Pursuant to a congressional request, GAO summarized its previous work suggesting better targeting of federal programs and services as a strategy for downsizing government and reducing the deficit.

GAO found that: (1) better targeting can reduce spending and improve federal programs and services, but poor targeting can result in overspending; (2) Congress must decide how to reduce funding for certain programs and alter the allocation of resources to meet its deficit reduction goals; and (3) options for better targeting include revising formula grants to states and localities to reflect differences in fiscal capacity, altering eligibility rules for federal benefit programs to restrict certain benefits, instituting fees for those that consume certain government-provided, business-type services, and limiting or eliminating tax preferences given to state and local governments that issue industrial development bonds.