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Financial Report of the United States Government

Management’s Discussion & Analysis

An Unsustainable Fiscal Path

An important purpose of the Financial Report is to help citizens understand current fiscal policy and the importance and magnitude of policy reforms necessary to make it sustainable. This Financial Report includes the SLTFP and a related note disclosure (Note 24). The Statements display the PV of 75-year projections of the federal government’s receipts and non-interest spending17 for FY 2023 and FY 2022.

Fiscal Sustainability

A sustainable fiscal policy is defined as one where the debt-to-GDP ratio is stable or declining over the long term. The projections based on the assumptions in this Financial Report indicate that current policy is not sustainable. This Financial Report presents data, including debt, as a percent of GDP to help readers assess whether current fiscal policy is sustainable. The debt-to-GDP ratio was approximately 97 percent at the end of FY 2023, which is similar to (but slightly above) the debt to-GDP ratio at the end of FY 2022. The long-term fiscal projections in this Financial Report are based on the same economic and demographic assumptions that underlie the 2023 SOSI, which is as of January 1, 2023. As discussed below, if current policy is left unchanged and based on this Financial Report’s assumptions, the debt-to-GDP ratio is projected to exceed 200 percent by 2047 and reach 531 percent in 2098. By comparison, under the 2022 projections, the debt-to-GDP ratio exceeded 200 percent one year earlier in 2046 and reached 566 percent in 2097. Preventing the debt-to-GDP ratio from rising over the next 75 years is estimated to require some combination of spending reductions and revenue increases that amount to 4.5 percent PV of GDP over the period. While this estimate of the “75-year fiscal gap” is highly uncertain, it is nevertheless nearly certain that current fiscal policies cannot be sustained indefinitely.

Delaying action to reduce the fiscal gap increases the magnitude of spending and/or revenue changes necessary to stabilize the debt-to-GDP ratio as shown in Table 6 below.

The estimates of the cost of policy delay assume policy does not affect GDP or other economic variables. Delaying fiscal adjustments for too long raises the risk that growing federal debt would increase interest rates, which would, in turn, reduce investment and ultimately economic growth.

The projections discussed here assume current policy18 remains unchanged, and hence, are neither forecasts nor predictions. Nevertheless, the projections demonstrate that policy changes must be enacted to move towards fiscal sustainability.

The Primary Deficit, Interest, and Debt

The primary deficit – the difference between non-interest spending and receipts – is the determinant of the debt-to-GDP ratio over which the government has the greatest control (the other determinants include interest rates and growth in GDP). Chart 8 shows receipts, non-interest spending, and the difference – the primary deficit – expressed as a share of GDP. The primary deficit-to-GDP ratio spiked during 2009 through 2012 due to the 2008-09 financial crisis and the ensuing severe recession, as well as the effects of the government’s response thereto. These elevated primary deficits resulted in a sharp increase in the ratio of debt to GDP, which rose from 39 percent at the end of 2008 to 70 percent at the end of 2012. As an economic recovery took hold, the primary deficit ratio fell, averaging 2.1 percent of GDP over 2013 through 2019. The primary deficit-to-GDP ratio again spiked in 2020, rising to 13.3 percent of GDP in 2020, due to increased spending to address the COVID-19 pandemic and lessen the economic impacts of stay-at-home and social distancing orders on individuals, hard-hit industries, and small businesses. Spending remained elevated in 2021 due to additional funding to support economic recovery, but increased receipts reduced the primary deficit-to-GDP ratio to 10.8 percent.

The primary deficit-to-GDP ratio in 2023 was 3.8 percent, increasing by 0.2 percentage points from 2022 primarily due to lower receipts, partially offset by lower non-interest spending. The primary deficit-to-GDP ratio is projected to fall to 3.2 percent in 2024, based on the technical assumptions in this Financial Report, and projected changes in receipts and outlays, including an estimated decrease in Medicaid outlays as the expiration of temporary measures related to the COVID-19 pandemic winds down. After 2024, increased spending for Social Security and health programs due to the continued retirement of the baby boom generation, is projected to result in increasing primary deficit ratios that peak at 4.4 percent of GDP in 2043. Primary deficits as a share of GDP gradually decrease beyond that point, as aging of the population continues at a slower pace and reach 2.8 percent of GDP in 2098, the last year of the projection period.

Trends in the primary deficit are heavily influenced by tax receipts. The receipt share of GDP was markedly depressed in 2009 through 2012 because of the recession and tax reductions enacted as part of the ARRA and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The share subsequently increased to nearly 18.0 percent of GDP by 2015, before falling to 16.3 percent in 2018, after enactment of the TCJA.

Receipts reached 19.6 percent of GDP in 2022, the highest share of GDP since 2000, then fell to 16.5 percent of GDP in 2023 due to a decrease in individual income tax receipts and lower deposits of earnings by the Federal Reserve. Receipts are projected to gradually increase to 18.1 percent of GDP in 2033 when corporation income tax and other receipts stabilize as a share of GDP. After 2033, receipts grow slightly more rapidly than GDP over the projection period as increases in real (i.e., inflation-adjusted) incomes cause more taxpayers and a larger share of income to fall into the higher individual income tax brackets. 19

On the spending side, the non-interest spending share of GDP was 20.3 percent in 2023, 2.9 percentage points below the share of GDP in 2022, which was 23.2 percent. The ratio of non-interest spending to GDP is projected to fall to 20.1 percent in 2024 and then rise gradually, reaching 23.3 percent of GDP in 2076. The ratio of non-interest spending to GDP then declines to 22.7 percent in 2098, the end of the projection period. These increases are principally due to faster growth in Social Security, Medicare, and Medicaid spending (see Chart 8). The aging of the baby boom generation, among other factors, is projected to increase the spending shares of GDP of Social Security and Medicare by about 0.7 and 1.7 percentage points, respectively, from 2024 to 2040. After 2040, the Social Security and Medicare spending shares of GDP continue to increase in most years, albeit at a slower rate, due to projected increases in health care costs and population aging, before declining toward the end of the projection period.

On a PV basis, deficit projections reported in the FY 2023 Financial Report decreased in both present-value terms and as a percent of the current 75-year PV of GDP. As shown in the SLTFP, this year’s estimate of the 75-year PV imbalance of receipts less non-interest spending is 3.8 percent of the current 75-year PV of GDP ($73.2 trillion), compared to 4.2 percent ($79.5 trillion) as was projected in last year’s Financial Report. As discussed in Note 24, these decreases are attributable to the net effect of the following factors:

  • Changes due to program-specific actuarial assumptions is the effect of new Social Security, Medicare, and Medicaid program-specific actuarial assumptions, which decrease the fiscal imbalance as a share of the 75-year PV of GDP by 0.6 percentage points ($10.6 trillion). This change is primarily attributable to near-term growth rate assumptions for Medicaid. In the 2022 projections, growth rates through 2027 followed projections in the 2018 Medicaid Actuarial Report. Growth rates for the 2023 projections are based on NHE data and reflect the expiration of temporary measures related to the COVID-19 pandemic.
  • Changes due to updated budget data increased the fiscal imbalance by 0.4 percentage points ($7.4 trillion). This change stems from actual budget results for FY 2023 and baseline estimates published in the FY 2024 President’s Budget, plus adjustments to discretionary spending and receipts from legislation enacted in the FRA (P.L. 118-5).20 This deterioration in the fiscal position is largely due to a higher 75-year PV of discretionary spending on defense programs and mandatory spending on programs other than Social Security, Medicare, and Medicaid, and lower individual income taxes as a share of wages and salaries. That deterioration is partially offset by a lower 75-year PV of spending on non-defense discretionary programs—attributable to the FRA caps—and higher other receipts.
  • Changes due to economic and demographic assumptions decreased the fiscal imbalance by 0.3 percentage points ($5.0 trillion). Contributing to this improvement in the imbalance are higher wages that increase receipts and GDP growth rates that lead to reduced spending as a percentage of GDP. The 75-year PV of GDP for this year’s projections is $1,919.1 trillion, greater than last year’s $1,872.9 trillion.
  • Change in reporting period is the effect of shifting calculations from 2023 through 2097 to 2024 through 2098 and increased the imbalance of the 75-year PV of receipts less non-interest spending by $1.9 trillion, which has a negligible effect on the 75-year PV of GDP.

The net effect of the changes in the table above, equal to the penultimate row in the SLTFP, shows that this year’s estimate of the overall 75-year PV of receipts less non-interest spending is negative 3.8 percent of the 75-year PV of GDP (negative $73.2 trillion, as compared to a GDP of $1,919.1 trillion).

One of the most important assumptions underlying the projections is that current federal policy does not change. The projections are therefore neither forecasts nor predictions, and do not consider large infrequent events such as natural disasters, military engagements, or economic crises. By definition, they do not build in future changes to policy. If policy changes are enacted, perhaps in response to projections like those presented here, then actual fiscal outcomes will be different than those projected.

Another important assumption is the future growth of health care costs. As discussed in Note 25, these future growth rates – both for health care costs in the economy generally and for federal health care programs such as Medicare, Medicaid, and PPACA exchange subsidies – are highly uncertain. In particular, enactment of the PPACA in 2010 and the MACRA in 2015 lowered payment rate updates for Medicare hospital and physician payments whose long-term effectiveness of which is not yet clear. The Medicare spending projections in the long-term fiscal projections are based on the projections in the 2023 Medicare Trustees Report, which assume the PPACA and MACRA cost control measures will be effective in producing a substantial slowdown in Medicare cost growth.

As discussed in Note 25, the Medicare projections are subject to much uncertainty about the ultimate effects of these provisions to reduce health care cost growth. Certain features of current law may result in some challenges for the Medicare program including physician payments, payment rate updates for most non-physician categories, and productivity adjustments. Payment rate updates for most non-physician categories of Medicare providers are reduced by the growth in economy-wide private nonfarm business total factor productivity although these health providers have historically achieved lower levels of productivity growth. Should payment rates prove to be inadequate for any service, beneficiaries’ access to and the quality of Medicare benefits would deteriorate over time, or future legislation would need to be enacted that would likely increase program costs beyond those projected under current law. For the long-term fiscal projections, that uncertainty also affects the projections for Medicaid and exchange subsidies, because the cost per beneficiary in these programs is assumed to grow at the same reduced rate as Medicare cost growth per beneficiary. Other key assumptions, as discussed in greater detail in Note 24—Long-Term Fiscal Projections, include the following:

  • Medicaid spending projections start with the NHE projections which are based on recent trends in Medicaid spending, as well as Trustees Report assumptions. NHE projections, which end in 2031, are adjusted to accord with the actual Medicaid spending in FY 2023. After 2031, the number of beneficiaries is projected to grow at the same rate as total population. Medicaid cost per beneficiary is assumed to grow at the same rate as Medicare benefits per beneficiary after 2034, after a three-year phase-in to the Medicare per beneficiary growth rate over the period 2032-2034. The most recent Social Security and Medicare Trustees Reports were released in March 2023.
  • Other mandatory spending includes federal employee retirement, veterans’ disability benefits, and means-tested entitlements other than Medicaid. Current mandatory spending components that are judged permanent under current policy are assumed to increase by the rate of growth in nominal GDP starting in 2024, implying that such spending will remain constant as a percent of GDP.
  • Defense and non-defense discretionary spending follows the FRA caps through 2025, then grows with GDP starting in 2026.
  • Debt and interest spending is determined by projected interest rates and the level of outstanding debt held by the public. The long-run interest rate assumptions accord with those in the 2023 Social Security Trustees Report. The average interest rate over this year’s projection period is 4.5 percent, approximately the same as the 2022 Financial Report. Debt at the end of each year is projected by adding that year’s deficit and other financing requirements to the debt at the end of the previous year.
  • Receipts (other than Social Security and Medicare payroll taxes) is comprised of individual income taxes, corporate income taxes and other receipts.
    • Individual income taxes were based on the share of individual income taxes of salaries and wages in the current law baseline projection in the FY 2024 President’s Budget, and the salaries and wages projections from the Social Security 2023 Trustees Report. That baseline accords with the tendency of effective tax rates to increase as growth in income per capita outpaces inflation (also known as “bracket creep”) and the expiration dates of individual income and estate and gift tax provisions of the TCJA. Individual income taxes are projected to increase gradually from 19 percent of wages and salaries in 2024, to 29 percent of wages and salaries in 2098 as real taxable incomes rise over time and an increasing share of total income is taxed in the higher tax brackets.
    • Corporation tax receipts as a percent of GDP reflect the economic and budget assumptions used in developing the FY 2024 President’s Budget ten-year baseline budgetary estimates through the first ten projection years, after which they are projected to grow at the same rate as nominal GDP. Corporation tax receipts fall from 1.7 percent of GDP in 2024 to 1.2 percent of GDP in 2033, where they stay for the remainder of the projection period.
    • Other receipts, including excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts, also reflect the FY 2024 President’s Budget baseline levels as a share of GDP throughout the budget window, and grow with GDP outside of the budget window. The ratio of other receipts, to GDP is estimated to increase from 1.1 percent in 2024 to 1.2 percent by 2027 where it remains through the projection period.
  • Projections for the other categories of receipts and spending are consistent with the economic and demographic assumptions in the Trustees Reports and include updates for actual budget results for FY 2023 or budgetary estimates from the FY 2024 President’s Budget.

The primary deficit-to-GDP projections in Chart 8, projections for interest rates, and projections for GDP together determine the debt-to-GDP ratio projections shown in Chart 9.That ratio was approximately 97 percent at the end of FY 2023 and under current policy is projected to exceed the historic high of 106 percent in 2028, rise to 200 percent by 2047 and reach 531 percent by 2098. The change in debt held by the public from one year to the next generally represents the budget deficit, the difference between total spending and total receipts. The debt-to-GDP ratio rises continually in great part because primary deficits lead to higher levels of debt, which lead to higher net interest expenditures, and higher net interest expenditures lead to higher debt.21 The continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.

These debt-to-GDP projections are lower than the corresponding projections in both the 2022 and 2021 Financial Reports. For example, the last year of the 75-year projection period used in the FY 2021 Financial Report is 2096. In the FY 2023 Financial Report, the debt-to-GDP ratio for 2096 is projected to be 518 percent, which compares with 559 and 701 percent for the 2096 projection year in the FY 2022 Financial Report and the FY 2021 Financial Report, respectively.22

The Fiscal Gap and the Cost of Delaying Policy Reform

The 75-year fiscal gap is one measure of the degree to which current policy is unsustainable. It is the amount by which primary surpluses over the next 75 years must, on average, rise above current-policy levels in order for the debt-to-GDP ratio in 2098 to remain at its level in 2023. The projections show that projected primary deficits average 3.8 percent of GDP over the next 75 years under current policy. If policies were adopted to eliminate the fiscal gap, the average primary surplus over the next 75 years would be 0.6 percent of GDP, 4.5 percentage points higher than the projected PV of receipts less non-interest spending shown in the financial statements. Hence, the 75-year fiscal gap is estimated to equal to 4.5 percent of GDP. This amount is, in turn, equivalent to 23.8 percent of 75-year PV receipts and 19.8 percent of 75-year PV non-interest spending. This estimate of the fiscal gap is 0.4 percentage points smaller than was estimated in the FY 2022 Financial Report (4.9 percent of GDP).

In these projections, closing the fiscal gap requires running substantially positive primary surpluses, rather than simply eliminating the primary deficit. The primary reason is that the projections assume future interest rates will exceed the growth rate of GDP. Achieving primary balance (that is, running a primary surplus of zero) implies that the debt grows each year by the amount of interest spending, which under these assumptions would result in debt growing faster than GDP.

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Table 6
Costs of Delaying Fiscal Reform
Period of Delay Change in Average Primary Surplus
Reform in 2024 (No Delay) 4.5 percent of GDP between 2024 and 2098
Reform in 2034 (Ten-Year Delay) 5.3 percent of GDP between 2034 and 2098
Reform in 2044 (Twenty-Year Delay) 6.5 percent of GDP between 2044 and 2098

Table 6 shows the cost of delaying policy reform to close the fiscal gap by comparing policy reforms that begin in three different years. Immediate reform would require increasing primary surpluses by 4.5 percent of GDP on average between 2024 and 2098 (i.e., some combination of reducing spending and increasing revenue by a combined 4.5 percent of GDP on average over the 75-year projection period). Table 6 shows that delaying policy reform forces larger and more abrupt policy reforms over shorter periods. For example, if policy reform is delayed by 10 years, closing the fiscal gap requires increasing the primary surpluses by 5.3 percent of GDP on average between 2034 and 2098. Similarly, delaying reform by 20 years requires primary surplus increases of 6.5 percent of GDP on average between 2044 and 2098. The differences between the required primary surplus increases that start in 2034 and 2044 (5.3 and 6.5 percent of GDP, respectively) and that which starts in 2024 (4.5 percent of GDP) is a measure of the additional burden that delay would impose on future generations. Future generations are harmed by policy reform delay, because the higher the primary surplus is during their lifetimes the greater the difference is between the taxes they pay and the programmatic spending from which they benefit.


The debt-to-GDP ratio is projected to rise over the 75-year projection period and beyond if current policy is unchanged, based on this Financial Report’s assumptions, which implies that current policy is not sustainable and must ultimately change. If policy changes are not so abrupt as to slow economic growth, then the sooner policy changes are adopted to avert these trends, the smaller the changes to revenue and/or spending that would be required to achieve sustainability over the long term. While the estimated magnitude of the fiscal gap is subject to a substantial amount of uncertainty, it is nevertheless nearly certain that current fiscal policies cannot be sustained indefinitely.

These long-term fiscal projections and the topic of fiscal sustainability are discussed in further detail in Note 24 and the RSI section of this Financial Report. The fiscal sustainability under alternative scenarios for the growth rate of health care costs, interest rates, discretionary spending, and receipts are illustrated in the “Alternative Scenarios” section within the RSI.

Social Insurance

The long-term fiscal projections reflect government receipts and spending as a whole. The SOSI focuses on the government’s “social insurance” programs: Social Security, Medicare, Railroad Retirement, and Black Lung.23 For these programs, the SOSI reports: 1) the actuarial PV of all future program revenue (mainly taxes and premiums) – excluding interest – to be received from or on behalf of current and future participants; 2) the estimated future scheduled expenditures to be paid to or on behalf of current and future participants; and 3) the difference between 1) and 2). Amounts reported in the SOSI and in the RSI section in this Financial Report are based on each program’s official actuarial calculations.

This year’s projections for Social Security and Medicare are based on the same economic and demographic assumptions that underlie the 2023 Social Security and Medicare Trustees Reports and the 2023 SOSI, while comparative information presented from last year’s report is based on the 2022 Social Security and Medicare Trustees Reports and the 2022 SOSI. Table 7 summarizes amounts reported in the SOSI, showing that net social insurance expenditures are projected to be $78.4 trillion over 75 years as of January 1, 2023 for the open group, an increase of $2.5 trillion over net expenditures of $75.9 trillion projected in the FY 2022 Financial Report.24 The current-law 2023 amounts reported for Medicare reflect the physician payment levels expected under the MACRA payment rules and the PPACA-mandated reductions in other Medicare payment rates, but not the payment reductions and/or delays that would result from trust fund depletion.25 Similarly, current-law projections for Social Security do not reflect benefit payment reductions and/or delays that would result from fund depletion. By accounting convention, the transfers from the General Fund to Medicare Parts B and D are eliminated in the consolidation of the SOSI at the government-wide level and as such, the General Fund transfers that are used to finance Medicare Parts B and D are not included in Table 7. For the FYs 2023 and 2022 SOSI, the amounts eliminated totaled $48.5 trillion and $47.5 trillion, respectively. SOSI programs and amounts are included in the broader fiscal sustainability analysis in the previous section, although on a slightly different basis (as described in Note 24).

In addition, the Medicare projections have been significantly affected by the enactment of the IRA of 2022. This legislation has wide-ranging provisions, including those that restrain price growth and negotiate drug prices for certain Part B and Part D drugs and that redesign the Part D benefit structure to decrease beneficiary out-of-pocket costs. The law takes several years to implement, resulting in very different effects by year. The total effect of the IRA of 2022 is to reduce government expenditures for Part B, to increase expenditures for Part D through 2030, and to decrease Part D expenditures beginning in 2031.

The amounts reported in the SOSI provide perspective on the government’s long-term estimated exposures for social insurance programs. These amounts are not considered liabilities in an accounting context. Future benefit payments will be recognized as expenses and liabilities as they are incurred based on the continuation of the social insurance programs’ provisions contained in current law. The social insurance trust funds account for all related program income and expenses. Medicare and Social Security taxes, premiums, and other income are credited to the funds; fund disbursements may only be made for benefit payments and program administrative costs. Any excess revenues are invested in special nonmarketable U.S. government securities at a market rate of interest. The trust funds represent the accumulated value, including interest, of all prior program surpluses, and provide automatic funding authority to pay cover future benefits.

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Table 7: Social Insurance Future Expenditures in Excess of Future Revenues
Dollars in Trillions 2023 2022 Increase/(Decrease)
$ %
Open Group (Net):        
  Social Security (OASDI) $ (25.2) $ (23.3) $ 1.9 8.2%
  Medicare (Parts A, B, & D) $ (53.1) $ (52.5) $ 0.6 1.1%
  Other $ (0.1) $ (0.1) $ -   0.0%
  Total Social Insurance Expenditures, Net
  (Open Group)
$ (78.4) $ (75.9) $ 2.5  3.3%
  Total Social Insurance Expenditures, Net
  (Closed Group)
$ (104.2) $ (100.6) $ 3.6 3.6%
Social Insurance Net Expenditures as a % of GDP*
Open Group
  Social Security (OASDI) (1.4%) (1.3%)  
  Medicare (Parts A, B, & D) (3.0%) (3.0%)  
Total (Open Group) (4.4%) (4.3%)  
Total (Closed Group) (5.7%) (5.7%)  
Source: SOSI. Amounts equal estimated present value of projected revenues and expenditures for scheduled benefits over the next 75 years of certain Social Insurance programs (e.g., Social Security, Medicare). Open Group totals reflect all current and projected program participants during the 75-year projection period. Closed Group totals reflect only current participants.
* GDP values used are from the 2023 & 2022 Social Security and Medicare Trustees Reports and represent the present value of GDP over the 75-year projection period.  As the GDP used for Social Security and Medicare differ slightly in the Trustees Reports, the two values are averaged to estimate the Other and Total Net Social Insurance Expenditures as percent of GDP. As a result, totals may not equal the sum of components due to rounding.

Table 8 identifies the principal reasons for the changes in projected social insurance amounts during 2023 and 2022.

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Table 8: Changes in Social Insurance Projections
Dollars in Trillions 2023 2022
NPV - Open Group (Beginning of the Year) $ (75.9) $ (71.0)
Changes in:    
    Valuation Period $ (2.0) $ (1.7)
    Demographic data, assumptions, and methods $ (0.2) $ (0.8)
    Economic data, assumptions, and methods1 $ (0.8) $ (0.2)
    Law or policy $ 1.1 $ -  
    Methodology and programmatic data1 $ (0.3) $ 0.6
    Economic and other healthcare assumptions2 $ (2.6) $ (5.3)
    Change in projection base2 $ 2.3 $ 2.5  
Net Change in Open Group measure $ (2.5) $ (4.9)
NPV - Open Group (End of the Year) $ (78.4) $ (75.9)
1Relates to Social Security Program.
2Relates to Medicare Program.

The following briefly summarizes the significant changes for the current valuation (as of January 1, 2023) as disclosed in Note 25—Social Insurance. Note 25 is compiled from disclosures included in the financial statements of those entities administering these programs, including SSA and HHS. See Note 25 for additional information.

  • Change in valuation period (affects both Social Security and Medicare): This change replaces a small negative net cash flow for 2022 with a much larger negative net cash flow for 2097. As a result, the PV of the estimated future net cash flows decreased (became more negative) by $0.7 trillion and $1.3 trillion for Social Security and Medicare, respectively.
  • Changes in demographic data, assumptions, and methods (affects both Social Security and Medicare): There was one notable change in demographic methodology. The method for projecting the age distributions of LPR new arrival and adjustment-of-status immigrants was updated reflecting recent data showing a slightly older population at the time of attaining LPR status than had previously been estimated. This change decreased the PV of the estimated future net cash flows. In addition, the starting demographic values and the way these values transition to the ultimate assumptions were changed. Projected birth rates through 2055, during the period of transition to the ultimate level, were slightly lower than in the prior valuation. Updates to near-term mortality assumptions to better reflect the effects of the COVID-19 pandemic led to an increase in death rates through 2024 compared to the prior valuation. Historical population data, other-than-LPR immigration data, and marriage and divorce data were updated since the prior valuation. Overall, changes to these assumptions caused the PV of the estimated future net cash flows to decrease (became more negative) by $0.1 trillion and $0.1 trillion for Social Security and Medicare, respectively.
  • Changes in economic data and assumptions (affects Social Security only): Several changes were made to the ultimate economic assumptions since the last valuation period. The annual percentage change in the average OASDI covered wage, adjusted for inflation, is assumed to average 1.14 percentage points over the last 65 years of the 75-year projection period. This is 0.02 percentage point higher than the value assumed for the prior valuation. This change to the wage growth assumptions increased the PV of estimated future net cash flows. In addition to these changes in ultimate economic assumptions, the starting economic values and the way these values transition to the ultimate assumptions were changed. The levels of GDP and labor productivity are assumed to be about 3.0 percent lower by 2026 and for all years thereafter relative to the prior valuation. The assumed real interest rates over the first 10 years of the projection period are generally higher than those assumed for the prior valuation. The changes to the GDP and productivity levels decreased the PV of the estimated future net cash flows, while the change to near-term real interest increased the PV of the estimated future net cash flows. There was one notable change in economic methodology. The method for estimating the level of OASDI taxable wages for historical years 2000-2021 was improved by adopting a more consistent approach for estimating completed values across various types of wages. This change increased the PV of the estimated future net cash flows. Overall, changes to economic data, assumptions, and methods caused the PV of the estimated future net cash flows to decrease (became more negative) by $0.8 trillion for Social Security.
  • Changes in law or policy (affects both Social Security and Medicare): The monetary effect of the changes in law or policy caused the PV of the estimated future net cash flows of Medicare to increase by $1.1 trillion; and the effect on the PV of estimated future net cash flows of OASDI was not significant at the consolidated level. Please refer to SSA’s and HHS’s financial statements for additional information related to the impact of the changes in law or policy on the PV of estimated future net cash flows of the OASDI and Medicare programs.
  • Changes in methodology and programmatic data (affects Social Security only). Several methodological improvements and updates of program-specific data are included in the current valuation (beginning on January 1, 2023). The most significant are as follows: Actual disability data for 2022 and slightly lower-near term disability incidence rate assumptions were incorporated. The sample of new beneficiaries used to project average benefits level was updated from worker beneficiaries newly entitled in 2018 to those newly entitled in 2019. Updates were made to the post-entitlement benefit adjustment factors. These factors are used to account for changes in benefit levels, primarily due to differential mortality by benefit level and earnings after benefit entitlement. Overall, changes to programmatic data and methods caused the PV of the estimated future net cash flows to decrease by $0.3 trillion for Social Security.
  • Changes in economic and healthcare assumptions (affects Medicare only): The economic assumptions used in the Medicare projections are the same as those used for the OASDI (described above) and are prepared by the Office of the Chief Actuary at SSA. In addition to the economic assumptions changes described above, the healthcare assumptions are specific to the Medicare projections. Changes to these assumptions in the current valuation include lower projected spending growth because of anticipated effect of negotiating drug prices and other price growth constraints. Overall, these changes decreased the PV of estimated future net cash flow by $2.6 trillion for Medicare.
  • Change in Projection Base (affects Medicare only): Actual income and expenditures in 2022 were different than what was anticipated when the 2022 Medicare Trustees Report projections were prepared. For Part A and Part B income and expenditures were lower than estimated based on experience. Part D income and expenditures were higher than estimated based on actual experience. Actual experience of the Medicare Trust Funds between January 1, 2022, and January 1, 2023, is incorporated in the current valuation and is less than projected in the prior valuation. Overall, the net impact of Part A, B, and D projection base change is an increase in the estimated future net cash flows by $2.3 trillion for Medicare.

As reported in Note 25, uncertainty remains about whether the projected cost savings and productivity improvements will be sustained in a manner consistent with the projected cost growth over time. Note 25 includes an alternative projection to illustrate the uncertainty of projected Medicare costs. As indicated earlier, GAO disclaimed opinions on the 2023, 2022, 2021, 2020 and 2019 SOSI because of these significant uncertainties.

Costs as a percent of GDP of both Medicare and Social Security, which are analyzed annually in the Medicare and Social Security Trustees Reports, are projected to increase substantially through the mid-2030s because: 1) the number of beneficiaries rises rapidly as the baby-boom generation retires; and 2) the lower birth rates that have persisted since the baby boom cause slower growth in the labor force and GDP.26 According to the Medicare Trustees Report, spending on Medicare is projected to rise from its current level of 3.7 percent of GDP in 2022 to 6.0 percent in 2047 and to 6.1 percent in 2097.27 As for Social Security, combined spending is projected to generally increase from 5.2 percent of GDP in 2023 to a peak of 6.3 percent for 2076, and then decline to 6.0 percent by 2097. The government collects and maintains funds supporting the Social Security and Medicare programs in trust funds. A scenario in which projected funds expended exceed projected funds received, as reported in the SOSI, will cause the balances in those trust funds to deplete over time. Table 9 summarizes additional current status and projected trend information, including years of projected depletion, for the Medicare HI and Social Security Trust Funds.

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Table 9: Trust Fund Status
Fund Projected Depletion Projected Post-Depletion Trend
Medicare Hospital Insurance *


In 2031, trust fund income is projected to cover 89 percent of benefits, decreasing to 81 percent in 2047, then returning to 96 percent by 2097.
Combined Old-Age Survivors and Disability Insurance **


In 2034, trust fund income is projected to cover 80 percent of scheduled benefits, decreasing to 74 percent by 2097.

*Source: 2023 Medicare Trustees Report     ** Source: 2023 OASDI Trustees Report
This Report's Projections assume full Social Security and Medicare benefits are paid after fund depletion contrary to current law.

As previously discussed and as noted in the Trustees’ Reports, these programs are on a fiscally unsustainable path. Additional information from the Trustees’ Reports may be found in the RSI section of this Financial Report.

Reporting on Climate Change

The Biden-Harris administration has deployed a whole-of-government approach to respond to the climate crisis. From reducing climate pollution and conserving our lands, waters, and biodiversity to increasing the resilience of federal facilities and operations to the impacts of climate change, federal entities are tackling the climate crisis. The federal government is on a path towards CFE by 2030, a zero-emission vehicles fleet by 2035, and a net-zero building portfolio by 2045.

The $1 trillion IIJA, signed in November 2021, and the IRA, signed in August 2022, included historic climate funding. The IIJA provides funding to protect the country against the detrimental effects of climate change, and the IRA, the largest climate investment in U.S. history, provides tax incentives and other clean energy initiatives to reduce energy costs for consumers and small businesses. These investments have put America on track to decrease GHG emissions by about 40 percent below 2005 levels in 2030.28

There is also growing recognition that climate-related events and climate-related financial risks will affect the financial position and condition of the federal government. Many CFO Act entities are engaged in a wide array of climate-related activities and have, per federal reporting guidance, discussed their responses to the climate crisis in their FY 2023 financial reports. The breadth of these important efforts is expansive, and the examples immediately below from financial statements discuss both the physical impacts of climate change on entities (physical risk) and the broader challenges entities face in transitioning to a lower-carbon economy (transition risk). Many entity climate adaptation and resiliency efforts emphasize the federal government's physical assets and infrastructure and discuss transition risks in the context of transitioning their infrastructure so as to reduce GHG emissions. Both of these risks are important and affect government operations in unique ways, which will be discussed below for a select number of federal entities.

The following illustrates the wide range of federal entity efforts to mitigate the risks of climate change on federal entity infrastructure:

  • The impact of climate change on DOE and its operations and infrastructure is significant and projected to increase with climate change. In support of the administration’s goals of net-zero GHG emissions by 2050, with power sector GHG emissions attaining net-zero by 2035; DOE has continued to develop solar and geothermal sourced energy for heating building space and water. DOE sites have been collaborating with their electricity provider to ensure the availability of CFE. For example, the National Renewable Energy Laboratory, a DOE national lab, has signed the first-ever CFE Memorandum of Agreement between DOE and Xcel Energy, committing to the delivery of 100 percent CFE by 2030 to federal entities served by the utility. In partnership with DOE, DOT has leveraged their newly formed Joint Office of Energy and Transportation to deploy a national network of EV chargers. This supports the President’s IIJA goal of installing 500,000 EV chargers.
  • GSA is also strategically focused on increasing building resilience, reducing overall GHG emissions, improving energy, water, and waste efficiency, and supporting the transition to CFE. In FY 2023, GSA significantly increased the number of zero-emission vehicles across government, thereby achieving a 37.1 percent increase in miles per gallon for vehicle replacements in the GSA leased fleet. GSA is taking steps to build a climate resilient supply chain by inviting all major Federal Supply Schedule contractors to voluntarily measure, track, and disclose their climate-related risks to the Carbon Disclosure Project, a not-for-profit charity, that runs the global disclosure system for companies to measure environmental risks and opportunities.
  • DOD is challenged with absorbing the recovery costs from extreme weather events typical of those fueled by climate change, including: $1 billion to rebuild Offutt Air Force Base, Nebraska after historic floods; $3 billion to rebuild Camp Lejeune, North Carolina after Hurricane Florence; and $5 billion to rebuild Tyndall Air Force Base, Florida after Hurricane Michael. To address transition risk, DOD has identified reducing climate impacts to its installations as an Agency Priority Goal and has invested $35.9 billion in facilities investments, including for Facilities, Sustainment, Restoration and Modernization with a $3.7 billion investment for installation resiliency and adaptation focused on military facilities to withstand harsh weather conditions.
  • DOC has been actively engaged in planning efforts with the White House Council on Environmental Quality, OMB, and DOE to identify opportunities to purchase CFE for federal use through federal contracting mechanisms directly with facilities’ utility providers.
  • SSA noted that a source of funding challenge for the agency includes the loss or replacement of facilities, fleet, and information technology equipment resulting from climate change, as well as the health and safety costs of keeping operations active during severe climate-related events. Its financial risk exposure mainly concerns the impact of energy usage to cool and heat its delegated sites.
  • Both State and USAID have advanced international climate programs under the auspice of the FY 2022-2026 State-USAID Joint Strategic Plan with both entities focused on mitigating physical and transition risks. State has more than 25,000 building assets at 287 locations overseas, with a current replacement value for these assets at $75.2 billion. For managing the risk of exposure to natural hazards of these overseas facilities, State uses a portfolio screening tool that assesses risk level for seven natural hazards: flooding, extreme heat, extreme wind, water stress, earthquake, tsunami, and landslide.

In-line with several Biden-Harris administration executive orders, including Executive Order 14008, Tackling the Climate Crisis at Home and Abroad , and other broad performance goals, entities have made strides towards a whole-of-government approach to the climate crisis affecting the nation. This section summarizes some of the actionable plans that federal entities are putting in place, and progress that they have seen. It illustrates the broader programmatic efforts that some entities are undertaking which support the growth of America’s clean energy and clean technology industries.

  • The economic impacts of positioning the global economy for a clean and sustainable future are a focus at Treasury. Treasury’s strategic objectives include aims to promote incentives and policies to encourage the private sector’s investment in climate-friendly projects. The IRA of 2022 is the most significant investment in climate and clean energy in U.S. history. As tax incentives deliver most of the law’s investment, Treasury is playing a leading role in implementing the law. The IRA of 2022 established or modified approximately 20 clean energy-related tax incentives that will be critical in advancing the nation’s climate goals while lowering costs for consumers and creating good-paying jobs.
  • DOI is concerned about conserving and protecting its natural and cultural resources. By September 30, 2025, DOI will assist states in reclaiming 1,150 abandoned coal mine lands; and support the plugging of 7,900 identified orphaned oil and gas wells on state, private, tribal, and federal lands. By reducing legacy pollution with IIJA investments, DOI is helping to improve community health and safety, create good paying jobs, and address the climate crisis, all of which is transforming a legacy of pollution into a legacy of environmental stewardship.
  • In addition to DOC’s efforts to mitigate the effects of climate change on agency operations, DOC’s financial statements also references a $799.1 million increase in the entity’s gross costs related to National Oceanic and Atmospheric Administration’s core mission of enhancing weather forecasting, water quality monitoring, and climate reporting.
  • To relay the importance of mitigating climate change for broader economic resiliency, HHS has discussed its efforts at addressing the impact of climate change on the health of the American people by identifying vulnerable communities and populations at risk from climate impacts and fostering climate adaptation and resilience for these communities. This summer HHS launched the Heat-Related Illness Emergency Medical Services Activation Surveillance Dashboard to help communities and officials keep people cool and safe through effective heat mitigation strategies. And its investments into infrastructure and emergency equipment ahead of hurricane season have ensured communities in hurricane-prone areas have continuous access to primary care services.
  • In addition to the joint State-USAID effort to address physical and transition risks referenced above, USAID has been at the fore of helping other countries phase out fossil fuels and transition to clean energy usage. The entity has boosted renewable energy through competitive auctions in the Philippines; boosted wind farm generation in South Africa; and secured renewable energy investment in Pakistan.

Readers are encouraged to review both the financial statements and Climate Adaptation Plans of the entities referenced above, as well as others for additional information about efforts being employed across the federal government to address the many risks associated with climate change.


17 For the purposes of the SLTFP and this analysis, spending is defined in terms of outlays. In the context of federal budgeting, spending can either refer to: 1) budget authority – the authority to commit the government to make a payment; 2) obligations – binding agreements that will result in either immediate or future payment; or 3) outlays, or actual payments made. (Back to Content)

18 Current policy in the projections is based on current law, but includes certain adjustments, such as extension of certain policies that expire under current law but are routinely extended or otherwise expected to continue (e.g., reauthorization of the Supplemental Nutrition Assistance Program). See Note 24 for additional discussion of departures of current policy from current law. (Back to Content)

19 Other possible paths for the receipts-to-GDP ratio and projected debt held by the public are shown in the “Alternative Scenarios” RSI section of this Financial Report. (Back to Content)

20 Legislation enacted toward the end of FY 2022 includes: An act making appropriations for Legislative Branch for the fiscal year ending September 30, 2022, and for other purposes (P.L. 117-167); PACT Act (P.L. 117-168); and an act to provide for reconciliation pursuant to title II of S.Con.Res. 14 (P.L. 117-169).  (Back to Content)

21The change in debt each year is also affected by certain transactions not included in the budget deficit, such as changes in Treasury’s cash balances and the nonbudgetary activity of federal credit financing accounts. These transactions are assumed to hold constant at about 0.3 percent of GDP each year, with the same effect on debt as if the primary deficit was higher by that amount. (Back to Content)

22 See the Note 24 of the FY 2022 Financial Report of the U.S. Government for more information about changes in the long-term fiscal projections between FYs 2022 and 2021.  (Back to Content)

23 The Black Lung Benefits Act provides for monthly payments and medical benefits to coal miners totally disabled from pneumoconiosis (black lung disease) arising from their employment in or around the nation's coal mines. See RRB’s projections are based on economic and demographic assumptions that underlie the 28th Actuarial Valuation of the Assets and Liabilities Under the Railroad Retirement Acts as of December 31, 2019 with Technical Supplement and the 2023 Annual Report on the Railroad Retirement System required by Section 502 of the Railroad Retirement Solvency Act of 1983 (P.L. 98-76).  (Back to Content)

24 Closed group and open group differ by the population included in each calculation. From the SOSI, the closed group includes: 1) participants who have attained eligibility; and 2) participants who have not attained eligibility. The open group adds future participants to the closed group. See ‘Social Insurance’ in the RSI section in this Financial Report for more information. (Back to Content)

25 MACRA permanently replaces the Sustainable Growth Rate formula, which was used to determine payment updates under the Medicare physician fee schedule with specified payment updates through 2025. The changes specified in MACRA also establish differential payment updates starting in 2026 based on practitioners’ participation in eligible APM; payments are also subject to adjustments based on the quality of care provided, resource use, use of certified electronic health records, and clinical practice improvement. (Back to Content)

26 A Summary of the 2023 Annual Social Security and Medicare Trust Fund Reports, page 8. (Back to Content)

27 Percent of GDP amounts are expressed in gross terms (including amounts financed by premiums and state transfers). (Back to Content)

28 (Back to Content)

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Last modified 03/14/24