Budget Policy:

Investment Budgeting for the Federal Government

T-AIMD-94-54: Published: Nov 9, 1993. Publicly Released: Nov 9, 1993.

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GAO discussed federal capital budgeting, focusing on the role of government investment in long-term economic growth. GAO noted that: (1) the surest way to increase savings and investment is to reduce the deficit; (2) the current budget structure is inadequate because it makes no distinction between current consumption and investment decisions that promote long term economic benefits; (3) federal spending for well-chosen investment programs will most likely increase the future capacity of the economy compared to spending for consumption programs; (4) budgets normally define capital investments as tangible assets with a specific dollar value that are intended for long-term use or possession, are relatively permanent in nature, and are not intended for resale; (5) budget presentations comparing investment spending with spending for consumption would be useful for congressional decisionmakers; (6) depreciation is not a practical component to use in making budget decisions, since it is difficult to determine and is often arbitrary; (7) deficit financing involves several risks to investment and the national economy; (8) establishing investment targets would help decisionmakers focus on the overall level of investment and build on the current congressional decisionmaking process; and (9) congressional decisionmakers need a framework to assess the relative worth of different investment programs.

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