Summary

This report compares the Office of Management and Budget's (OMB) original and revised estimates of the deficit, outlays, receipts, and economic conditions with the actual fiscal year 1993 results. GAO (1) identifies reasons for the major difference between OMB's original estimates and actual results; (2) assesses whether patterns of estimating problems are discernable; and (3) includes, for comparison purposes, the recent estimates reported by the Congressional Budget Office (CBO). Excluding deposit insurance, OMB's estimate of the budget deficit for fiscal year 1993 tracked closely to the final adjusted deficit. The budget estimation process is, however, unlikely to become any easier given upcoming tax changes and the proposals for health care and welfare reform. Although the fiscal year 1993 budget deficit was the lowest in three years, it still added more than $250 billion to the nation's debt; in fiscal year 1993, interest payments on this borrowing totaled another $293 billion. CBO projects that the deficit will shrink to $166 million in fiscal year 1996 but will turn upward at the end of the decade unless additional action is taken. In GAO's view, now is the time--while the economy is growing and the deficit is not--to adopt policies to put the deficit on a downward path.

GAO found that: (1) OMB did not forecast the $95 billion decline in the federal deficit; (2) outlays for deposit insurance were lower than originally estimated because of the improved health of the bank and thrift industries and the delay in appropriations for the Resolution Trust Corporation; (3) lower-than-estimated Medicaid outlays were partially offset by high outlays for Medicare; (4) lower-than-estimated receipts from individual and social insurance taxes and contributions were partially offset by high corporate income tax receipts; (5) varying conditions in unemployment, inflation and economic growth contributed to the offsetting differences between OMB budget estimates and actual FY 1993 results; (6) the largest differences between OMB estimates and actual results were for mandatory program outlays for fiscal years 1992 and 1993; and (7) OMB economic assumptions for FY 1993 were generally consistent with CBO forecasts.