Budget Issues:

Incorporating an Investment Component in the Federal Budget

AIMD-94-40: Published: Nov 9, 1993. Publicly Released: Nov 9, 1993.

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Pursuant to a congressional request, GAO provided information on budget issues, focusing on whether investment budgeting can promote long-term economic growth.

GAO found that: (1) the current budget structure does not encourage Congress to make budgeting decisions based on long-term growth and productivity or assist budget policy makers in discerning between spending for long-term investment and current consumption; (2) a federal budget investment component could assist the administration and Congress in making more informed decisions on federal spending for noninvestment activities and future investments; (3) a definition of investment needs to be agreed upon if an investment component is to be effectively used by decisionmakers; (4) the most appropriate definition of investment would include federal spending that is intended to enhance the private sector's long-term productivity, distinguish between federally-owned capital and private-sector investments, and give priority to those activities that lower the cost of goods and services provided by the private sector; (5) the most promising way to implement an investment budget component is to establish investment targets for appropriate levels of investment spending similar to current budget legislation spending limits; and (6) budget reduction and investment decisions should be made within the context of the unified budget in order to prevent infringement from other activities and reduce the deficit over an appropriate period.

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