Budget Structure:

Providing an Investment Focus in the Federal Budget

T-AIMD-95-178: Published: Jun 29, 1995. Publicly Released: Jun 29, 1995.

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GAO discussed how the budget process could be used to focus on long-term economic growth. GAO noted that: (1) since the 1970s, U.S. economic growth has been hampered by declining U.S. savings rates and an increasing federal deficit; (2) long-term investment planning for federal spending would boost economic growth; (3) the current budget process does not distinguish between short-term consumption spending and long-term investment spending; (4) the level of investment spending has declined significantly since 1966 partly due to the increase in consumption spending for federal health programs; (5) a capital budgeting approach would present difficulties concerning depreciation and deficit financing; (6) incorporating an investment component within the discretionary spending caps would be an appropriate and practical approach to supplement the unified budget's focus on macroeconomic issues; (7) under an investment component approach, Congress would define those activities that are intended to enhance the private sector's long-term productive capacity; (8) a mechanism is needed to focus decisionmaking on the appropriate allocation of resources, such as establishing investment targets within the discretionary spending caps and establishing a declining unified budget deficit path; (9) the present budget process raises questions on how to implement investment budgeting; and (10) Congress would need to address how to achieve trade-offs between the discretionary and the pay-as-you-go portions of the budget without destroying the existing controls in the Budget Enforcement Act.

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