The Budget Deficit

Outlook, Implications, and Choices Gao ID: OCG-90-5 September 12, 1990

GAO reviewed the budget deficit problem facing the nation, the implications of the deficit for the U.S. economy, and the choices that must be made to reduce the deficit problem.

GAO found that: (1) the Office of Management and Budget reported that the baseline deficit for fiscal year 1991 was $100.5 billion; (2) the total debt stood at over $3 trillion in 1990 and was projected to reach $5 trillion in 1995; (3) gross interest on the debt increased by 222 percent from 1980 to 1989 and was the fastest growing budget expenditure; (4) net savings in the United States has declined from 9 percent in 1960 to 3.7 percent in 1987; and (5) the 1990 budget summit negotiators are seeking to reach agreement on a deficit reduction package of $30 billion to $50 billion for 1991, with a longer term goal of about $500 billion over the 5-year period from 1991 to 1995. GAO believes that: (1) $242 billion in program cuts or revenue increases could yield $120 billion in additional budget savings by 1997; and (2) developing a package of $240 billion in policy changes was a major political challenge involving difficult choices.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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