H.R. 251 (103rd): Monetary Policy and Treasury Finance Enhancement Act of 1993

103rd Congress, 1993–1994. Text as of Jan 05, 1993 (Introduced).

Status & Summary | PDF | Source: GPO

HR 251 IH

103d CONGRESS

1st Session

H. R. 251

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

IN THE HOUSE OF REPRESENTATIVES

January 5, 1993

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


A BILL

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

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Monetary Policy and Treasury Finance Enhancement Act of 1993’.

SEC. 2. PURPOSES.

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

SEC. 3. ISSUANCE OF INDEXED OBLIGATIONS.

    (a) IN GENERAL- Subchapter I of chapter 31 of title 31, United States Code, is amended by adding at the end thereof the following new section:

‘Sec. 3114. Indexed Obligations

    ‘(a) MANDATORY ISSUANCES-

      ‘(1) IN GENERAL- At least 10 percent of the aggregate face amount of longer-term public debt obligations issued during a fiscal year shall be in the form of indexed obligations.

      ‘(2) HIGHER REQUIREMENT IN CERTAIN CASES- If, as of the beginning of any fiscal year, less than 10 percent of the aggregate face amount of outstanding obligations issued under section 3102 and 3103 and having at least 5 years to maturity are in the form of indexed obligations, the aggregate face amount of longer-term public debt obligations issued during such fiscal year which shall be in the form of indexed obligations shall be at least the greater of--

        ‘(A) the amount required to be in such form under paragraph (1), or

        ‘(B) 2 percent of the aggregate face amount of obligations issued under section 3102 and 3103 which, as of the beginning of such fiscal year, are outstanding and have at least 5 years to maturity.

      The indexed face amount of an outstanding indexed obligation shall be taken into account under this subparagraph and subsection (c) (in lieu of its actual face amount) in determining the amount of indexed obligations required or permitted to be issued.

      ‘(3) LONGER-TERM PUBLIC DEBT OBLIGATIONS- For purposes of this subsection, the term ‘longer-term public debt obligation’ means any obligation issued under section 3102 or 3103 which matures at least 5 years after the date of issue.

    ‘(b) DISCRETIONARY ISSUANCES-

      ‘(1) IN GENERAL- The Secretary of the Treasury may issue obligations under section 3102 or 3103 which mature at least 270 days but less than 5 years after the date of issue in the form of indexed obligations.

      ‘(2) MINIMUM ISSUANCE IF DISCRETION EXERCISED- The Secretary of the Treasury may exercise the authority under this subsection only if at least 5 percent of the aggregate face amount of the obligations referred to in paragraph (1) which are issued during a fiscal year are in the form of indexed obligations.

    ‘(c) AGGREGATE LIMIT- Not more than 50 percent of the aggregate face amount of obligations issued under section 3102 or 3103 which mature on any day shall be in the form of indexed obligations.

    ‘(d) INDEXED OBLIGATIONS- For purposes of this section--

      ‘(1) IN GENERAL- The term ‘indexed obligations’ means any obligation--

        ‘(A) which has a redemption value at maturity equal to its indexed face amount,

        ‘(B) which has a face amount at issuance of at least $1,000 but not more than $5,000,

        ‘(C) which may not be redeemed before maturity, and

        ‘(D) the interest (if any) on which is payable for any period on the basis of its indexed face amount as of the beginning of such period.

      ‘(2) INDEXED FACE AMOUNT- The term ‘indexed face amount’ means, as of any date, the sum of--

        ‘(A) the face amount of the obligation at issuance, plus

        ‘(B) such face amount multiplied by the percentage by which--

          ‘(i) the selected index for such date, exceeds

          ‘(ii) the selected index for the issue date of the obligation.

      ‘(3) SELECTED INDEX FOR DATE- The selected index for any date is the selected index for the second calendar month preceding the calendar month in which such date occurs. If the selected index is not determined on a monthly basis, the Secretary of the Treasury shall prescribe a rule for determining the selected index for any date, and such prescribed rule shall apply in lieu of the preceding sentence.

      ‘(4) SELECTED INDEX-

        ‘(A) IN GENERAL- Except as provided in subparagraph (B), the term ‘selected index’ means the CPI.

        ‘(B) ANOTHER INDEX MAY BE USED- If the Secretary of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System--

          ‘(i) agree that the use of the CPI for purposes of paragraph (2) is unsatisfactory and that the use of another index would be more satisfactory for such purposes, and

          ‘(ii) submit a report to Congress jointly recommending the use of such other index,

        the term ‘selected index’ means such other index.

        ‘(C) CHANGES IN INDEX- The selected index applicable to any indexed obligation shall be such index as of the date of issue of such obligation, and such index shall be determined, with respect to such obligation, without regard to changes in its structure or computation after such date.

      ‘(5) CPI- The term ‘CPI’ means the Consumer Price Index for all urban consumers published by the Department of Labor.

    ‘(e) TERMS AND CONDITIONS- Indexed obligations may be offered for sale on a competitive or other basis under such regulations and upon such terms and conditions as the Secretary of the Treasury may prescribe. The Secretary shall provide that such obligations shall be available for purchase by individuals both directly from the Department of the Treasury and through Federal Reserve System facilities.

    ‘(f) CONSULTATION WITH FEDERAL RESERVE- The Secretary of the Treasury shall consult with the Chairman of the Board of Governors of the Federal Reserve System in determining the amounts, maturities, and timing of issuances of indexed obligations under this section. The Secretary shall maintain appropriate records of all recommendations received from the Chairman in such consultations.

    ‘(g) CONSIDERATIONS- In determining the amounts, maturities, and timing of issuances of indexed obligations under this section, the Secretary of the Treasury shall--

      ‘(1) attribute reasonable benefits to improvements in monetary management resulting from the issuance of indexed obligations, including reasonable estimates for reduced interests costs on obligations that are not indexed obligations arising from better inflation control and from smaller budget deficits as a consequence of improved economic stabilization, and

      ‘(2) assure liquidity and pricing reliability in indexed obligations and the competitiveness of such obligations with nonindexed obligations issued under section 3102 and 3103 with comparable maturities, including assuring that each issue of interest-bearing indexed obligations is of an amount sufficient to permit the right to receive interest on such obligations to be traded separately from the underlying obligations.

    The Secretary shall periodically announce expected issuance and maturity dates of issues of indexed obligations and the expected proportion of the total obligations issued under sections 3102 and 3103 having those maturity dates which are expected to be indexed obligations. Such announcements shall precede expected issuance dates by at least 1 year.

    ‘(h) MONITORING- The Secretary of the Treasury shall monitor the ownership and trading activity of indexed and nonindexed obligations issued under section 3102 or 3103 having the same maturity dates for purposes of assuring liquidity and pricing reliability with respect to indexed obligations.

    ‘(i) REPORTS- Not later than 2 years after the date of the enactment of this section, and not later than the close of each 2-year period thereafter, the Secretary of the Treasury shall submit to the Congress a report on the program established under this section. No report shall be required under this subsection for any period after the 10th year after the date of the enactment of this section.’.

    (b) PROCEDURE- Subsection (a) of section 3121 of such title 31 is amended by striking ‘and’ at the end of paragraph (6), by redesignating paragraph (7) as paragraph (8), and by inserting after paragraph (6) the following new paragraph:

      ‘(7) whether the obligation is to be issued as an indexed obligation; and’.

    (c) CLERICAL AMENDMENT- The table of sections for subchapter I of chapter 31 of title 31 of such Code is amended by adding at the end thereof the following new item:

      ‘3114. Indexed obligations.’.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to fiscal years beginning after the date of the enactment of this Act.

    (e) TAXATION- It is the intent of the Congress that--

      (1) except for changes to minimize any Federal income tax incentives or disincentives to acquiring indexed obligations as compared to nonindexed obligations, Federal income tax changes which affect nonindexed obligations should apply to the fullest extent feasible to indexed obligations, and

      (2) there should be symmetrical treatment applied to increases and decreases in the indexed face amount of an indexed obligation such that, for example, if increases in the indexed face amount of an obligation are includible in gross income as ordinary income, decreases in the indexed face amount of an obligation should be allowable as a deduction as an ordinary loss.