the 103rd Congress also passed the Brady Bill, which established a five-day waiting period for the purchase of a handgun. The House approved that measure (H.R. 1025) on November 10, 1993 by a vote of 238-189. President Clinton signed it into law on November 30, 1993 as P.L. 103-159. Other smaller crime- related bills passed during this Congress include the National Child Protection Act of 1993 (P.L. 103-209) which established criminal background checks for child care providers, and the International Parental Kidnapping Crime Act (P.L. 103-173) which made it a federal crime for a parent to kidnap a child under the age of 16 years from his custodial parent and remove him from the United States. Provisions: Death Penalty Provisions (Title I) General Habeas Corpus Reform. The bill makes a number of revisions to federal and state habeas corpus processes (the process by which prisoners who have exhausted all direct appeals challenge the constitutionality of their sentences). Specifically, it places a one-year limitation on the filing of general federal habeas corpus appeals after all state remedies have been exhausted. State capital cases must be filed in a federal court within six months, and state capital prisoners who file a second or successive federal habeas appeal must receive a certificate of probable cause stating that their case has merit. Non-capital federal prisoners must file within two years. The bill also forces federal courts to consider federal habeas petitions within a certain time frame. In addition to placing a time limit on when appeals may be made, The bill limits prisoners to one appeal unless the defendant can show by "clear and convincing evidence, that but for constitutional error, no reasonable fact finder would have found [him] guilty of the underlying offense or eligible for the death penalty." Under current law, there are virtually no limits or restrictions on when prisoners can file habeas corpus appeals. For example, under current law, defendants can appeal anytime there is a change in the law or a new Supreme Court ruling. Bill sponsors argue that delays of up to 14 years are not uncommon, making abuse of the habeas corpus system the most significant factor in states' inability to implement credible death penalties. They also contend that current law favors the convicted criminal. For example, the recently-enacted crime legislation included a requirement that at least two lawyers be appointed to represent the defendant at every stage of the process. Latin for "you have the body," a habeas corpus writ is used to determine whether a person is lawfully imprisoned. Originally designed as a remedy for imprisonment without trial, it is now a tool of federal and state defendants who have been convicted and exhausted all direct appeals (prisoners currently have three successive procedures to challenge a conviction or sentence: appeal, state habeas corpus and federal habeas corpus). Critics of the current habeas corpus process argue that (1) most petitions are totally lacking in merit, (2) thousands upon thousands of frivolous petitions clog the federal district court dockets each year, and (3) it allows prisoners on death row to almost indefinitely delay their punishment. Authorization of Funds for States to Prosecute Capital Cases. Congress already provides funds for death penalty resource centers to litigate federal habeas corpus petitions for death row inmates. The bill authorizes equal funding for states to prosecute these cases. Bill sponsors argue that equal funds should be provided to both the defense and the prosecution in these cases. Reform of Death Penalty Procedures. The bill mandates that juries be instructed to recommend a death sentence if aggravating factors (circumstances of the crime that increase the level of guilt) outweigh "mitigating factors" (circumstances that reduce the degree of moral culpability). Juries must also be instructed to avoid any "influence of sympathy, sentiment, passion, prejudice or other arbitrary factors" in their decisions. Under the recent omnibus crime control act, the Justice Department is required to notify the court and the defendant that it intends to seek the death penalty, and it must indicate the "aggravating" factors it intends to prove as the basis for imposition of a capital sentence. The law specifically states that a jury is never required to impose a death sentence (even if it finds that aggravating factors outweigh mitigating factors), and that death penalties can never be imposed on individuals who are mentally retarded, incompetent or under 18 years of age at the time of their crime. Critics of current law argue that it (1) establishes an elaborate system of aggravating and mitigating factors, but then allows juries to ignore the evidence and make an arbitrary sentencing recommendation; (2) gives too much discretion to a judge and jury; (3) weakens current law; and (4) greatly complicates the use of any new federal death penalty. Mandatory Minimum Sentencing for Drug Crimes (Title II) The Comprehensive Crime Control Act of 1984 (P.L. 98-473) created the U.S. Sentencing Commission to develop and monitor sentencing guidelines to be used by federal judges when sentencing criminal defendants. Despite the commission's suggestions that mandatory minimum sentences tend to warp the guidelines system, Congress has enacted about 100 mandatory minimum sentences for a variety of federal crimes. Many federal judges have complained that these restrictions are foolish, wasteful and cruel (sometimes requiring them to impose a sentence without regard to the nature of the offense or the character and background of the offender), and that they have no deterrent effect on crime. Supporters of mandatory sentences counter that they complement the sentencing guidelines, prevent disparity in sentencing, and ensure certainty of punishment. Mandatory minimums send a strong and unmistakable message to criminals that they will serve a set minimum sentence if they commit certain violent crimes. Mandatory minimums are also used by prosecutors to extract confessions from low-level offenders in exchange for reduced sentences. The information is then used to build cases against criminal crime bosses. Although judges object to mandatory minimums because they take away their sentencing discretion, prosecutors see them as important law enforcement tools. The bill establishes a mandatory minimum sentence of 10 years for state or federal drug or violent crimes that involve possession of a gun. Penalties increase to 20 years for a second conviction and life in prison for a third. For those who discharge a firearm with intent to injure another person, the first offense is punishable by a minimum of 20 years in prison, second offenses are punishable by a minimum of 30 years, and third violations get life in prison. Finally, possession or use of a machine gun or other destructive device during the commission of these crimes is punishable for no less than 30 years. Second-time offenses are punishable by life in prison. Mandatory Victim Restitution (Title III) The bill mandates that criminals pay full restitution to their victims for damages caused as a result of the crime. (Current law allows the court to order that such restitution be made but it does not require it.) In addition, the bill allows (but does not require) the court to order restitution of any person who, as shown by a preponderance of the evidence, was harmed physically, emotionally or financially by the unlawful conduct of the defendant. Court Responsibility. Under the bill, restitution is to reimburse the victim for necessary child care, transportation and other expenses incurred while participating in the investigation or court proceedings. The court is to determine the amount of restitution based on the victim's situation and not on the economic resources of the offender or the fact that the victim is entitled to insurance or other compensation. The court is also to set the payment schedule (e.g., a single, lump-sum payment or a partial payment at specified intervals) and method of payment (e.g., cash, return of property, or replacement of property). Limitations on Restitution Awards. Court-ordered compensation is not to affect the victim's eligibility to receive insurance awards or other compensation until such time that the court- ordered compensation fully compensates the victim for his losses. In addition, the bill stipulates that if the claimant seeks additional awards in a civil case, any new award is to be reduced by the amount of the criminal court restitution order (bill supporters argue that claimants may seek additional awards but should not be able to receive a second, full compensation). Defendant Compliance. Compliance with the schedule of payment and other terms of the restitution order is a condition for probation, parole or any other form of release. If the defendant fails to comply with the restitution order, the court may revoke probation or parole, modify the conditions of probation or parole, hold the defendant in contempt of court, enter a restraining order or injunction against the defendant, order the sale of the defendant's property, or take any other action necessary to insure compliance with the restitution order. The victim or offender may, at any time, petition the court to modify a restitution order if the offender's economic circumstances change. Law Enforcement Block Grants (Title IV) The bill authorizes a total of $10 million over five years ($2 million in each of FY 1996-2000) for local governments to fund law enforcement programs. These block grants replace the police, prevention and drug courts titles of the recently-enacted crime bill. Under the bill, money may be used to (1) hire, train or employ law enforcement officers; (2) pay overtime to police officers; (3) purchase equipment and technology directly related to basic law enforcement purposes; (4) enhance school security measures (e.g., police patrols around school grounds, metal detectors, fences, closed circuit cameras, gun hotlines, etc.); (5) establish citizen neighborhood watch programs; and/or (6) fund programs that advance moral standards and the values of citizenship and involve local law enforcement officials. To qualify for these grants, a unit of local government must show that it will (1) establish a trust fund in which block grant money is to be deposited; (2) use the money within two years; (3) spend the money in accordance with the guidelines in this section; (4) use approved accounting, audit and fiscal procedures; (5) make any requested records available to the Bureau of Justice Assistance and the comptroller of the U.S. for review; and (6) submit the required progress reports. Each state that applies is to automatically receive 0.25 percent of the funds as well as additional funds based on its number of reported violent crimes in 1993 compared to the rest of the country. States are to distribute the funds among local units of government based on their population and the number of reported violent crimes in 1993 compared to the rest of the local governmental units in the state. If a unit of local government does not spend all of its grant money within two years of receipt, it must repay the unused portion to the Bureau of Justice Assistance within three months. The bill also stipulates that (1) this grant money is intended to supplement, not supplant, state funds; (2) grantees may not use more than 2.5 percent of their grant for administrative costs; and (3) grantees must hold one public hearing on the proposed use of their grant. The bill also sets out procedures to be used if a local government violates any portion of this title. As noted above, The bill repeals sections of the recently-enacted crime control act that provide specific funds for drug courts, recreational programs, community justice programs and other social prevention spending. Bill sponsors argue that providing money directly to local law enforcers and letting them decide how to spend the funds (as the Taking Back Our Streets Act does) is preferable to the current law approach of authorizing specific amounts of money for programs approved by Washington bureaucrats. Grants for Prison Construction Based on Truth-in-Sentencing (Title V) The bill authorizes $10.5 billion over six years ($232 million in FY 1995, $997.5 million in FY 1996, $1.3 billion in FY 1997, $2.5 billion in FY 1998, $2.7 billion in FY 1999 and $2.8 billion in FY 2000) for the Attorney General to make grants to states so they can build, expand and operate prisons for serious violent felons. This title replaces the prison section in the recently- enacted crime bill. The bill also authorizes the AG to make grants for states to move non-violent offenders and criminal aliens to other correctional facilities (including old military bases) to make room for violent criminals at existing prisons. Grants are to be awarded based on two formulas: a percentage that applies to all states (.40 percent) and a percentage based on population. Fifty percent of the funds authorized under this section are designated as "general grants." To receive these funds, states must show that since 1993 (1) an increased percentage of convicted violent offenders have been sentenced to prison, (2) the state has increased the average prison time actually served in prison, and (3) the state has increased the percentage of sentences to be actually served. The other 50 percent is reserved for truth-in-sentencing incentive grants. To be eligible for these funds, states must show that they require serious violent felons to serve at least 85 percent of the sentence imposed, and require sentencing or releasing authorities to allow the defendant's victim (or the victim's family) to testify on the issue of sentencing and any post-conviction release. The bill includes an exception for prisoners over the age of 70 years after a public hearing in which representatives of the public and the prisoner's victims have an opportunity to testify on the issue of release. It also stipulates that (1) grant money is to supplement, not supplant, state funds; (2) no more than three percent of the grant is to be used by states for administrative costs; (3) the federal share of a grant is not to exceed 75 percent of the total cost of a state proposal; and (4) any funds not spent in one year will carry over and remain available until spent. Reform of the Exclusionary Rule (Title VI) The Supreme Court enforces the Constitution's Fourth Amendment (which protects Americans against unreasonable searches and seizures) through the so-called exclusionary rule. The rule holds that any evidence discovered as a result of improper police action cannot be introduced in a federal or state criminal trial -- i.e. "the criminal is to go free because the constable has blundered." Critics of the rule's rigidity argue that it suppresses evidence of unquestionable reliability and leads to the acquittal of many who are obviously guilty. In 1984, the Supreme Court modified the exclusionary rule to permit the introduction of evidence that was obtained in good faith reliance on a search warrant that was later found to be invalid. However, many have called for a "good faith exemption" in cases where the police officer, acting in good faith, conducted a search or seizure without a warrant. The bill amends current law to allow introduction of evidence obtained during a search or seizure that was conducted with the objectively reasonable belief that it was in accordance with the fourth amendment, regardless of whether a search warrant had been granted. Prisoner Lawsuits (Title VII) The bill directs federal courts to dismiss any frivolous or malicious action brought by an adult convicted of a crime and confined in any jail, prison or other correctional facility. The bill also requires that prisoners filing a suit include a statement of all assets in their possession so the court can require a full or partial payment of filing fees based on the prisoner's ability to pay. Bill sponsors argue that states are forced to spend millions of dollars defending prisoner lawsuits to improve prison conditions -- many of which are frivolous. Critics of the proposal argue that it will restrict prisoners' rights to seek legitimate redress of grievances. Deportation of Criminal Aliens (Title VIII) This title of the bill provides for the prompt deportation of any alien without a green card who has been convicted of an aggravated felony and who is deportable. According to bill sponsors, it addresses the current problem of releasing these felons into the general population prior to finalization of deportation proceedings, since few of those released ever show up for their deportation hearings. Definition of an Aggravated Felony. For purposes of alien felon deportation, the bill expands the definition of an aggravated felony to include any state or federal offense involving (1) firearms violations; (2) failure to appear in court for a felony carrying a sentence of two or more years; (3) demanding or receiving ransom money; (4) a RICO violation; (5) owning, controlling, managing or supervising a prostitution business; (6) treason; (7) tax evasion exceeding $200,000; and (8) certain immigration-related offenses including alien smuggling and sale of fraudulent documents. Sponsors of the bill argue that these crimes are serious enough to put a convicted alien on the fast track for deportation. The current law definition of an aggravated felony includes murder, drug trafficking, trafficking in firearms or explosives, money laundering, terrorism, and any crime of violence carrying a prison sentence of at least five years. Criminal Alien Deportation Proceedings. The bill allows the Attorney General to issue a final order of deportation against any alien determined to be deportable for conviction of an aggravated felony (without requiring a deportation hearing). An alien is defined as anyone who (1) was not lawfully admitted for permanent residence in the U.S. at the time that proceedings for the commission of an aggravated crime began or (2) had permanent resident status on a conditional basis at the time that proceedings for the commission of an aggravated crime began. An alien against whom a deportation order is issued may appeal for judicial review in federal court; however, the court action is limited to challenging only the defendant's identification (whether the person is who the Immigration and Naturalization Service [INS] says he is and whether he committed the aggravated felony). Judicial Deportations. When an alien whose conviction causes him to be deemed deportable is sentenced, a federal court may issue a judicial order of deportation if the U.S. attorney requested one prior to sentencing and the INS commissioner is in agreement. A judicial order of deportation or a denial of such order may be appealed by either party to the circuit court of appeals. A court action, however, is limited to challenging only the defendant's identification (whether the person is who the Immigration and Naturalization Service [INS] says he is and whether he committed the aggravated felony). If a judicial order is denied, the Attorney General may still pursue a deportation order through administrative channels. Defenses Based on Permanent Residence. Under current law, when an alien is in deportation proceedings, he can use certain defenses to get out. One such defense is showing that he has been a permanent resident of the United States for the past seven years. The bill does not change the underlying defense, but changes the time frame in which INS can begin deportation proceedings against an alien convicted of an aggravated offense. Under current law, deportation proceedings are to begin after the alien has served five years. The bill allows INS to begin deportation proceedings when an alien is sentenced to a term of at least five years. Bill sponsors argue that this standard is more relevant for judging the seriousness of a crime since dangerous criminals may be released prematurely due to prison overcrowding, or other reasons not related to the seriousness of the crime. Defenses Based on Withholding of Deportation. Aliens may also reverse deportation proceedings by showing that they will suffer physical harm if returned to their native country. As defined by international law, "withholding of deportation" is a higher standard of protection than asylum: if an alien can prove such a situation exists, he must be retained in the U.S. unless he poses a danger to the public. The bill clarifies current law to stipulate that aggravated felons pose a serious danger to the public and are not allowed to request or be granted this protection. Enhanced Penalties for Failing to Deport or Reentering. Under current law, aliens who are deportable for criminal offenses, for document fraud or because they are a security risk to the U.S. face up to 10 years in prison for failure to depart. Bill sponsors argue that there are no penalties for aliens who are deportable for other reasons but refuse to leave. The bill retains the current law penalty and establishes a penalty of up to four years in prison for all other deportable aliens who refuse to leave. The bill also establishes civil penalties for those who refuse to leave. Under current law, an alien who is convicted of a felony (other than an aggravated offense), is deported and then reenters the country is subject to five years in prison and a criminal fine. The bill extends such penalties to aliens convicted of three or more misdemeanors and increases the maximum sentence to 10 years. Deported aggravated felons who re-enter the U.S. are currently subject to criminal fines and up to 15 years in prison. The bill increases the maximum prison sentence to 20 years. Finally, under the bill, a deported alien who re-enters the U.S. cannot challenge his original deportation unless he can show that (1) all available administrative remedies were exhausted, (2) an opportunity for judicial review was denied, and (3) the deportation order was fundamentally unfair. Criminal Alien Tracking Center. The bill directs the INS commissioner and the director of the FBI, with the heads of other agencies, to operate a criminal tracking center. The measure authorizes $14 million over four years ($5 million in FY 1994 and $2 million in each of FY 1995-98) for the center, which is to assist federal, state and local law enforcement agencies identify and locate aliens who may be subject to deportation due to conviction of an aggravated felony. * * * The Personal Responsibility Act (Welfare Reform) Highlights: The Personal Responsibility Act overhauls the American welfare system to reduce government dependency, attack illegitimacy, require welfare recipients to enter work programs and cap total welfare spending. The bill's main thrust is to give states greater control over the benefits programs, work programs, and Aid to Families with Dependent Children (AFDC) payments and requirements. Under the bill, the structure for AFDC payments will drastically change. Mothers under the age of 18 may no longer receive AFDC payments for children born out of wedlock and mothers who are ages 18, 19 and 20 can be prohibited by the states from receiving AFDC payments and housing benefits. Mothers must also establish paternity to as a condition for receiving AFDC payments, except in cases of rape and incest. Also, in order to reduce the amount of time families are on welfare, states must begin moving welfare recipients into work programs if they have received welfare for two years. States are given the option to drop families from receiving AFDC benefits after they have received welfare for two years if at least one year has been spent in a work program. To further limit the length of time on AFDC, states must drop families from the program after they have received a total of five years of AFDC benefits. The bill allows states to design their own work programs and determine who will be required to participate. Welfare recipients must work an average of 35 hours a week or enroll in work training programs. By the year 2001, 1.5 million AFDC recipients will be required to work. The bill caps the spending growth of several major welfare programs (AFDC, Supplemental Security Income (SSI) and public housing) and consolidates 10 nutrition programs, including food stamps, WIC and the school lunch program, into one discretionary block grant to states. Finally, the bill grants greater flexibility to states allowing them to design their own work programs and determine who participates in them and can choose to opt out of the current AFDC program by converting their share of AFDC payments into fixed annual block grants. Background: In the mid-1960s President Lyndon Johnson launched a war on poverty with the hope of creating a "Great Society." The federal government was mobilized to fight poverty by creating a slew of new federal programs and expanding existing ones, such as AFDC. Established in 1935 under the Social Security Act, AFDC was created to help widows care for their children. It now serves divorced, deserted and never-married individuals and their children. AFDC continues to be the major cash welfare program for families. Federal funds pay at least 50 percent of each state's benefits and administrative costs. In June 1994, enrollment reached 5,028,000 families, just below the record of 5,083,000 set in March 1994. Individual recipients numbered 14.2 million and unemployed two-parent families totaled 362,000. Also, food stamp enrollment in June 1994 was 27.4 million persons -- a record high. Although almost half of the mothers who enter AFDC can be expected to leave within 2 years, most return. Long- term users often are young, never-married, and high school dropouts; and most AFDC families begin with a birth to a teenager.. In the past few years, the federal governments and state governments have tried to change and improve the welfare system. The Clinton Administration campaigned to "end welfare as we know it," though, to date, Congress has not held a vote on its proposal. The administration proposal limits AFDC benefits to two years, during which employment services would be provided to recipients. Nearly 20 welfare reform bills have been introduced in the 103d Congress, including three major proposals offered by Republican members: The GOP Leadership Welfare Reform Bill (H.R. 3500) - After two years on AFDC (or less at a state's option), welfare recipients must work 35 hours per week in a private or public sector job. It also requires mothers to establish paternity before receiving AFDC benefits, denies AFDC benefits to parents under age 18, and denies increased AFDC benefits for having additional children while on welfare -- unless a state enact laws to exempt itself from any of these requirements. The Real Welfare Reform Act (H.R. 4566) - This measure prohibits AFDC, food stamps, and public housing to unmarried mothers under age 21 (the age limit is raised to 25 in 1998); requires paternity to be established as a condition for receiving AFDC, food stamps and public housing; provides a $1,000 pro-marriage tax credit, requires 50 percent of AFDC recipients to work by 1996; requires single able-bodied food stamp recipients to work for benefits; and freezes the rate of growth in several welfare programs at 3.5 percent per year. The Welfare and Teenage Pregnancy Reduction Act (H.R. 1293) - This measure freezes AFDC at current funding levels and returns the program to the states in the form of block grants, giving states maximum discretion to design their own welfare-to-work programs. The bill also prohibits AFDC benefits to parents under age 18 and requires that paternity be established in order to receive AFDC benefits. Provisions: Reducing Illegitimacy The bill is designed to diminish the number of teenage pregnancies and illegitimate births. It prohibits AFDC payments and housing benefits to mothers under age 18 who give birth to out-of-wedlock children. The state has the option of extending this prohibition to mothers ages 18, 19, and 20. The savings generated from this provision to deny AFDC to minor mothers (and to mothers age 18 to 20 if the state elects that option) is returned to the states in the form of block grants to provide services -- but not cash payments -- to help these young mothers with illegitimate children. The state will use the funds for programs to reduce out-of-wedlock pregnancies, to promote adoption, to establish and operate orphanages, to establish and operate residential group homes for unwed mothers, or for any purpose the state deems appropriate. None of the funds may be used for abortion services or abortion counseling. The bill also includes a number of other provisions to reduce illegitimacy. While AFDC is prohibited to mothers ages 17 and younger who have children out of wedlock, mothers age 18 who give birth to illegitimate children must live at home in order to receive aid -- unless the mother marries the biological father or marries an individual who legally adopts the child. Mothers already receiving AFDC will not receive an increase in benefits if additional children are born out of wedlock. Finally, the bill requires mothers to establish paternity as a condition for receiving AFDC. Exceptions are provided for cases of rape and incest and if the state determines that efforts to establish paternity would result in physical danger to the mother. The bill requires states to establish paternity in 90 percent of their cases. Also, states are encouraged to develop procedures in public hospitals and clinics to determine paternity and establish legal procedures that help pinpoint paternity in a reasonable time period. Requiring Work States are allowed to establish their own work training and education programs to help recipients move from the welfare program to paid employment as soon as possible. The training programs require recipients to work for an average of 35 hours a week or 30 hours per week plus five hours engaged in job search activities. One parent in a two-parent family is required to work 32 hours a week plus eight hours of job searching. States may not provide the work programs for more than two years to any individual or family which receives welfare benefits. States have the option of ending AFDC to families that have been on the welfare rolls for two years, if at least one year was spent in a work program. All states must terminate AFDC payments to families who have received a total of five years of welfare benefits -- regardless of whether or not the AFDC recipient has participated in a jobs program. As long as states meet the participation requirements, the federal government will not advise other parts of the program. States will design their own work programs and determine who will be required to participate in them. Part of the participation requirement is requiring a certain number of recipients to participate in the job program. Starting in 1996, 100,000 AFDC recipients will be required to work; in 1997, 200,000 recipients will be required; in 1998, 400,000 will be required; in 1999, 600,000 recipients will be required; in 2000, 900,000 will be required; and by 2001, 1.5 million recipients will be required to work. Identified non-parents, usually men, who receive food stamp benefits are required to work -- eight hours per week for those benefits. Capping the Growth of Welfare Spending The bill caps the spending growth of AFDC, SSI and numerous public housing programs, and the mandatory work program established under the bill. The cap equals the amount spent the preceding year for these programs with an adjustment for inflation plus growth in poverty population. The entitlement status of these programs is ended. The bill also consolidates a number of nutrition programs into a block grant to states, funded in the first year at 95 percent of the aggregate amount of the individual programs. Programs consolidated into the block grant include food stamps, the supplemental feeding program for women, infants, and children (WIC), and the school lunch and breakfast programs, among others. Under the block grant, states will distribute food assistance to economically disadvantaged individuals more freely. To further reduce welfare spending, welfare assistance (AFDC, SSI, food stamps, housing and host of other public assistance) is denied to non-citizens, except refugees over 75 years of age, those lawfully admitted to the U.S., or those who have resided in the U.S. for at least five years. Emergency medical assistance will continue to be provided to non-citizens. State Flexibility The bill allows states to create their own work programs and determine who participates in them. States can also opt out of the AFDC program and convert their AFDC payments into a fixed annual block grant and have the option to provide new residents AFDC benefits comparable to the level provided in the state in which they previously resided. To help combat illiteracy, states may reduce AFDC payments by up to $75 per month to mothers under the age of 21 who have not completed high school or earned their high school "equivalency". Payments may also be reduced if a dependent child does not maintain minimum school attendance. Other Provisions State adoption agencies are encouraged to decrease the amount of time a child must wait to be adopted (today, the average child waits approximately 2.8 years). Specifically, the bill prohibits states from discriminating on the basis of race, color or national origin when placing children for adoption. Also, AFDC beneficiaries who the state identifies as addicted to drugs or alcohol must enroll in an addiction treatment program and participate in random drug testing in order to continue receiving welfare benefits. Estimated Savings The bill is estimated to result in net savings of approximately $40 billion over five years. The denial of welfare to non- citizens saves about $22 billion, the cap on welfare spending saves about $18 billion, the nutrition block grant saves about $11 billion, and the requirement for paternity establishment saves about $2 billion. The costs included in the bill are $9.9 billion for the work program and approximately $2 billion for miscellaneous state options. * * * The Family Reinforcement Act Summary: The bill (1) protects parents' rights to supervise their children's participation in any federally funded program and shield them from federally sponsored surveys that involve intrusive questioning, (2) requires states to give "full faith and credit" to child support orders issued by the courts or the administrative procedures of other states, (3) provides a refundable tax credit of up to $5,000 for families adopting a child, (4) strengthens penalties for child pornography and criminal sexual conduct involving minors, and (5) provides a $500 tax credit for families caring for a dependent elderly parent or grandparent. Family Privacy Protection The bill requires parental consent for the participation of a minor in any federally funded survey or analysis regarding (1) parental political affiliations; (2) any mental or psychological problems in the family; (3) family or individual sexual behavior and attitudes; (4) any illegal or self-incriminating behavior; (5) privileged relationships with lawyers, physicians or clergymen; (6) any household income information other than that required by law for federal program participation; (7) religious beliefs; and (8) appraisals of other individuals with whom the minor has had a familial relationship. Child Support Enforcement The bill requires states to give "full faith and credit" to child support orders from other states. It provides federal assistance in developing a uniform child support/visitation order in order to streamline interstate enforcement. Finally, the bill requires noncustodial parents who receive state aid to participate in a state job-search program if they have child support arrearages. Adoption Assistance The bill establishes a refundable tax credit of up to $5,000 for adoption expenses such as adoption fees, court costs and attorney fees. The tax credit is phased out for incomes beginning at $60,000. Eldercare Assistance The bill provides a $500 refundable tax credit for individuals who care for a parent or grandparent at home. Child Protection The bill increases sentences for sexual offenses against children and closes certain loopholes in federal laws protecting children. Today, computers with their enhanced graphics and rapid communication are increasingly used by pornographers. To address this, the bill increases federal sentencing guidelines by two levels for the use of a computer in the shipment of pornography. Current law provides a maximum sentence of 10 years for the prostitution of children. The bill establishes a three year minimum sentence for anyone who forces children into prostitution. It also assures that an increase in the age of the victimized child will not result in lighter punishment. Finally, the bill creates mandatory three year minimum sentences for sexual abuse of a minor or a minor who is a ward in federal custody. Currently, federal laws are much weaker than most state laws in these areas, and are therefore seldom used. Creating mandatory minimum sentences will reactiviate prosecutions under these federal laws. * * * The American Dream Restoration Act Summary: The American Dream Restoration Act (ADRA) provides a tax credit for families, reforms the so-called "marriage penalty" and establishes a new and improved Individual Retirement Account. Today, the average family spends more on taxes than it spends on food, clothing and shelter combined. Many families now need a second earner not to support the household, but to support the government. Middle income families are forced to buy their first homes later in life and must scramble to send their children to college. ADRA is designed to deliver relief from the heavy burden of government and let families keep more of their hard- earned dollars to pursue their own version of the American Dream. $500 Family Tax Credit Effective in 1996, the bill provides a $500 per child tax credit for families with annual incomes up to $200,000. (A child is defined as an individual under 18 years of age.) The tax credit will benefit approximately 50 million families, 90 percent of which earn less than $75,000 per year. Reform of the Marriage Penalty The 1993 tax increases and expanded Earned Income Tax Credit resulted in many married couples across the income spectrum paying higher taxes than they would by filing as two singles. The bill provides up to $2 billion annually of marriage penalty relief. Each family currently subject to the marriage penalty would be entitled to a credit to an amount determined by the Secretary of Treasury. Tax Deductible Individual Retirement Accounts (IRAs) The bill allows individuals to contribute up to $2,000 a year into an American Dream Savings Account (ADSA). Non-employed spouses may also participate. The ADSA is "back-ended", meaning the individual pays income taxes on the amount deposited, but not on the amount withdrawn if used for (1) retirement income; (2) purchase of a first-owner occupied home; (3) education expenses at a post-secondary institution (college or training institution) for self, spouse or dependent child; or (4) medical costs, including purchase of insurance for long-term care. Within two years of enactment of ADRA, current IRA participants can cash out their current IRA and pay the tax due on it without having to pay any penalty provided the money is transferred to an ADSA. * * * The National Security Restoration Act Highlights: The bill, the National Security Restoration Act, reforms DOD to ensure that U.S. troops are only deployed to support missions in the U.S.'s national security interests, to reinvigorate a national missile defense and to accelerate the expansion of NATO. Other provisions in the bill are designed to address concerns that readiness has suffered because defense spending has been cut too far and too quickly in order to pay for expensive social programs. U.S. defense spending (as a percentage of GDP) is at its lowest level since World War II and many assert that any more military reductions could leave the U.S. unprepared to respond to unforeseen global threats. Despite severe personnel reductions and shortfalls in funding over the last 10 years, U.S. troops have been deployed more often and have taken part in more operations per year than ever before. Presently, over 48,000 U.S. personnel serve in unstable regions such as Haiti, Iraq, Bosnia, Macedonia, the Adriatic Sea, Rwanda and the Caribbean. The National Security Restoration Act addresses this problem by: restricting DOD from taking part in military operations that would place U.S. troops under foreign command; requiring an accurate and comprehensive review of U.S. defense needs by authorizing a blue-ribbon panel of independent defense experts to assess military readiness, maintenance practices and general operational needs; restoring defense spending "firewalls" that prohibit the transfer of DOD funds to other departments and agencies in order to fund social spending programs unrelated to military readiness. Future defense spending cuts are to be used only for deficit reduction; renewing the U.S.'s commitment to an effective national missile defense by requiring DOD to deploy anti-ballistic missile systems capable of defending the U.S. against ballistic missile attacks; and renewing the U.S.'s commitment to a strong North Atlantic Treaty Organization (NATO) by urging the Clinton Administration to proceed with full NATO partnership discussions with nations that are striving to embrace democracy, enact free market economic reforms and place their armies under civilian control. Provisions: Restricting Multi-National and U.N. Command of U.S. Troops Prohibition of Foreign Command of U.S. Armed Forces. DOD is prohibited from taking part in military operations which place U.S. troops under foreign command. The president may waive this provision if he certifies to Congress that operational control of our troops under foreign command is vital to U.S. national security interests. No later than 10 days after this certification, the president must report to Congress with (1) a description of the vital national security interest that requires the placement of U.S. troops under foreign command; (2) the size, composition, mission and objectives of the U.S. troops involved and the estimated time the troops will serve under foreign command; (3) the U.S.'s cost for the mission; (4) the precise command and control relationship between the U.S. and the foreign command structure; and (5) the extent to which the U.S. troops will rely on non-U.S. military forces for security and self defense and an assessment of those forces' ability to carry out these duties. Placing U.S. Troops Under Foreign Command for U.N. Peacekeeping Activities. The bill stipulates that any special peacekeeping agreement negotiated between the president and the U.N. Security Council which places U.S. troops under foreign command must be approved by Congress. The president may not place U.S. troops under foreign command unless he (1) reports to Congress with the size, composition, mission and command structure of U.S. troops involved; (2) certifies that placing U.S. troops under foreign command is vital to national security; (3) retains the option to remove U.S. troops from peacekeeping activities at any time; and (4) guarantees that all U.S. troops placed under foreign leadership will remain under U.S. administrative command for discipline and evaluation. The above stipulations must be met no less than 15 days before U.S. troops are placed under foreign command. Notice to Congress of Proposed U.N. Peacekeeping Activities. The president must report to Congress at least 15 days prior to any U.N. Security Council vote authorizing U.N. peacekeeping activities which involve the use of U.S. troops and funds. The report is to include a description of U.S. force involvement, the mission of the U.S. troops, the cost and source of funding for the U.S.'s share of the mission, and an estimated termination date for troop involvement. Transmittal to Congress of U.N. Resolutions and Reports. Within 24 hours after the U.N. Security Council adopts a resolution authorizing peacekeeping activities involving U.S. troops, the president must submit the text and supporting documentation of the resolution to Congress. Reports to Congress on U.S. Contributions For U.N. Peacekeeping Activities. The president must (1) notify Congress within 15 days after the U.N. submits a billing statement to the U.S. for its share of peacekeeping activities and (2) notify Congress at least 15 days prior to disbursing funds for peacekeeping. Budgeting for Annual U.S. Contributions For U.N. Peacekeeping Activities. The president is directed to submit to Congress, along with his annual budget, a report with estimates of the U.S.'s fiscal year funding requirements for U.N. peacekeeping. Beginning with the FY 1996 budget, the president is to submit to Congress an estimate of all U.S. costs associated with U.N. peacekeeping for each of FY 1996, 1997 and 1998. Annual Reports to Congress on Peacekeeping. No later than 90 days after enactment, and each year thereafter at the time of the president's annual budget submission, the president is to report to Congress on U.S. contributions to U.N. peacekeeping. The report is to include (1) the number and nature of ongoing peacekeeping activities, (2) the priority and anticipated duration of each ongoing activity, (3) an assessment of each ongoing peacekeeping operation and its effect on U.S. national security, (4) the total costs of each U.N. peacekeeping mission and the U.S. contribution to each of these missions, and (5) an assessment of U.N. management of peacekeeping activities. The initial report is to include the costs for all U.N. peacekeeping activities since October 1945. Subsequent reports are to include the same information for the preceding and current fiscal year U.S. Reimbursement For In-Kind Contributions to U.N. Peacekeeping Operations. Beginning in FY 1995, appropriated peacekeeping funds may not be used to pay the U.S. share of U.N. operations unless DOD certifies to Congress that the U.N. has reimbursed DOD for all goods and services that have been provided to the U.N. on a reimbursable basis. Limitation on the Use of DOD Funds For U.N. Peacekeeping. Beginning October 1, 1995, DOD Operations and Maintenance funds for U.S. contributions to U.N. peacekeeping missions are subject to congressional authorization. Assessed Contributions For U.N. Peacekeeping Activities. The bill expresses the sense of Congress that (1) the U.S. should not fund more than 25 percent of the total cost of any U.N. peacekeeping mission and (2) the U.N. should review each nation's assessed contributions for U.N. peacekeeping activities. Buy America Requirement. No U.S. funds may be contributed to the U.N. for peacekeeping activities unless the Secretary of State determines that U.S. manufacturers and suppliers are being given the opportunity to provide equipment, services and material for peacekeeping mission activities equivalent to those being given to foreign manufacturers and suppliers. U.S. Personnel Taken Prisoner While Serving in Multilateral Peacekeeping Missions. The bill expresses the sense of Congress that the president should take all necessary steps to (1) ensure that any U.S. military personnel captured during U.N. peacekeeping activities are to be treated as prisoners of war and (2) bring to justice all individuals responsible for the mistreatment, torture and death of American prisoners. Provision of Intelligence to the U.N. The U.S. is authorized to provide intelligence assets to the U.N. only if the president and the secretary general of the U.N. agree to the types of intelligence to be provided, the circumstances under which the intelligence assistance is to be provided, and the procedures to be observed by the U.N. to ensure the secrecy of the intelligence. The president must report to Congress at least 30 days prior to entering into such an agreement. U.N. Peacekeeping Budgetary and Management Reform. The bill contains numerous budgetary reforms to ensure efficiency when the U.S. contributes funds to the U.N. At the beginning of each fiscal year (beginning in FY 1995), 50 percent of all U.S. funds made available for U.N. peacekeeping must be withheld until the president certifies to Congress that (1) the U.N. has established an independent and objective Office of Inspector General to audit, inspect and investigate peacekeeping activities; and (2) the secretary general of the U.N. has appointed an inspector general who is proficient in accounting, financial analysis, law and public administration. Comprehensive Review of U.S. Defense Needs Independent Blue-Ribbon Panel. The bill establishes a blue- ribbon panel to conduct an accurate and comprehensive review of the U.S.'s national security needs, force readiness requirements and modernization plans. This provision comes in response to critics of President Clinton's "bottom-up-review" who assert that it contained unrealistic financing for the established goals. Restoring Budget Firewalls For Defense Spending The bill stipulates that DOD funds may not be transferred to any other department or agency unless the secretary of Defense reports to Congress, at least 30 days before these funds are to be made available, with proof that it is vital to U.S. national security interests. DOD may waive this provision during periods of national emergency declared by the president or Congress, however the waiver may not take effect until Congress has been notified. Renewed Commitment to a National Missile Defense DOD is directed to (1) develop for deployment at the earliest possible date a cost-effective, operational anti-ballistic missile defense system to protect the U.S. against ballistic missile threats (e.g., accidental or unauthorized launches or Third World attacks); (2) implement as quickly as possible advanced theater missile defense systems; and (3) report to Congress within 60 days of enactment with a plan for both missile defense systems. Renewed Commitment to a Strong North Atlantic Treaty Organization (NATO) On January 10, 1994 leaders of the NATO member nations meeting in Brussels, Belgium issued an invitation to European countries that do not belong to NATO to participate in the Partnership for Peace program. In that invitation, NATO reaffirmed its commitment to expand the organization to increase the security of the North Atlantic area. NATO pointed out that many European countries that in the past had been adversaries, had rejected ideological hostility to the West and, in varying degrees, had begun to implement policies aimed at achieving democracy, protecting human rights and building free market economies. The bill expresses the sense of Congress that (1) the U.S. should continue its commitment to an active leadership in NATO; (2) the U.S. should join with its NATO allies to redefine the alliance's role in the post-Cold War world (taking into account the changes in central and eastern Europe and the emerging security threats posed by nuclear, chemical and biological weapons of mass destruction); (3) the U.S. should reaffirm that NATO military planning includes joint military operations outside of NATO jurisdiction; (4) that Poland, Hungary, the Czech Republic and Slovakia should be in a position to further the principles of the North Atlantic Treaty and contribute to the security of the North Atlantic area no later than January 10, 1999 (the bill also states that these countries should continue working toward democracy, free market economics and civilian control of their militaries); (5) the U.S. should assist these nations as they work towards inclusion in NATO; and (6) other European nations should be invited to join NATO in the future if they agree to contribute to the security of the North Atlantic. The president is given authority to establish a program to assist Poland, Hungary, the Czech Republic, Slovakia and other European countries that are working toward full membership to NATO. The program is to assist the new nations with joint planning and military exercises with NATO forces and encourage greater interoperability of military equipment to achieve a uniform military doctrine. The president may also provide assistance to other European countries emerging from communist domination if he certifies that they have made significant progress in embracing democracy and establishing free-market economies. President's Report to Congress Within one year after enactment, and at least once every year thereafter, the president is to report to Congress on the progress made by Poland, Hungary, the Czech Republic, Slovakia and other emerging European countries in their efforts to achieve full NATO membership. Background: The Present Landscape of the DOD Review Process Bottom Up Review. In 1990-91, the Bush Administration studied how U.S. military forces should be restructured after the end of the Cold War and produced a blueprint for a base force 20-25 percent smaller in budget and forces than the current structure. In spite of this review, the Clinton Administration decided to undertake its own "bottom up review" -- making its own assessment of the U.S.'s post Cold War defense needs and making its own proposals to restructure the military to meet them. In September 1993, the bottom-up review (BUR) was released with its recommendation to cut an additional 10 percent on top of the Bush Administration proposals. BUR's FY 1995-99 defense spending recommendation was $91 billion below the Bush Administration's adjusted baseline of $1,325 billion and $13 billion more than the Clinton Administration's own defense spending target of $1,221 billion. Former Defense Secretary Aspin expressed the administration's intent to trim down spending to meet the target. The FY 1995 defense authorization bill was the first defense authorization measure drafted in accordance with BUR. BUR's proposals are based on maintaining a force structure sufficient to win two major regional conflicts simultaneously (a strategy called win-win). BUR claims savings of (1) $24 billion from cutting 160,000 more active duty personnel than the Bush administration, (2) $19 billion from infrastructure changes, including base closings, and cutting 115,000 more civilian personnel than the Bush Administration, (3) $21 billion from realigning ballistic missile defense programs, and (4) $32 billion from reduced development and procurement of many systems. Savings were also achieved in weapons modernization programs. The Clinton Administration argues the BUR force structure reflects a cautious strategy to maintain U.S. freedom of action in a still dangerous world. The U.S. military will have greater strategic mobility, more firepower and be armed with "smart" and "brilliant" weapons. Moreover, additional savings will be possible from changes in strategic nuclear programs and minor procurement programs, acquisition reform, and Vice President Gore's national performance review. Critics have charged that (1) the win-win strategy is purely military -- that is, the Clinton Administration has yet to develop a national security strategy encompassing all its concerns and priorities; (2) the proposed force is inadequate; it is the same force that previous DOD analyses considered appropriate for less-demanding strategies; (3) the strategy overestimates the savings to be achieved from base closures; (4) the BUR force cannot be maintained within the Clinton Administration's own budget guidelines; (5) the Army, with only 10 active divisions, will be hard pressed to support the win-win strategy while fulfilling peacekeeping missions around the globe; (6) cutting the aircraft carrier fleet from 13 to 11 will create gaps in global coverage; and (7) the Air Force may have too few long range attack aircraft, too few aerial tankers, and an insufficient airlift capacity to support two major regional conflicts. The Current Outlook for Defense Spending President Clinton's FY 1995 Defense Budget Request. On February 7, 1994, President Clinton presented his FY 1995 defense budget to Congress. Recommending $263.7 billion in new BA and $270.7 billion in outlays, the plan continues the decline in military spending that began in the late 1980s. Under the president's proposal, by FY 1997, BA for national defense will fall to about 40 percent of the FY 1985 spending peak (in constant, inflation- adjusted dollars), with spending beginning to level off after that. Late in 1993, discussion of the defense budget focused on a five- year $50 billion gap between the projected cost of planned military programs and the amount available under budget plans formulated last year. The projected gap was mainly due to higher estimates of inflation and a congressionally-mandated military pay raise. Subsequently, revised inflation estimates reduced the projected gap, and the president approved an increase of $11.4 billion over five years in defense funding to cover costs of the pay raise. These changes narrowed the gap to about $20 billion, but the administration decided to postpone dealing with the shortfall until this year. Following debate on the defense funding shortfall, the president reaffirmed support for his long-term defense spending plan by arguing in his State of the Union address against further cuts. Perhaps partly because of the president's endorsement of the defense plan, debate over defense spending levels was relatively muted once the House and Senate considered the annual congressional budget resolution in March 1994. In the House, a proposal to reduce FY 1995 defense budget authority by $2.4 billion was defeated by a substantial margin. But both chambers also rejected proposals to increase five-year defense spending levels by at least the $20 billion shortfall. The Senate approved a measure to reduce caps on overall discretionary spending by $46 billion in BA and $26 billion in outlays. Although many supporters of the measure argued that the cuts should not come from defense, critics warned that DOD would likely bear a large share of the reductions. The House, which had no comparable provision, narrowly rejected a motion to instruct conferees to include these Senate-passed cuts, and the final conference agreement split the difference between the House and the Senate, cutting $13 billion in outlays over five years. The allocation of the reductions is left to the appropriations committees. Debate over the FY 1995 defense budget was heated, with a number of longer-term defense spending and policy issues emerging to the forefront. Major issues included whether the administration budget is sufficient to maintain high levels of military readiness, whether the planned military force is large enough to support the military strategy articulated in BUR, and whether the necessary pace of weapons modernization will outrun likely weapons budgets after the turn of the century. Spending Trends Over the past several years, debate has focused not on whether defense spending should be cut, but rather by how much. Proponents of greater and accelerated reductions have argued that with the end of the Cold War, funds previously allocated for defense are now free to be spent on urgent domestic needs. With defense spending currently at its lowest level (as a percentage of GDP) since World War II, others have argued that downsizing must be done methodically and carefully, warning that quick and deep reductions in the past have left the U.S. unprepared to respond to unforeseen global threats. A key issue in the current defense policy debate is whether the defense budget projected by the Clinton Administration for the next several years is sufficient to support a well-equipped, well-trained, high-quality military force. Defense analysts have generally assumed that if the size of the military force remains stable, then defense spending will and probably should grow moderately over time in order to purchase and operate more modern equipment and to improve the quality of life in the military. Some observers see current defense budgets as comparable (in inflation-adjusted prices) to average Cold War-era budgets, and conclude that a continuing "Cold War level of funding" should suffice to support a substantially smaller, post-Cold War force. Because defense spending normally has grown over time relative to the size of the force, however, such a comparison may not be very meaningful. When the normal growth in defense funding per troop is taken into account, it appears that currently planned budgets will begin to fall below the historical trend over the next few years. How well or how poorly the budget fits the force will depend on the impact of a slowdown in weapons modernization and on how well efforts to protect readiness are managed. Senior administration officials acknowledge that procurement funding has declined substantially in recent years, but, they say this is acceptable in the short run. Judging by historical standards, however, significant increases in defense funding may be necessary in the future to maintain a capable force of the planned size unless there are significant changes in patterns of acquisition and operations. International Peacekeeping Operations The U.S. participates in a number of peacekeeping operations worldwide, most of which are organized, carried out and paid for by the U.S. in association with U.N. efforts. Currently, the incremental costs associated with the mission -- costs above and beyond normal peacetime operating expenses -- are funded through (1) supplemental appropriations, (2) DOD reprogramming, (3) absorption by DOD accounts, and (4) earmarkings in annual defense funding bills. The U.S. has 13 ongoing missions. Last year, President Clinton requested $597 million for peacekeeping and Congress appropriated $401.6 million. Because of the rapid increase in both the number and cost of peacekeeping operations since the end of the Cold War, some members of Congress have expressed concern about the existing funding procedures. One solution is to create a new account to hold advanced funding of U.S. peacekeeping missions. The Clinton Administration tried to do this in the FY 1994 defense budget, calling the account the Global Cooperative Initiative, but it was rejected by Congress. The U.S. also funds peacekeeping operations through mandatory contributions to the U.N. The U.S. is responsible for 25 percent of the U.N.'s normal operating budget and 31.7 percent of the cost of each U.N.-sponsored peacekeeping activity. The peacekeeping assessment was raised from 30.4 percent to 31.7 percent last year to compensate for reduced contributions by the now-dissolved Soviet Union. This increase added fire to existing concerns about the U.N.'s management practices, causing the administration to demand that the U.S. share be reduced to 25 percent. At the end of the Cold War, partially fueled by the success of Operation Desert Storm, enthusiasm for peacekeeping operations peaked. But the mood quickly changed as Americans monitored an inconclusive U.S. mission in Somalia and considered the possibility of many American deaths in a ground war in Bosnia. On May 8, 1994, the Clinton Administration unveiled criteria the president will use to decide which peacekeeping efforts to support with money, troops or both. Under these criteria, in order for the U.S. to vote in favor of a mission it must advance U.S. interests; result from a threat to international peace and security; and have clear, realistic objectives. The criteria for deciding whether to commit troops to the mission, especially if combat is expected, are more stringent. The directive also makes clear that American forces can never be placed under foreign command unless doing so would serve American security interests. White House national security adviser Anthony Lake describes these guidelines as an attempt to reform and limit U.S. participation for such activities. * * * Senior Citizens' Equity Act Summary: The Senior Citizens' Equity Act removes financial burdens on American senior citizens to (1) allow them to earn more income without losing Social Security benefits and (2) reduce the percentage of Social Security benefits on which they must pay taxes to the level before they were increased by the Clinton Administration in 1993. The bill provides tax incentives to encourage individuals to buy private long-term care insurance and makes it easier for seniors to reserve retirement communities for adults only without facing lawsuits. Increase of the Social Security Earnings Limit Threshold Under current law, senior citizens between the ages of 65 and 69 lose one dollar in Social Security benefits for every three dollars they earn above $11,160. This earnings test amounts to an additional 33 percent marginal tax rate, on top of existing income taxes, and punishes seniors who choose to remain productive beyond age 64. Over five years, the bill raises to $30,000 the amount which seniors can earn before losing Social Security benefits. The limit will be raised according to the following schedule. By January 1, 1996 seniors can earn $15,000 without losing Social Security benefits. By January 1, 1997, $19,000 By January 1, 1998, $23,000 By January 1, 1999, $27,000 By January 1, 2000, $30,000 Repeal of Clinton's Social Security Benefits Tax The 1993 Omnibus Reconciliation Act (OBRA 1993) requires senior citizens who earn more than $34,000 (singles) or $44,000 (couples) to pay income taxes on 85 percent of their Social Security benefits. Over five years this bill returns the amount of Social Security benefits subject to income tax to 50 percent, the level of benefits taxable before OBRA. The percentage of Social Security benefits subject to income taxes will drop from 85 percent to: 75 percent for tax year 1996, 65 percent for tax year 1996, 60 percent for tax year 1997, 55 percent for tax year 1999, and 50 percent for tax year 2000. Tax Incentives for Private Long-Term Care Insurance The bill includes several provisions pertaining to the tax treatment of long-term health care included in the Affordable Health Care Now Act (H.R. 3080), the House Republican health reform package: allows tax-free withdrawals from IRAs, 401(k) plans and other qualified pension plans in order to purchase long-term care insurance; allows accelerated death benefits to be paid from life insurance policies for individuals who are terminally ill or permanently confined to a nursing home; and treats long-term care insurance as a tax-free fringe benefit and the same as accident and health insurance for taxation purposes. The bill also allows deductions for long-term care premiums, limited to the following amounts (indexed for inflation annually): Age 40 and under $ 200 Age 40 to 50 $ 375 Age 50 to 60 $ 750 Age 60 to 70 $1,600 Age 70 and older $2,000 Senior Citizen Retirement Communities Current law is vague on what constitutes senior housing. Consequently, lawsuits have been brought against real estate agents and retirement community board members. The bill allows housing communities to meet the Fair Housing Amendment Act's "adults-only housing test" if those communities can prove that at least 80 percent of their units have occupants age 55 or older. The Fair Housing Amendments Act of 1988 prohibits discrimination based on familial status, although it does include a vague definition of adults-only housing. Under current law, senior communities are exempt from the 1988 law's anti-discrimination provisions if at least 80 percent of the units in a senior community are occupied by those 55 and over, and the community has "significant facilities" such as support rails and transportation vans. The law, however, does not specifically state what must be present to merit exemption. This current vague definition has posed problems for many retirement communities and has resulted in law suits against real estate agents and retirement community board members. This provision of the bill repeals the significant facilities test and exempts real estate agents and community board members from liability for monetary damages in lawsuits if they acted on a good-faith belief that the community was exempt. Thus, senior communities must only meet the 80 percent test to be awarded an exemption. Background: Americans over the age of 65 number more than 30 million and constitute more than 12 percent of the population. Two important areas of concern for them are Social Security and the cost of long-term care. The Social Security Earnings Test Congress passed the Social Security Act in 1935 as part of President Roosevelt's New Deal, establishing a program to provide income to older Americans. The program has always included an earnings test. There have been many proposals to alter or end the earnings test, but none has been enacted. Social Security benefits are intended to compensate for income lost because of retirement, but many seniors have complained theat it is unfair to punish those who keep working by not allowing them to collect Social Security benefits when they have paid into the system all their working lives. Social Security Benefits Tax The other provision of the bill affecting Social Security deals with a relatively new phenomenon. Social Security benefits were not taxed at all until 1984. It was then that a system was established whereby individuals with total income of $25,000 or more and couples with a total income of $32,000 or more would have to pay taxes on up to 50 percent of their Social Security benefits. In 1993 President Clinton sought to tax up to 85 percent of Social Security benefits. Although the House approved this provision as part of the 1993 Omnibus Budget Reconciliation bill (OBRA 1993), the provision was modified in conference. The final version of the bill increased the maximum percentage of benefits that could be taxed to 85 percent, but also created a second set of thresholds at $34,000 for individuals and $44,000 for couples. OBRA 1993 created a complicated system whereby recipients who had to pay taxes on 50 percent of benefits continue to do so, and those whose income exceeds the new threshold have to pay taxes on up to 85 percent of benefits. Long-Term Care The cost of long-term care concerns senior citizens and others. About 7.1 million of the elderly need long-term care, and estimates indicate 13.8 million may need it by 2030. Most long- term care is paid for by private individuals and Medicaid. Many elderly do not need constant medical attention, but do need assistance with daily activities. Medicare and most other health insurance plans do not cover most services associated with long- term care. In order to qualify for Medicaid assistance for long- term care, individuals must first "spend down" a significant portion of their own savings and other assets. * * * The Job Creation and Wage Enhancement Act Highlights: The Job Creation and Wage Enhancement Act includes a variety of tax-law changes and federal bureaucratic reforms designed to enhance private property rights and economic liberty and make government more accountable for the burdens it imposes on American workers. Specifically, the bill: provides a 50 percent capital gains rate cut and prospectively indexes capital gains to account for inflation; increases the value of investment depreciation to equal the full value of original investment; allows small businesses to deduct the first $25,000 worth of investment each year; clarifies the home office deduction; empowers taxpayers to designate a portion of their tax liability to a public debt reduction fund; requires federal agencies to assess the risk and cost of each imposed regulation; forces federal agencies to publicly announce the cost of their policies; requires Congress to report the cost of mandates it imposes on state and local governments; reduces the paperwork burden imposed on American business five percent; limits the government's ability to impose undue burdens on private property owners; and requires federal agencies to complete regulatory impact analyses. Government-imposed mandates and regulations suppress wages and excessive taxation of capital and investment stifles economic growth and job creation. Current federal policies threaten the competitiveness of American business, stifle entrepreneurial activity and suppress economic growth and job creation. Regulations can also have a direct impact on the lives of all Americans -- raising the prices they pay for goods and services, restricting the use of their private property, and limiting the availability of credit. The bill lowers taxes on investment and reigns in regulation to create additional jobs, enhance wages and recognize private property rights. The Job Creation and Wage Enhancement Act, its sponsors assert, is consistent with the maintenance of a competitive marketplace. It is committed to breaking down unnecessary barriers to entry created by regulations, statutes and judicial decisions, and calls for open, simultaneous and immediate competition within all industries in the United States. Provisions: Capital Gains Reform The Job Creation Act allows individuals to exclude from taxes 50 percent of capital gains income, effectively halving the rate. Under The bill, individuals in the 15 percent income tax bracket would pay an effective capital gains tax rate of 7.5 percent, those in the 28 percent bracket would effectively pay 14 percent, and those in the top bracket of 39.6 percent would pay 19.8 percent on capital gains. Corporations would pay a 17.5 percent capital gains rate. In addition, individuals may deduct any capital loss with respect to the sale or exchange of a principle residence. The bill indexes the basis of capital assets for inflation (prospectively) so taxes are not paid on illusory earnings. Neutral Cost Recovery The bill increases the value of investment depreciation to equal the full value of the original investment. The current value of investment depreciation is less than the original investment because the amounts deducted in later years are eroded by inflation. The bill adjusts the amounts written off after the first year by a discount rate. The neutral cost recovery provision makes taxpayers pay interest on the delayed portions of the write-off. The bill is expected to (1) add approximately a percentage point to the economic growth rate, (2) increase the GDP by $4 trillion between 1995 and 2000, and (3) create almost 2.7 million jobs. Small Business Appreciation The bill recognizes the important contribution small businesses make in our economy by encouraging investment and alleviating the cumbersome paperwork of depreciation schedules. Its provisions include: raising the expensing level from $17,5000 to $25,000, allowing small businesses to deduct the first $25,000 they invest in equipment and inventory each year; clarifying the home office deduction allowing taxpayers to qualify if the home- office is (1) used exclusively for business purposes, (2) used on a regular basis, (3) used to perform tasks that could not easily be performed elsewhere, and (4) is essential to the taxpayer's business; and increasing the estate tax exemption from $600,000 to $750,000, thus restoring the value eroded by inflation and making it easier for small business owners and family farmers to keep their shops and farms in the family. Taxpayer Debt Buydown The bill allows taxpayers to designate up to ten percent of their tax liability to be used to help reduce the public debt. The designated funds would be transferred to the Public Debt Reduction trust fund to be established by the Department of Treasury. Congress is required to reduce spending equivalent to the amount designated by the taxpayer. If for some reason the spending cuts do not occur, an across-the-board sequester will be imposed on all government accounts except the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Resolution Trust Corporation. Risk Assessment/Cost Benefit Analysis The Job Creation and Wage Enhancement Act requires each federal agency to assess the risks to human health and safety and the environment for each new regulation. Agencies must also provide the cost associated with the regulation and an analysis comparing the economic and compliance costs of the regulation to the public. Each agency must form an independent peer review panel to certify the assessment and incorporate the best available scientific data. The review panel members must either possess professional experience conducting risk assessment or in the given field of study. Regulatory Budget The bill requires federal agencies to issue an annual report projecting the cost to the private sector of compliance with all federal regulations. The cost of the regulations will then be capped below its current level forcing agencies to (1) find more cost-effective ways to reach goals and (2) identify regulatory policies whose benefits exceed their costs to the private sector. Unfunded Mandate Reform Congressional Budget Office (CBO) is required to issue an analysis of each piece of legislation containing a federal mandate (a programs that burdens state and local governments with undo costs resulting in over $5 million annually). The analysis must include a description of the mandate, the expected cost to state and local governments, and if the mandates are to be partly or entirely unfunded. CBO budgetary impact reports are to be printed in the committee reports accompanying legislation. The bill caps the mandates cost below its level for the proceeding year. Strengthen Paperwork Reduction Act and the Regulatory Flexibility Act Compliance with federal regulations consumes tens of thousands of man-hours annually. Employers must hire lawyers and other experts to fill out the government paperwork. Consequently, they hire fewer workers to produce goods and services. To address this problem, The bill requires the government to reduce the paperwork burden by five percent annually. Also, The bill subjects the Regulatory Flexibility Act to judicial review, so small businesses can sue to enforce the law. The Regulatory Flexibility Act determines whether or not a regulation has a substantial impact on a significant number of small businesses. Protection against Federal Regulatory Abuse The bill provides individuals a "Citizens' Bill of Rights" when being inspected or investigated by a federal agency. The bill of rights affirms individuals rights to (1) remain silent, (2) refuse a warrantless search, (3) be warned that statements can be used against them, (4) have an attorney or accountant present, (5) be present at an inspection or investigation, and (6) be reimbursed for unreasonable damages. Also, The bill allows individuals who are threatened by a prohibited regulatory practice to take legal action against the responsible agency. A prohibited regulatory practice is defined as an inconsistent application of any law, rule or regulation causing mismanagement of agency resources by any agency or employee of the agency. Private Property The bill allows private property owners to receive compensation (up to 10 percent of fair market value) from the federal government for any reduction in the value of their property. If a question arises over the value of the property, the private property owner may use an arbitrator to decide the outcome. Regulatory Impact Analysis The bill requires federal agencies to complete a regulatory impact analysis when drafting a major rule (affecting more than 100 people and costing more than $1 million). The bill lists 23 specific criteria the agencies must follow, including; (1) explaining the necessity and appropriateness of the rule, (2) a statement of whether the rule is in accord with or in conflict with any legal precedent, (3) a demonstration that the rule is cost-effective, (4) an estimate of the number of persons affected by the rule, and (5) an estimate of the costs to the agency for implementation of the rule. * * * The Common Sense Legal Reforms Act Highlights: The bill makes a number of legal reforms to, among other things, make sure that expert witness testimony is based on scientifically sound evidence, that product liability laws are uniformly applied, that abusive securities lawsuits are limited, and that opportunities for alternative dispute resolution are expanded. Background: Almost everyone agrees that America has become a litigious society: we sue each other too often and too easily. In the federal courts alone, the number of lawsuits filed each year has almost tripled in the last 30 years -- from approximately 90,000 in 1960 to more than 250,000 in 1990. As President Bush's Council on Competitiveness found, this dramatic growth in litigation carries high costs for the U.S. economy: manufactures withdraw products from the market, discontinue product research, reduce their workforces, and raise their prices. In addition to the sheer volume of lawsuits that filter through the legal system each year are the problems associated with frivolous suits. In many cases, defendants know that the suit would not stand on its own merits, but agree to settle out of court just to avoid the endless and expensive claim and appeal processes. Such responses merely perpetuate our propensity to sue. Legal experts point to a few straightforward reforms that can help stem abuse of the system. Promoting voluntary settlements instead of court trials, and encouraging meritorious claims while discouraging baseless suits and devious trial tactics are just some of these proposals. Provisions: "Loser Pays Rule" The bill applies the so-called "loser pays rule" (in which the unsuccessful party in a suit pays the attorneys' fees of the prevailing party) to diversity cases filed in federal court. A diversity case involves citizens from different states. However, the bill limits the size of the coverage to the loser's own attorneys' fees costs (e.g., if the prevailing party spent $100 dollars defending himself and the unsuccessful party spent $50, then the unsuccessful party is only responsible for $50 of the prevailing party's court costs). Courts may also impose other limits on the award of attorneys' fees. Bill sponsors argue that the "loser pays rule" strongly discourages the filing of weak cases as well as encourages the pursuit of strong cases, since claimants can get their court costs reimbursed if they win. Honesty in Evidence The bill amends Rule 702 of the Federal Rules of Evidence regarding expert witness testimony to state that expert testimony is not admissible in a federal court (1) unless it is based on "scientifically valid reasoning" and (2) if the expert is paid a contingency fee (however, the bill allows the judge to waive this second prohibition). Bill sponsors argue that so-called experts too often base their opinions on "junk science" in order to justify absurd claims. Product Liability The legislation creates a uniform product liability law (covering state and federal actions) in three areas: punitive damages, joint and several liability, and fault-based liability for product sellers. For punitive damages, the bill requires that claimants establish by "clear and convincing evidence" that the harm they suffered was the direct result of malicious conduct. Under the measure, punitive damages are limited to three times the actual harm (i.e., the economic damages awarded). For claimants with little actual harm, awards of up to $250,000 could be awarded. The bill also abolishes joint liability for non-economic losses (mental distress, pain and suffering, etc.) and holds defendants liable only for their proportion of the harm. Under current law, a defendant can be held responsible for the entire award, even if he is not completely responsible for all the harm done. For example, if a consumer sues the manufacturer, the buyer, the shipper and the merchant and only the merchant is solvent, the merchant becomes responsible for the total amount of damages awarded by the court -- including the portions owed by the other parties. The solvent individual is then forced to recover the others' portions on his own. This legislation would make an individual party responsible only for the portion of damages directly attributable to it. Finally, the bill makes product sellers liable only for harms caused by their own negligence (e.g., altering or assembling a product or making false claims about the product). Product sellers would only be responsible for manufacturer errors when the manufacturer cannot be brought to court or lacks the funds to pay a settlement. Attorney Accountability The bill expresses the sense of Congress that states should enact laws requiring attorneys practicing within their borders to disclose certain information to clients. Specifically, in contingency fee cases, states should make attorneys disclose (1) the actual duties performed for each client and (2) the precise number of hours actually spent performing these duties. The bill also amends Rule 11 of the Federal Rules of Civil Procedure to restore the mandatory requirement that courts sanction attorneys for improper actions and frivolous arguments intended to harass, unnecessarily delay, and needlessly increase the cost of litigation. Sanctions are to be determined by the judge and may involve financial penalties, contempt orders, limits on discovery and other procedural penalties. Prior to December 1, 1993, federal courts were required to impose sanctions for violations of Rule 11. However, on that date the Federal Judicial Conference's recommendations to amend Rule 11 (making sanctions optional rather than mandatory) took effect since Congress did not act on the proposed rule change. In addition to reinstating the mandatory sanction, the bill requires, for the first time, that sanctioned attorneys compensate injured parties. Prior Notice At least 30 days before a plaintiff can bring a suit, he must transmit written notice to the defendant of the specific claims involved and the actual amount of damages sought. Proponents of the legislation argue that prior notice of a grievance provides an opportunity for both parties to resolve the dispute without going to court. Legislative Checklist This section of the bill is designed to limit needless and costly litigation resulting from poorly-drafted legislation. Frequently Congress fails to directly address basic issues that later result in court challenges. For example, during consideration of the most recent amendments to the Civil Rights Act, Congress failed to resolve the issue of retroactivity. Litigation dragged on for two years until the Supreme Court ruled that the law was not retroactive. Bill sponsors argue that this could have been avoided if Congress had been forced to take a decisive stand on the issue. The bill seeks to limit such situations by requiring that committee reports address the following issues: preemptive effect, retroactive effect, authorization for private suits and applicability to the federal government. Strike Lawsuits The bill reforms federal securities law to limit so-called "strike" lawsuits -- lawsuits filed by class action attorneys on behalf of shareholders whose once-attractive stock purchases have failed to live up to their expectations. Although these suits claim that the holding company misrepresented the healthiness of their stocks, many times the down-turn can only be blamed on market violatility. Bill sponsors argue that these cases usually involve highly speculative investments in the securities field (less than one percent involve truly fraudulent companies) and, it is the attorney, not the shareholder, that benefits from the suit. Since class action lawyers can make decisions that are not in the best interest of the clients without fear of reprisal and take a big chunk of the settlement off the top, shareholders are often exploited. Strike suits are money-makers for the lawyers, but such frivolous claims destroy jobs and hurt the economy. Instead of spending money on research and development, or hiring more employees, or reducing the cost of their products, companies end up spending big bucks on strike suit insurance and legal fees. High-technology, biotechnology and other growth companies are hardest hit because their stocks are naturally volatile. Small- and medium-sized companies alone have paid out nearly $500 million dollars during the last two years (settling a case is often times cheaper and quicker than defending in court). The problem is rapidly getting worse: in the last five years, the number of strike suits has tripled. To address these abuses, The bill (1) provides a court-appointed trustee for plaintiffs (to make sure that lawyers act in the best interests of their clients), (2) guarantees plaintiffs full disclosure of key settlement terms (including a breakdown of how much is to go to them and how much to their lawyers to pay legal fees), (3) limits "professional plaintiffs" to five class-action lawsuits every three years (these individuals typically purchase one share of every stock on the New York Stock Exchange and wait for the stock to drop. They then work with the class action lawyer to initiate the class action and receive bonus payments for their cooperation.), (4) makes losing litigants responsible for the winner's costs, (5) prohibits application of the Racketeer Influence and Corrupt Organizations (RICO) Act to securities cases, and (6) prohibits vague and open-ended complaints. In a key reform, the bill requires that claimants show they relied on intentionally misrepresented information or omissions of information in deciding to purchase their stock, and that their losses were not caused by bad luck in the stock market. * * * Citizen Legislature Act Summary: This resolution provides for consideration of two joint resolutions which propose amendments to the constitution limiting the number of terms members of the Senate and the House of Representatives can serve. The first joint resolution (identical to H.J.Res. 38 as introduced in the 103rd Congress) limits the number of Senate terms to two and the number of House terms to six. The second joint resolution (identical to H.J.Res. 160 as introduced in the 103rd Congress) also limits Senators to two terms, but it limits members of the House to three terms. Under the terms of this resolution, the joint resolution with the text of H.J.Res. 38 will be debated first and the first amendment in order will be a substitute consisting of H.J.Res. 160. Background: The idea of limiting the tenure of elected officials has recurred through our history, but it has become more popular in the last few years. In 1992, 14 states passed initiatives limiting the tenure of federal legislators. Two of these laws, however, have been challenged and found unconstitutional in court. The U.S. Supreme Court will review the ruling by the Arkansas Supreme Court. Since there is a chance the high court will uphold the state court's ruling, a constitutional amendment may be necessary to limit congressional tenure.