An Analytical Framework for Federal Policies and Programs Influencing Capital Formation in the United States

The rate of capital formation in the United States has slowed down. During the 1970's, the rate of increase in the net stock of fixed business capital was 25 percent lower than during the 1950's and 1960's. Because the slowdown was accompanied by a sharp acceleration in the rate of growth of the labor force, the rate of increase in the ratio of capital to labor declined even more. The ratio of capital to labor grew only 1 percent a year during the 1970's, compared with a 3 percent annual rate of increase from 1949 to 1969. GAO examined the means by which Federal policies, programs, and activities can affect the rate of capital formation. The purpose is to provide Congress with a perspective on an economic problem of major national significance, so that it can better evaluate policies designed to stimulate more rapid capital formation.