Summary: GAO discussed proposed legislation that would repeal the Balanced Budget and Emergency Deficit Control Act of 1985 and substitute a new deficit reduction approach that would require annual recalculation of new deficit targets under a pay-as-you-go formula. GAO noted that the: (1) current budget structure does not accurately present investments, costs, and surpluses for effective resolution of budget deficits; and (2) 1985 legislation's formula budgeting approach weakens the legislative process and long-term public confidence in government budgeting. GAO also noted that the proposed legislation: (1) did not include a sequestration procedure to enforce required cutbacks; (2) included provisions designed to make it more difficult to increase spending or decrease revenues from the budget-resolution approved levels; (3) had such advantageous features as reduced incentives for adopting measures producing short-term cash benefits but higher long-term costs, clarification of some budget scorekeeping uncertainties, improved budgeting for federal credit and deposit insurance programs, and decreased misuse of the government-sponsored enterprise concept for moving federal activities off-budget; and (4) presented some weaknesses in terms of the continued use of a formula feature and lack of an easily understood deficit reduction plan. GAO believes that the development of a more comprehensive bill that includes many of the proposed legislation's budget-discipline enhancing provisions, in the context of a multi-year, bipartisan budget summit agreement, could better implement budget resolution targets.
