Budget Policy:

The Budget Deficit and Long-Term Economic Growth

T-OCE-92-1: Published: Jun 11, 1992. Publicly Released: Jun 11, 1992.

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GAO discussed the federal budget deficit and federal spending priorities, focusing on the deficit's long-term economic consequences and the economic benefits of deficit reduction. GAO noted that: (1) the rising budget deficit is increasingly absorbing the net national savings available for investment, and trends in expenditures for health care, interest, and social security indicate continued deficit and debt growth; (2) continuation of a no-action approach to the deficit could result in further deficit increases and declining economic growth; (3) approaches that continue to attempt to control the budget, without setting discrete and decisive action, will not lessen the prospect of a serious economic crisis; (4) deficit reduction approaches that focus on achieving and maintaining a balanced budget or a budget surplus could produce a healthy economy capable of meeting national needs in the future; (5) it is important to consider the international dimension of the long-term U.S. economic outlook, but such analysis is contentious and difficult; and (6) increased national saving through deficit reduction could reduce reliance on foreign capital, improve the U.S. net international investment position, make foreign investment opportunities more attractive, and increase economic and job growth. GAO believes that decisionmakers should continue to consider long-term economic effects in budget analysis activities and budget structure and process reform attempts.

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