Improvements to the Congressional Budget and Impoundment Control Act of 1974

In testimony before a House committee, GAO reviewed possible improvements to the budget process and proposed legislation which could achieve greater stability, control, and flexibility in government programs and funding, especially where states and localities are concerned. GAO believes that there is a growing recognition that it is a mix of fiscal, monetary, and income policies that affect economic conditions and that integration will depend on agreement between the administration, Congress, and the Federal Reserve Board on the long-range goals and policies necessary to achieve those goals. GAO believes that it will be necessary for Congress to constrain the growth of both entitlements and defense spending, while generating additional revenues. GAO found that few economists support a constitutional amendment to require a balanced budget, which 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 government's ability to implement effective economic policy. GAO concluded that the dominant view supports an approach to economic policy built around the following principles: (1) policy should be based on a long-run objective of moderating inflation; (2) unemployment should not be reduced by either expansive monetary or fiscal policy to levels where inflationary pressures are renewed; (3) policy adjustments should be gradual and moderate so as to minimize uncertainty and instability in financial markets and investments; (4) long-run growth should be a paramount goal in policies to stimulate investment in the economy; and (5) monetary and fiscal policy should be based on a consistent and achievable set of long-run employment, price level, and economic growth goals for the economy.