Budget Trends

During the past decade, concerns have been raised about the declining levels of federally and domestically financed investment and national savings. Continued efforts to reduce the federal deficit could help boost national savings and expand domestic capital available for private investment. At the same time, reducing the deficit constrains the government's discretionary spending, which finances most federal investment. As the constraints on discretionary spending have tightened with the broad agreement to balance the budget by fiscal year 2002, legislative proposals before Congress have sought to promote long-term economic growth in the private sector. This report provides trend data and estimates of future outlays for investments through fiscal year 2002.

GAO noted that: (1) the share of total federal budget outlays and of gross domestic product devoted to investment gradually declined from the early 1980s through 1996; (2) according to the administration's policy estimates, this decline will continue for 1997 through 2002; (3) however, over the same time period, a slightly different picture emerges when investment outlays are converted to constant 1992 dollars; (4) investment spending in estimated constant dollar outlays increased slightly from the 1980s to the mid-1990s, with a gradual decline through 2002; (5) investment by category (character class) in constant dollars shows varying patterns; (6) physical capital remained relatively stable from the 1980s through 1995, with slight declines in 1996 and in the President's policy estimates for fiscal years 1997 through 2002; (7) research and development shows increases from the 1980s through 1990 and then drops off gradually; (8) in contrast, education and training has shown a relatively steady increase from 1981 that is projected to continue through 2002; (9) the pattern of investment from 1981 through 2002 in constant dollars varies across budget functions; (10) seven functions contain about 96 percent of investment outlays; (11) two of those functions, Education and Training and Health, show a general increase over the period; (12) the General Science function shows an increase to the mid-1990s and then levels off; (13) the National Defense and Transportation functions show increases followed by declines in the 1990s and through 2002; and (14) investment spending in the Natural Resources and Environment and Energy functions show a continued downward trend from the 1980s through 2002.