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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 2022 and FY 2021.

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 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 2022, and was approximately 100 percent at the end of FY 2021. The long-term fiscal projections in this report are based on the same economic and demographic assumptions that underlie the 2022 SOSI , which is as of January 1, 2022.18 As discussed below, if current policy is left unchanged and based on this report’s assumptions, the debt-to-GDP ratio is projected to exceed 200 percent by 2046 and reach 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 4.9 percent 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 policy 19 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 to 10.8 percent.

The primary deficit-to-GDP ratio in 2022 was 3.6 percent, decreasing by 7.2 percentage points from 2021 as spending attributable to the pandemic winds down. The primary deficit-to-GDP ratio is projected to fall to 2.2 percent in 2023, based on the assumptions20 in this report, and then average 3.0 percent through 2029. After 2029, however, increased spending for Social Security and health programs due to the ongoing retirement of the baby boom generation and increases in the price of health care services is projected to result in increasing primary deficit ratios that peak at 4.8 percent of GDP in 2044. Primary deficits as a share of GDP gradually decrease beyond that point, as aging of the population continues at a slower pace, and reaches 3.5 percent of GDP in 2097, 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 18.0 percent of GDP by 2015, before falling below the 30-year average of 17.2 percent in 2018, after enactment of the TCJA.

Receipts were 19.6 percent of GDP in 2022, 1.5 percentage points above 2021. Receipts are projected to fall to 17.7 percent of GDP in 2023 and then further decrease to 17.1 percent of GDP in 2025. Receipts are projected to be 18.1 percent of GDP in 2032 when corporation income tax and other receipts stabilize as a share of GDP. After 2032, 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. 21

On the spending side, the non-interest spending share of GDP was 23.2 percent in 2022, 5.8 percentage points below the share of GDP in 2021, which was 28.9 percent. The ratio of non-interest spending to GDP is projected to fall to 19.9 percent in 2023 and then rise gradually, reaching 23.8 percent of GDP in 2078. The ratio of non-interest spending to GDP then declines to 23.3 percent in 2097, the end of the projection period. Beginning in 2025, 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 0.9 and 1.5 percentage points, respectively, from 2023 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 2022 Financial Report decreased in both present-value terms and as a percent of the current 75-year PV of GDP. As discussed in Note 24, the largest factor affecting the projections is an adjustment to the model’s technical assumptions, which decreases the imbalance by 0.7 percent of the 75-year PV of GDP ($11.9 trillion). In last year’s projections, discretionary spending grew from the 2022 baseline estimate in the President’s Budget. As discussed below, discretionary spending in this year’s projections grows with GDP from actual budget results following an adjustment to remove outlays of supplemental funding22 provided in response to the COVID-19 pandemic. This adjustment prevents inflating projections with spending considered temporary. The second largest factor is the effect of new Social Security, Medicare, and Medicaid program-specific actuarial assumptions, which decrease this imbalance as a share of the 75-year PV of GDP by 0.3 percentage points ($5.0 trillion). The third largest factor affecting the projections – decreasing the imbalance as a share of the 75-year PV of GDP by 0.2 percentage points ($4.6 trillion) – is attributable to actual budget results for FY 2022 and baseline estimates published in the FY 2023 President’s Budget, and changes to spending and receipts from legislation enacted toward the end of the fiscal year.23 This improvement in the fiscal position is primarily due to a lower 75-year PV of spending for mandatory programs other than Social Security, Medicare, and Medicaid. That decrease in spending is partially offset by a lower 75-year PV of individual income taxes receipts and other receipts (includes excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts). The fourth factor was the update of economic and demographic assumptions. While the 75-year PV of receipts less non-interest spending deteriorated by $1.5 trillion and appears to worsen the fiscal position, the imbalance decreased by 0.2 percentage points as a share of the 75-year PV of GDP. The 75-year PV of GDP for this year’s projections is $1,872.9 trillion, greater than last year’s $1,724.4 trillion. That increase in GDP exceeds the increase in the imbalance of receipts less non-interest spending, and thus improves the fiscal position as a percent of GDP. Larger GDP is attributable to updates that raised the level of GDP for 2022 and higher growth rates near the start of the projection period. The last factor, the change in reporting period – the effect of shifting calculations from 2022 through 2096 to 2023 through 2097 – increases the imbalance of the 75-year PV of receipts less non-interest spending by $2.1 trillion, which has a negligible effect on the 75-year PV of GDP.

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 established cost controls 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 2022 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. The projections in the Medicaid Actuarial Report, which end in 2027, are adjusted to accord with the actual Medicaid spending in FY 2022. Actual Medicaid spending includes temporary spending increases due to changes in enrollment and other temporary measures related to the pandemic. The amounts related to these temporary spending increases cannot be identified, which adds uncertainty to the projections. After 2027, the projections assume no further change in State Medicaid coverage under the PPACA, and the numbers of aged beneficiaries (65-plus years) and non-aged beneficiaries (less than 65 years) are expected to grow at the same rates as the aged and non-aged populations, respectively. The most recent Social Security and Medicare Trustees Reports were released in June 2022. See Note 24—Long-Term Fiscal Projections for additional information.

As discussed in Note 24 of the FY 2022 Financial Report, other key assumptions include, but are not limited to the following. For receipts, individual income taxes are based on the share of individual income taxes of salaries and wages in the current law baseline projection in the FY 2023 President’s Budget, and the salaries and wages projections in the Social Security 2022 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. Effects of recent legislation enacted toward the end of FY 2022 are added to projections based on CBO estimates and assumed to continue through the projection period. After falling to 19 percent of wages and salaries in 2024, individual income taxes increase gradually to 29 percent of wages and salaries in 2097 as real taxable incomes rise over time and an increasing share of total income is taxed in the higher tax brackets. Through the first ten years of the projections, corporation tax receipts as a percent of GDP reflect the economic and budget assumptions used in developing the FY 2023 President’s Budget ten-year advance baseline budgetary estimates plus estimated effects of recent legislation. After this time, corporation tax receipts grow at the same rate as nominal GDP. Other receipts also reflect FY 2023 President’s Budget baseline levels as a share of GDP throughout the budget window, plus estimated effects of recent legislation, and grow with GDP outside of the budget window. Corporation tax receipts peak at 1.8 percent of GDP in 2024 before falling to 1.3 percent of GDP in 2032, where they stay for the remainder of the projection period. The ratio of other receipts, including excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts, to GDP is estimated to be 1.3 percent in 2023, after which it gradually declines to 1.1 percent by 2032 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 2022 or budgetary estimates from the FY 2023 President’s Budget. Where possible, those budget totals are adjusted before spending is projected to remove outlays for programs or activities that are judged to be temporary, such as spending related to the COVID-19 pandemic and economic recovery. Such an adjustment is not possible for increased Medicaid outlays under the COVID-19 Public Health Emergency, resulting in higher projections of future spending, increasing the uncertainty surrounding the projections. See Note 24—Long-Term Fiscal Projections for additional information about the assumptions used in this analysis.

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 2022 and under current policy is projected to exceed the historic high of 106 percent in 2029, rise to 200 percent by 2046 and reach 566 percent by 2097. 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.24 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 2021 and 2020 Financial Reports. For example, the last year of the 75-year projection period used in the FY 2020 Financial Report is 2095. In the FY 2022 Financial Report, the debt-to-GDP ratio for 2095 is projected to be 552 percent, which compares with 692 and 623 percent for the 2095 projection year in the FY 2021 Financial Report and the FY 2020 Financial Report, respectively. 25

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 2097 to remain at its level in 2022. The projections show that projected primary deficits average 4.2 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, 4.9 percentage points higher than the projected PV of receipts less non-interest spending shown in the basic financial statements. Hence, the 75-year fiscal gap is estimated to equal 4.9 percent of GDP. This amount is, in turn, equivalent to 26.0 percent of 75-year PV receipts and 21.2 percent of 75-year PV non-interest spending. This estimate of the fiscal gap is 1.4 percentage points smaller than was estimated in the FY 2021 Financial Report (6.2 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 2023 (No Delay) 4.9 percent of GDP between 2023 and 2097
Reform in 2033 (Ten-Year Delay) 5.7 percent of GDP between 2033 and 2097
Reform in 2043 (Twenty-Year Delay) 7.0 percent of GDP between 2043 and 2097

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 4.9 percent of GDP on average between 2023 and 2097 (i.e., some combination of reducing spending and increasing revenue by a combined 4.9 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 5.7 percent of GDP on average between 2033 and 2097. Similarly, delaying reform by 20 years requires primary surplus increases of 7.0 percent of GDP on average between 2043 and 2097. The differences between the required primary surplus increases that start in 2033 and 2043 (5.7 and 7.0 percent of GDP, respectively) and that which starts in 2023 (4.9 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 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.26 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 2022 Social Security and Medicare Trustees Reports27 and the 2022 SOSI, while comparative information presented from last year’s report is based on the 2021 Social Security and Medicare Trustees Reports and the 2021 SOSI. Table 7 summarizes amounts reported in the SOSI, showing that net social insurance expenditures are projected to be $75.9 trillion over 75 years as of January 1, 2022 for the open group, an increase of $4.9 trillion over net expenditures of $71.0 trillion projected in the FY 2021 Financial Report.28 The current-law 2022 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.29 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 2022 and 2021 SOSI, the amounts eliminated totaled $47.5 trillion and $43.2 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).

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 2022 2021 Increase/(Decrease)
$ %
Open Group (Net):        
  Social Security (OASDI)  $ (23.3)  $ (22.7)  $ 0.6 2.6%
  Medicare (Parts A, B, & D)  $ (52.5)  $ (48.2)  $ 4.3 8.9%
  Other  $ (0.1)  $ (0.1)  $   -  0.0%
  Total Social Insurance Expenditures, Net
  (Open Group)
 $ (75.9)  $ (71.0)  $  4.9 6.9%
  Total Social Insurance Expenditures, Net
  (Closed Group)
 $  (100.6)  $ (93.6)  $ 7.0 7.5%
Social Insurance Net Expenditures as a % of GDP*
Open Group
  Social Security (OASDI) (1.3%) (1.3%)  
  Medicare (Parts A, B, & D) (3.0%) (3.1%)  
Total (Open Group) (4.3%) (4.4%)  
Total (Closed Group) (5.7%) (5.8%)  
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 2022 & 2021 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 2022 and 2021.

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Table 8: Changes in Social Insurance Projections
Dollars in Trillions 2022 2021
NPV - Open Group (Beginning of the Year)  $ (71.0)  $ (65.5)
Changes in:    
    Valuation Period  $  (1.7)  $  (2.2)
    Demographic data, assumptions, and methods  $  (0.8)  $  1.5
    Economic data, assumptions, and methods1  $  (0.2)  $  (1.2)
    Law or policy  $     -   $ (0.2)
    Methodology and programmatic data1  $   0.6  $   (1.2)
    Economic and other healthcare assumptions2  $  (5.3)  $  (3.8)
    Change in projection base2  $   2.5  $   1.6
Net Change in Open Group measure  $  (4.9)  $  (5.5)
NPV - Open Group (End of the Year)  $ (75.9)  $ (71.0)
1Relates to Social Security Program.
2Relates to Medicare Program.

The following briefly summarizes the significant changes for the current valuation (as of January 1, 2022) 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 2021 with a much larger negative net cash flow for 2096. As a result, the PV of the estimated future net cash flows decreased (became more negative) by $0.7 trillion and $1.0 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. An improvement was made to put more emphasis on recent mortality data by increasing the weights for the most recent years in the regressions used to calculate the starting rates of improvement and starting death rates. 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. Final birth rate data for calendar year 2020 indicated slightly lower birth rates than were assumed in the prior valuation. Death rates increased significantly for 2020 and 2021. Overall, changes to these assumptions caused the PV of the estimated future net cash flows to decrease (became more negative) by $0.3 trillion and $0.5 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. Economic starting values and near-term growth assumptions were updated to reflect the stronger-than-expected recovery from the pandemic-induced recession. 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. Near-term real interest rates are assumed to be slightly higher on average than those for the prior valuation. Economic starting values and near-term growth assumptions were updated to reflect the stronger-than-expected recovery from the pandemic-induced recession. The level of potential GDP for years 2021 and later is assumed to be about 1.1 percent higher than the level in the prior valuation, reflecting the strong recovery and the expectation of a permanent level shift in total economy labor productivity. There were no additional notable changes in economic methodology. Overall, changes to economic data, assumptions, and methods caused the PV of the estimated future net cash flows to decrease (became more negative) by $0.2 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 on the PV of estimated future net cash flows of the OASDI and Medicare programs 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, 2022). The most significant are as follows: The ultimate disability incidence rate was lowered from 5.0 per thousand exposed in the prior valuation to 4.8 in the current valuation. The current valuation is updated using a 10.0 percent sample of all newly entitled worker beneficiaries to project average benefit levels of retired-worker and disabled-worker beneficiaries. Recent data and estimates provided by the Office of Tax Analysis at Treasury indicate higher near-term and ultimate levels of revenue from taxation of OASDI benefits than projected in the prior valuation. 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 increase by $0.6 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: high projected spending growth for outpatient hospital services and for physician-administered drugs; and slower price growth and higher direct and indirect remuneration. Overall, these changes decreased the PV of estimated future net cash flow by $5.3 trillion for Medicare.
  • Change in Projection Base (affects Medicare only): Actual income and expenditures in 2021 were different than what was anticipated when the 2021 Medicare Trustees Report projections were prepared. For Part A and Part B income and expenditures in 2021 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, 2021, and January 1, 2022, is incorporated in the current valuation and is more 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 $2.5 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 2022, 2021, 2020, 2019 and 2018 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.30 According to the Medicare Trustees Report, spending on Medicare is projected to rise from its current level of 3.9 percent of GDP to 6.2 percent in 2046 and to 6.5 percent in 2096.31 As for Social Security, combined spending is projected to generally increase from its current level of 5.0 percent of GDP to a peak of 6.2 percent for 2077, and then decline to 5.9 percent by 2096. 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 2028, trust fund income is projected to cover 90.0 percent of benefits, decreasing to 80.0 percent in 2046, then returning to 93.0 percent by 2096.
Combined Old-Age Survivors and Disability Insurance **


In 2035, trust fund income is projected to cover 80.0 percent of scheduled benefits, decreasing to 74.0 percent by 2096.

*Source: 2022 Medicare Trustees Report     ** Source: 2022 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

As stated in EO 14008, Tackling the Climate Crisis at Home and Abroad “the United States and the world face a profound climate crisis…Domestic action must go hand in hand with United States international leadership, aimed at significantly enhancing global action.” Among other things, the EO “directs each federal agency to develop a plan to increase the resilience of its facilities and operations to the impacts of climate change and directs relevant agencies to report on ways to expand and improve climate forecast capabilities – helping facilitate public access to climate related information and assisting governments, communities, and businesses in preparing for and adapting to the impacts of climate change.” As a corollary to EO 14008, EO 14030, Climate-Related Financial Risk, is intended to help the American people understand how climate change could impact their financial security, to strengthen the U.S. financial system so that climate change does not affect the system’s stability, and to inform federal government decision-making to mitigate the risks of climate change. Section 5(a) of EO 14030 specifically tasks OMB and the National Economic Council, in consultation with Treasury, to develop recommendations to integrate climate-related financial risk into financial management and reporting, with a focus on the climate-related financial risk of lending programs. Section 5(a) directs the recommendations to include an evaluation of changes to accounting standards where appropriate for federal financial reporting. As required by EO 14030, in October 2021, the National Economic Council issued a report32 laying out a government-wide strategy to address the financial risk that climate change poses to the government and the U.S. economy. Finally, on December 8, 2021, EO 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, was issued. Among other things, this EO directs agencies to develop plans, processes, and analytic tools that will allow federal agencies and programs to adapt to climate change.

In November 2021, President Biden signed a $1 trillion bipartisan infrastructure bill, the IIJA that, in part, included historic funding to protect the country against the detrimental effects of climate change, including expanded access to clean drinking water, programs that help reduce flood risk and damage investments in clean energy transmissions and electric vehicle infrastructure, electrifying thousands of school and transit buses across the country, and creating a new Grid Deployment Authority to build a resilient, 21st century electric grid. Less than a year later, President Biden signed legislation that made the largest climate investment in U.S. history: IRA provides tax incentives and other clean energy initiatives to reduce energy costs for consumers and small businesses, including investments in underserved communities and historic energy communities. For example, the IRA provides a range of tax incentives to accelerate the build-out of a clean energy economy, as well as direct consumer rebates and tax incentives to purchase more efficient appliances and electric vehicles. These investments have put America on track to decrease greenhouse gas emissions by about 40 percent below 2005 levels in 2030.33

Many of the 24 CFO Act agencies have leveraged their FY 2022 financial statements to discuss a wide range of topics concerning how their agencies are responding to the climate crisis. The form of the required financial statement climate-related reporting is at the discretion of each agency, so the content varies across the reports, but taken in combination, the following summary provides a broad picture of the many efforts in effect across the 24 CFO Act agencies.

More than half of CFO Act agency heads cited climate change in their financial statements’ transmittal messages. For example:

  • The Secretary of the Interior referenced the BIL as having made a major investment in the conservation and stewardship of America’s public lands, including several provisions that invest in DOI initiatives, such as restoring critical habitats, addressing the drought crisis, assisting with wildlife management, and helping communities prepare for extreme weather events.
  • The Secretary of Agriculture stated that USDA has embarked on a department-wide effort to enact climate-smart agriculture, forestry, and rural clean energy policies that are voluntary, flexible, and producer-led. In service of this goal, USDA announced the new Partnerships for Climate-Smart Commodities Program, which finances pilot projects for U.S. agriculture and forestry products that use climate-smart practices.
  • The NASA Administrator stated that NASA contributes significantly to what is known about Earth’s changing climate and cited recent agency efforts related to climate change, disaster mitigation, fighting forest fires, and improving real-time agricultural processes.
  • The GSA Administrator stated that accelerating clean energy and innovation was a priority area, noting that GSA manages the largest civilian vehicle fleet in the country which it is working to electrify, as well as to build to the infrastructure to support it. GSA is advancing clean energy through its buildings portfolio, including through the IRA, which has historic investments for low carbon materials, emerging clean technology, and more.

All but one of the CFO Act agencies referenced their climate action and adaptation plans, or sustainability reports, including:

  • State’s plan focuses on three goals: 1) protect the health and safety of personnel; 2) adapt department facilities, operations, and mission-critical services to be more resilient to the impacts of climate change; and 3) lead by example through showcasing climate adaptation and resilience solutions.
  • Commerce’s sustainability reports contain information regarding the department’s performance toward energy and sustainability goals in the following categories: facility energy use, water use, renewable energy, facility efficiency investments, high performance sustainable buildings, fleet petroleum and alternative fuel, and greenhouse gas emissions.
  • EPA’s Sustainability Report and Implementation Plan identifies targets for reducing agency-wide greenhouse gas emissions and outlines steps to reduce energy, water, waste, and other resource use.
  • Referencing its Climate Action Plan and Office of the Chief Sustainability Officer, SSA notes that it has identified five priority areas at delegated facilities located in four of the ten climate regions identified in the National Climate Assessment Report.

Several agencies, including State indicated that their plans include discussions of climate-related financial risk and efforts to manage that risk, using a framework developed by the global Task Force on Climate-Related Financial Disclosures – Governance, Strategy, Risk Management, and Metrics.

Approximately two-thirds of CFO Act agencies discussed climate change in the context of their strategic and performance goals. For example:

  • Many of DOI’s strategic goals and objectives reference climate change remediation efforts, including Strategic Goal 2 – “conserve, protect, manage, and restore natural and cultural resources in the face of climate change and other stressors”. Efforts supporting this goal includes DOI’s Wildland Fire Management Program, featuring a suite of activities, including preparedness, suppression, fuels management, burned area rehabilitation, and science.
  • EPA’s strategic goals include a new goal focused exclusively on tackling the climate crisis and an unprecedented strategic goal to advance environmental justice and civil rights.
  • Treasury’s strategic goals include “Combat Climate Change”, supported by four objectives: 1) to demonstrate global leadership through reengagement with international partners; 2) to promote the flow of capital towards clean and renewable investments; 3) to identify and mitigate climate-related financial risks through improved measuring and monitoring of climate impacts; and 4) to reduce greenhouse gas emissions.
  • DOE’s strategic plan includes two climate-oriented goals: 1) “Drive U.S. Energy Innovation and Deployment on a Path to Net-Zero Emissions by 2050”, which is supported by DOE’s Office of Clean Energy Demonstrations; and 2) “Strengthen the Nation’s Energy, Security, Resilience, Affordability, and Reliability”. Each of DOE’s objectives within this goal are aimed at fulfilling the mission of the National Climate Strategy to keep America on track to achieve a clean energy economy with net-zero emissions by 2050. Efforts include: supporting major breakthroughs in the development of cost-effective electric heat pumps to help decarbonize the building sector; completing field development activities for carbon storage; and accelerating deployment of clean technologies at scale and pace.
  • DOT’s discussion of agency performance includes Agency Priority Goal 5: Joint U.S./DOE Electric Vehicle Charging Infrastructure Deployment under the BIL. The BIL invests in the deployment of a national network of electric vehicle chargers as one of many important ways to address the climate crisis across DOT, DOE, and their newly formed Joint Office of Energy and Transportation. All three entities will support building a national network of electric vehicle chargers.

Approximately one-third of the CFO Act agencies discussed climate change as part of the forward-looking content of their MD&A.

  • State’s Special Presidential Envoy for Climate leads diplomatic engagement on the climate crisis, exercises climate leadership in international fora, increases international climate ambition and ensures that climate change is integrated into all elements of the Administration’s foreign policy-making process.
  • SBA reports that for every $1 spent on hazard mitigation, can save up to $6 in future disaster recovery costs. In 2022, SBA spotlighted the promotion of its disaster mitigation loan option through an Agency Priority Goal to drive increased awareness of this option and encourage businesses and homeowners to invest in their own preparedness.
  • HHS’s Office of Climate Change and Health Equity will launch the Inter-agency Working Group to Decrease Risk of Climate Change to Children, the Elderly, People with Disabilities, and the Vulnerable in 2023 in addition to updating the Sustainable and Climate Resilient Healthcare Facilities Toolkit.
  • HUD’s Strategic Plan prioritizes the sustainable, inclusive development of American communities, with added emphasis on furthering social equity and environmental justice. Overarching priorities include increasing social equity throughout all HUD programs and operations, as well as prioritizing the needs of vulnerable populations and underserved communities. HUD also discusses its roles under the National Disaster Recovery Framework, wherein HUD has both coordinating and primary roles in the housing recovery function after a declared disaster.
  • VA discussed its primary climate vulnerabilities being built, infrastructure and burdens placed on its health care delivery systems, and interruptions in the supply of energy and material. VA has identified specific adaptation actions to decrease its vulnerability to the impacts of climate change, including implementing changes to building design and resilience standards, and updating sustainable building certification requirements.

A few CFO Act agencies discussed the financial effects of their climate-related efforts by relating those efforts to the budgetary expenses and/or financial costs incurred to execute these important programs. For example:

  • USAID identifies the net costs associated with its program areas focused on climate change, including sustainable landscapes, clean energy, and adaptation, and provides detail of those costs by USAID’s many bureaus.
  • State indicates that it budgeted a total of $658.3 million in 2021 for climate change programming to reduce the federal government’s exposure to climate related financial risks. Funding supported a variety of projects, including those to improve energy efficiency and resilience, such as the installation of on-site renewable energy storage systems, for maintenance and repairs to department facilities, and for tools to analyze potential for future climate risks.
  • DOI’s Net Cost of Operations links DOI net costs with its four mission areas, including two climate-oriented areas: 1) “Conserve, Protect, Manage, and Restore Natural and Cultural Resources in the Face of Climate Change and Other Stressors” ($7.0 billion); and 2) “Sustainably Balance the Use of Resources While Supporting Communities and the Economy” ($8.0 billion). A related note disclosure provides additional detail presenting these net costs by bureau or responsibility segment (e.g., BIA, BLM, etc.).

Approximately one-third of the Inspectors General from CFO Act agencies identified climate change as a management challenge.

  • Treasury’s OIG added a new Management Challenge in FY 2022, Tackling the Climate Crisis at Home and Abroad, stating that Treasury will play a significant role working with other federal agencies, foreign governments, and international financial institutions to stimulate global action on addressing climate change.
  • DOD’s OIG includes Adapting to Climate Change, Accelerating Resilience, and Protecting the Environment among DOD’s Management Challenges. DOD’s response to this effort addresses three lines of effort of DOD’s Climate Adaptation Plan – making climate-informed decisions, training and equipping a climate-ready force, and building resilient installations and infrastructure. Key to this challenge is expanding climate literacy and training, integrating climate effects into operations, and addressing installations’ maintenance and improvement backlog.
  • DOT’s OIG identified executing federal priorities related to the impact of climate change, advancing equity, and promoting resilience in infrastructure as among the top management challenges facing the agency. A primary challenge for DOT will be balancing these goals and priorities with the need to execute IIJA projects timely, cost-effectively, and in a manner that provides value.

EO 14008 established the Justice40 Initiative a whole of government effort with the goal that 40 percent of the overall benefits of certain federal investments flow to disadvantaged communities that are marginalized, underserved, and overburdened by pollution. The Justice40 investment categories are: climate change, clean energy and energy efficiency, clean transit, affordable and sustainable housing, training and workforce development, remediation and reduction of legacy pollution, and the development of critical clean water and wastewater infrastructure. Several agencies referenced their Justice40 or environmental justice efforts in their financial statements, including DOE, DOT, EPA, and HUD.

The diversity of climate-related risks reported in agency financial statements is an indicator of the emergent and evolving nature of these efforts and the significant challenge that climate change presents to the nation.


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 The 2022 long-term fiscal projections are not adjusted for the more current near-term economic information (e.g., higher inflation and lower real growth). (Back to Content)

19 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).  (Back to Content)

20 Projections for discretionary and mandatory programs – other than Social Security, Medicare, and Medicaid – exclude COVID-19-related spending judged to be temporary. The primary deficit-to-GDP ratio would likely be higher in the near-term if projections assumed outlays of remaining COVID-19 relief funding. See Note 24 for more detail on technical assumptions for the long-term fiscal projections.  (Back to Content)

21 Other possible paths for the receipts-to-GDP ratio and the projected debt held by the public are illustrated in the “Alternative Scenarios” section. (Back to Content)

22 Discretionary outlays of supplemental funding provided in response to COVID-19 are identified using Disaster Emergency Fund Code attributes in budget execution data for the following laws: the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (P.L. 116-123); Families First Coronavirus Response Act (P.L. 116-127); the CARES Act (P.L. 116-136); the Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-139); and the CAA (P.L. 116-260, Division M).  (Back to Content)

23 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)

24 The 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)

25 See the Note 26 of the FY 2021 Financial Report of the U.S. Government for more information about changes in the long-term fiscal projections between FYs 2021 and 2020. (Back to Content)

26 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 2022 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)

27 These assumptions were developed based on data primarily as of January 1, 2022. Subsequent to January 1, 2022, inflation and interest rates increased faster than previously expected. The SOSI projections are not adjusted for the more current near-term economic information. (Back to Content)

28 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)

29 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)

30 A Summary of the 2022 Annual Social Security and Medicare Trust Fund Reports, page 12. (Back to Content)

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

32 The report can be found here: A ROADMAP TO BUILD A CLIMATE-RESILIENT ECONOMY ( (Back to Content)

33 DOE Projects Monumental Emissions Reduction From Inflation Reduction Act. (Back to Content)

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Last modified 04/06/23