Understanding the Federal Budget

Abstract

How do you capture the complexity and breadth of an entity that spends over $1.5 trillion and employs over 4.5 million people? As an initial step in dealing with the challenges presented by the scope and magnitude of the federal government, the U.S. General Accounting Office (GAO) has produced a variety of primarily graphical products based on historical budget information. The Debt Primer The topic of the federal debt provokes much confusion among both policy makers and the public. For example, one point that is sometimes overlooked is that even if Congress and the president agree to balance the budget within the next several years, the dollar amount of the federal debt would continue to grow until balance is actually achieved. Once the budget is balanced, although the debt would decline as a share of the economy, its dollar value would essentially remain the same. The only way to reduce the amount of debt is to run a budget surplus. Although many excellent articles, reports, and books have been written on the debt and its effects, these discussions tend to be complex and technical. To help provide basic information about the debt in an accessible way, the GAO has published an informational report called Federal Debt: Answers to Frequently Asked Questions (AIMD-97-12, November 27, 1996). In this document, the GAO defines key terms, such as debt, deficits, and interest, and explains how they are related. With the help of numerous charts and graphs, the document summarizes the historic trends in these important fiscal indicators and discusses their economic and budgetary effects. In addition, the report briefly addresses more technical issues, such as how the government borrows and the rollover of the debt. Fiscal Trends Two recent publications address the basic question: What's growing (and what's not). In Federal Fiscal Trends: Fiscal Years 1971-1995 (AIMD-97-3, November 1, 1996), the GAO presents basic fiscal data -- revenues, outlays and deficits -- in easy to understand graphs and figures, accompanied by brief explanatory statements. The publication focuses on one of the most dynamic periods of federal fiscal affairs and shows the dramatic changes that have occurred. In Budget Trends: Obligations by Item of Expense, Fiscal Years 1971-1994 (AIMD-95-227, September 12, 1995), the GAO summarizes spending according to the items of government expenditure. This classification approach, one of the oldest used in governmental budgeting, provides insight into the shifting patterns of federal spending and, specifically, the declining share of operating expenses as a percentage of total spending. Government Restructuring In a series of reports for the Chairman of the Senate Committee on Government Affairs, the GAO addressed the question of fragmentation and overlap in federal programs by arraying spending and personnel levels by (1) mission (i.e., the budget function and subfunction presentations), and (2) department and agency. By examining the functions of government agencies, the GAO laid the foundation for further inquiries about government restructuring. The GAO publications in this line of work include the following: Government Restructuring: Identifying Potential Duplication in Federal Missions and Approaches (T-AIMD-95-161, June 7, 1995); Budget Function Classification: Agency Spending by Subfunction and Object Category, Fiscal Year 1994 (AIMD-95-116FS, May 10, 1995); and Budget Function Classification: Agency Spending and Personnel Levels for Fiscal Year 1994 and 1995 (AIMD-95-115FS, April 11, 1995). …