Objectives, Scope, and Methodology

The objectives of this study were to (1) determine the feasibility of  designing and using trigger mechanisms to constrain growth in mandatory  spending and (2) provide an analysis of the factors (legislative, economic,  and technical) that led to differences between estimated and actual outlays  in seven mandatory budget accounts during fiscal years 2000 through 2004. A “soft” response prompts special consideration of a program or a proposal  for action when a certain threshold or target is breached. Issues to Consider in Designing the Triggered Response

Whether a triggered response is soft, hard, or a combination of the two,  efforts to constrain growth in mandatory programs need to be focused at  the program level. Some of the experts expressed strong support for budget triggers. Many tax expenditures operate like mandatory  spending programs and generally are not subject to reauthorization. The analysis we  applied to spending in this report would also be useful in examining tax  expenditures. Reasons for Differences between Estimated and Actual Outlays in Selected Accounts Varied

To better appreciate the reasons behind growth in mandatory accounts and  thus inform our thinking on triggers, we examined the reasons for  differences between originally estimated and actual outlays for seven  mandatory accounts that experienced relatively large dollar changes. Finally, technical factors,  which cover a broad spectrum, most significantly drove 13 out of 40  differences. In many  cases, a combination of factors resulted in differences. By  identifying significant increases in mandatory spending relatively early and  acting to constrain it, Congress may avert even larger fiscal challenges in  the future. While we appreciate the concerns  raised by budget experts, in our opinion, establishing budget triggers  warrants serious consideration in order to constrain growth in mandatory  spending programs. In any case, recognizing the natural tension in balancing both  long-term fiscal challenges and other public policy goals, each program  needs to be considered individually to ensure that any responses triggered  strike the appropriate balance between the long-term fiscal challenge and  the program goals. Once a trigger is tripped, Congress  could either accept or reject all or a portion of the response to the spending  growth. One idea to constrain growth in mandatory programs is to develop triggers  that, when tripped, would cause some automatic cost-cutting or revenue-  increasing response—such as changes in eligibility criteria, benefit  formulas, or fees—automatically to go into effect unless Congress and the  President act to make other changes. If a trigger were established  that resulted in a contractionary response, it could undermine these  important goals and exacerbate the effects of unemployment on the  economy.
Why GAO Did This Study

Prepared as part of GAO's basic statutory responsibility for monitoring the condition of the nation's finances, the objectives of this report were to (1) determine the feasibility of designing and using trigger mechanisms to constrain growth in mandatory spending programs and (2) provide an analysis of the factors that led to differences between estimated and actual outlays in seven mandatory budget accounts during fiscal years 2000 through 2004.

What GAO Found

One idea to constrain growth in mandatory programs is to develop program-specific triggers that, when tripped, prompt a response. A trigger could result in a "hard" or automatic response, unless Congress and the President acted to override or alter it. Alternatively, reaching a trigger could require a "soft" response, such as a report on the causes of the overage, development of a plan to address it, or an explicit and formal decision to accept or reject a proposed action or increase. By identifying significant increases in the spending path of a mandatory program relatively early and acting to constrain it, Congress may avert larger financial challenges in the future. However, both in establishing triggers and in designing the subsequent responses, the integrity of program goals needs to be preserved. In addition, tax expenditures operate like mandatory programs but do not compete in the annual appropriations process. The analysis GAO applied to spending in this report would also be useful in examining tax expenditures. The budget experts GAO consulted had mixed views of triggers. Proponents of triggers noted that mandatory spending is currently unconstrained and a mechanism that causes decision makers to at least periodically reevaluate spending is better than allowing spending to rise unchecked. Others, however, expressed considerable skepticism about the effectiveness of triggers; many felt they would either be circumvented or ignored. While GAO appreciates the views expressed by budget experts, in our opinion establishing budget triggers warrants consideration in efforts to constrain significant and largely unchecked growth in mandatory programs. However, recognizing the natural tension in balancing both long-term fiscal challenges and other public policy goals, each program needs to be considered individually to ensure that any responses triggered strike the appropriate balance between the long-term fiscal challenge and the program goals. To better understand growth in mandatory spending and thus inform GAO's thinking on triggers, for seven case study accounts GAO categorized the reasons provided by agencies for differences between estimated and actual outlays during a 5-year period as the result of legislative, economic, or technical changes. Out of 40 differences, subsequent legislation was the primary reason for 19, economic changes for 7, and technical changes for 13. In many cases, a combination of these factors caused the differences.