This report includes actual investment outlays for fiscal years 1981 through 1997 and estimates contained in the President’s 1999 budget for fiscal years 1998 through 2003. The estimates for 1998 through 2002 using the 1999 budget estimates are higher than those for the corresponding period contained in the 1998 budget both in dollars and as a percent of total outlays. Accordingly, to offer assurance that the investment trend line was not a function of the level of overall federal outlays, we analyzed the outlays’ share of GDP. As figure 2 shows, these estimates for the 1998 through 2002 period are higher in all years than the corresponding estimates from the 1998 budget. The spending pattern is different when analyzed in terms of constant dollars. As shown in figure 5, the 1999 budget estimates for investment from 1998 through 2002 range from slightly more than $2 billion to almost $11 billion higher than the 1998 budget estimates. Investment by Category

Investment by category is a way of describing the three major types of investment financed by the federal government—outlays for physical assets, research and development, and education and training. Estimates in the 1999 budget for 1998 through 2003 are in the $33 billion to $34 billion range and are higher than those contained in the 1998 budget. Based on the average annual outlays from 1981 through 2003, investment outlays in seven budget functions comprise about 95 percent of all investment outlays, with the top four comprising 79 percent of total investment. In descending order of constant dollar investment outlays, the functions are (1) Education, Training, Employment, and Social Services, (2) Transportation, (3) Health (principally R&D at the National Institutes of Health), (4) General Science, Space, and Technology, (5) Natural Resources and Environment, (6) National Defense, and (7) Energy. However, as illustrated in figure 10, 1999 budget estimates for 1998 through 2003 remain in the $27 billion to $28 billion range as compared to 1998 budget estimates which had projected a steady decrease after 1997 to $23 billion in 2002. Estimates in the 1999 budget increase from $12 billion in 1998 to $15 billion in 2003, in contrast to last year’s estimates which showed a gradual decline to $11 billion in 2002. Outlays then continued a fairly steady increase to $11 billion in 1995. Downward Trends

Investment outlays in the Natural Resources and Environment function (300), which includes items such as Environmental Protection Agency activities, show a continuous downward trend from 1981 through 2003. Estimates in the 1999 budget for 1998 through 2003 show a continuing decline to less than $5 billion.
Why GAO Did This Study

Pursuant to a congressional request, GAO updated its 1997 report on federal investment trends.

What GAO Found

GAO noted that: (1) the annual levels of investment spending for the period 1998 through 2002 in the President's 1999 budget is estimated to range from slightly more than $2 billion to almost $11 billion higher each year than the levels estimated in the President's 1998 budget for the same period; (2) only one budget function--energy--has lower estimates for 1998 through 2002 than in the 1998 budget; (3) the share of total federal budget outlays and of gross domestic product (GDP) devoted to investment declined slightly from the early 1980s through 1997; (4) according to the administration's policy estimates contained in the President's 1999 budget, investment's share of both outlays and GDP will increase slightly from 1998 through 2000 and then fall slightly through 2003; (5) these new estimates represent a change from the 1998 budget estimates which showed a continuing gradual decline from 1998 through 2002; (6) when investment outlays are converted to constant 1992 dollars, roughly the same picture emerges over this time period; (7) investment spending in estimated constant dollar outlays generally increased from the mid-1980s through 1995 before dropping in 1996 and 1997; (8) in the 1999 budget, investment spending is projected to increase from 1998 through 2000 and then gradually decrease through 2003; (9) after dropping from 1981 to 1983, physical capital remained relatively stable through 1995, with slight declines in 1996 and 1997; (10) the 1999 budget estimates for fiscal years 1998 through 2003 show a relatively stable level--around $33 billion to $34 billion each year; (11) this is a higher level than the 1998 budget estimates, which showed a steady decline from 1998 through 2002; (12) the research and development category had relatively steady increases from the mid-1980s through 1997 and estimates for 1998 through 2003 continue to increase; (13) this is a change from the estimates for 1998 through 2002 made in the 1998 budget which had shown modest decreases after 1998; (14) the pattern of investment from 1981 through 2003 in constant dollars varies across budget functions; (15) seven functions contain about 95 percent of investment outlays; (16) four of those functions, Education and Training, Transportation, Health, and General Science, Space, and Technology show general increases over this period; (17) the National Defense function shows several fluctuations but remains relatively flat overall; and (18) the Natural Resources and Environment and Energy functions shows a continued downward trend from the 1980s through 2003.