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Improvements to the Congressional Budget and Impoundment Control Act of 1974

Published: Sep 21, 1982. Publicly Released: Sep 21, 1982.
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Highlights

In testimony before a congressional committee, GAO discussed improvements to the Congressional Budget and Impoundment Control Act of 1974, which was designed to create a framework within which Congress could set national budget priorities and establish appropriate levels of Federal revenue and expenditures. Implementation of the Act has been difficult, because delays in funding decisions have increased and have affected both financial markets and the efficient operation of Government agencies and programs. GAO suggested that the following guidelines be used to ease monetary policy and to reduce substantially the budget deficits projected for fiscal year 1984 and beyond. First, policy should be based on the long-run objective of moderating inflation. Second, unemployment should not be reduced by either expansive monetary or fiscal policy to levels where inflationary pressures are renewed. The exact magnitude of a noninflationary unemployment rate is now generally thought to be substantially above the traditional 5 percent. Third, adjustments in policy should be gradual and moderate so as to minimize uncertainty and instability in financial markets and investments. Fourth, long-run growth should be a paramount goal in policies to stimulate investment in the economy. Fifth, monetary and fiscal policy should be based on a consistent and achievable set of long-run goals, including employment, price levels, and economic growth. GAO also noted that, despite concern over the size of projected budget deficits, few economists support a constitutional amendment to require a balanced budget. GAO believes that this lack of support reflects both a general skepticism that such an amendment would achieve its stated purpose and the concern that, if effective, the amendment would inappropriately constrain the Federal Government's ability to carry out an effective economic policy.

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