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AIMD-94-79R 1 (1994-02-18)

handle is hein.gao/gaobackms0001 and id is 1 raw text is: Comptrolier General of the United States Washington, D.C. 20548 B-256486 February 18, 1994 The Honorable Paul Simon United States Senate Dear Senator Simon: You requested our views on the need for continued deficit reduction and how the current deficit outlook compares to the no action scenario discussed in our June 1992 report, Budget Policy: Prompt Action Necessary to Avert Long-Term Damage to the Economy (GAO/OCG-92-2, June 5, 1992). Your request comes in the context of the pending debate on a constitutional amendment to require a balanced federal budget. GAO has not endorsed any of the proposed balanced budget amendments. We have, however, long supported making the hard policy choices that would lead the country to a more balanced budget. In our 1992 report, we looked at the trends driving the deficit over the long term. We developed four scenarios to show the implications of various fiscal policies in dealing with the deficit. These scenarios, projected to the year 2020, were: (1) doing nothing and allowing the deficit and cumulative debt to grow unchecked, (2) holding the deficit to 3 percent of gross national product (GNP), (3) achieving a balanced budget early in the next century and maintaining balance thereafter, and (4) achieving a balanced budget and then moving into surplus. While the no action scenario depicted an explosion of the deficit and the national debt, this alternative was included in the report to illustrate the need to take action before external events forced belated but certainly more painful policy changes. We said at the time that we did not believe the no action scenario would come to pass, and, indeed, the deficit outlook has changed in the 2 years since our report was issued. In the Omnibus Budget Reconciliation Act of 1993, the Congress and the President have taken action that the Congressional Budget Office (CBO) estimates will reduce the deficit by $433 billion from 1994 through 1998. CBO now projects the GAO/AIMD-94-79R Deficit Reduction

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