Budget Reductions for FY 1986

As required by the Balanced Budget and Emergency Deficit Control Act, GAO reviewed the economic assumptions contained in the Office of Management and Budget (OMB) and Congressional Budget Office (CBO) report on budget reductions for fiscal year (FY) 1986.

GAO found that: (1) OMB and CBO failed to include in the sequestrable base approximately $6.3 billion of unobligated balances authorized for transfer to other accounts in the Department of Defense which should have been included for sequestration; (2) the appropriation to pay the federal share of interest costs on bonds issued by the Washington Metropolitan Transit Authority should not be subject to sequestration; (3) changes were necessary in the report with respect to the application of the act to certain other nondefense area accounts which would increase the estimated outlay reduction from sequestration in the nondefense area by $3.3 million; and (4) both the OMB and CBO economic assumptions were within a reasonable range for FY 1986. GAO also found that: (1) there were no alternative assumptions which would result in a deficit of less than $191.9 billion; (2) OMB and CBO expect a $220.5 billion deficit in FY 1986, which is $48.6 billion more than the maximum deficit specified in the act; (3) eliminating automatic spending increases for certain indexed programs may reduce outlays by $1 billion; (4) a $5.4 billion reduction is required in defense programs; (5) the President will exempt about $61.3 billion of military personnel costs from the sequestration procedures of the act, and other defense programs will require a uniform 4.9 percent reduction; and (6) there is a remaining $5.3 billion required reduction in nondefense programs and, while some programs are subject to special reduction procedures, other programs will require a 4.3 percent reduction.