The Budget Deficit:

Outlook, Implications, and Choices

OCG-90-5: Published: Sep 12, 1990. Publicly Released: Sep 12, 1990.

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GAO reviewed the budget deficit problem facing the nation, the implications of the deficit for the U.S. economy, and the choices that must be made to reduce the deficit problem.

GAO found that: (1) the Office of Management and Budget reported that the baseline deficit for fiscal year 1991 was $100.5 billion; (2) the total debt stood at over $3 trillion in 1990 and was projected to reach $5 trillion in 1995; (3) gross interest on the debt increased by 222 percent from 1980 to 1989 and was the fastest growing budget expenditure; (4) net savings in the United States has declined from 9 percent in 1960 to 3.7 percent in 1987; and (5) the 1990 budget summit negotiators are seeking to reach agreement on a deficit reduction package of $30 billion to $50 billion for 1991, with a longer term goal of about $500 billion over the 5-year period from 1991 to 1995. GAO believes that: (1) $242 billion in program cuts or revenue increases could yield $120 billion in additional budget savings by 1997; and (2) developing a package of $240 billion in policy changes was a major political challenge involving difficult choices.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: A multiyear budget resolution was approved as part of OBRA 1990.

    Matter: Congress and the President should reach agreement on a multiyear plan to move the general fund budget to approximate balance by 1997. A $300-billion fiscal policy swing could result in total budget surpluses of approximately 2 percent of the gross national product annually by 1997.

  2. Status: Closed - Not Implemented

    Comments: This recommendation was superseded by the content of a report issued June 5, 1992 (OCG-92-2), wherein GAO discussed the positive economic effects of achieving a 2-percent surplus by 2005.

    Matter: The 102nd Congress should resume budget summit negotiations with the objective of reaching agreement on a comprehensive package of policy changes that will produce an overall budget surplus of about 2 percent of the Gross National Product, about $180 billion, by 1997.

  3. Status: Closed - Not Implemented

    Comments: A multiyear budget resolution was approved as pert of the Omnibus Budget Reconciliation Act of 1992.

    Matter: The 102nd Congress should resume budget summit negotiations with the objective of enacting those changes into law in the form of a multiyear budget resolution, along with the substantive legislation required to implement that resolution, by the conclusion of the first session of the 102nd Congress.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: This recommendation was superseded by the content of a report issued June 5, 1992, (OCG-92-2), wherein GAO discussed the positive economic effects of achieving a 2-percent surplus by 2005.

    Recommendation: Congress and the President should reach agreement on a multiyear plan to move the general fund budget to approximate balance by 1997. A $300-billion fiscal policy swing could result in total budget surpluses of approximately 2 percent of the gross national product annually by 1997.

    Agency Affected: Executive Office of the President

 

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