Budget Deficit

Pursuant to a congressional request, GAO reviewed the short- and long-term effects of deficit reduction on the economy, focusing on the: (1) benefits of adopting a balanced budget amendment to the Constitution; and (2) long-term deficit outlook. GAO noted that: (1) although it has not endorsed a balanced budget amendment, it has supported making programmatic policy choices that would lead to a more balanced budget; (2) its 1992 economic model was not designed to forecast the short-term effects of deficit reduction on the economy, but to achieve deficit reduction of no more than 0.5 percent of the gross national product per year; (3) the deficit outlook has improved since 1992; and (4) the Congressional Budget Office projects that the Omnibus Budget Reconciliation Act will reduce the deficit by $433 billion from 1994 through 1998, and the deficit will be 3.1 percent of the gross domestic product in 2003.