NOTES TO THE FINANCIAL STATEMENTS 144

Note 24. Long-Term Fiscal Projections

The SLTFP is prepared pursuant to SFFAS No. 36, Comprehensive Long-Term Projections for the U.S. Government. 

The financial statements, Note 24, and unaudited RSI provide information to aid readers of the Financial Report in assessing 

whether current policies for federal spending and taxation can be sustained and the extent to which the cost of public services 

received by current taxpayers will be shifted to future taxpayers. This assessment requires prospective information about 

receipts and spending, the resulting debt, and how these amounts relate to the size of the economy. A sustainable policy is 

defined as one where the ratio of federal debt held by the public to GDP (the debt-to-GDP ratio) is ultimately stable or 

declining. The Financial Report does not address the sustainability of state and local government fiscal policy.

The projections and analysis presented here are extrapolations based on an array of assumptions described in detail 

below. A fundamental assumption is that current federal policy will not change. This assumption is made so as to inform the 

question of whether current fiscal policy is sustainable and, if it is not sustainable, the magnitude of needed reforms to make 

fiscal policy sustainable. The projections are therefore neither forecasts nor predictions. If policy changes are implemented, 

perhaps in response to projections like those presented here, then actual financial outcomes will be different than those 

projected. The methods and assumptions underlying the projections are subject to continuing refinement.

The projections focus on future cash flows, and do not reflect either the accrual basis or the modified-cash basis of 

accounting. These cash-based projections reflect receipts or spending at the time cash is received or when a payment is made 

by the government. In contrast, accrual-based projections would reflect amounts in the time period in which income is earned 

or when an expense or obligation is incurred. The cash basis accounting underlying the long-term fiscal projections is 

consistent with methods used to prepare the SOSI and the generally cash-based federal budget. 

The SLTFP displays the PV of 75-year projections for various categories of the federal government’s receipts and noninterest spending.6 The projections for FYs 2023 and 2022 are expressed in PV dollars and as a percent of the PV of GDP7 as 

of September 30, 2023 and September 30, 2022, respectively. The PV of a future amount, for example $1.0 billion in October 

2098, is the amount of money that if invested on September 30, 2023 in an account earning the government borrowing rate 

would have a value of $1.0 billion in October 2098.

8

The PV of a receipt or spending category over 75 years is the sum of the annual PV amounts. When expressing a receipt 

or spending category over 75 years as a percent of GDP, the PV dollar amount is divided by the PV of GDP over 75 years. 

Measuring receipts and spending as a percent of GDP is a useful indicator of the economy’s capacity to sustain federal 

government programs. 

Fiscal Projections

Receipt categories in the long-term fiscal projections include individual and corporation income taxes, Social Security 

and Medicare payroll taxes, and a residual category of “other receipts.” Non-interest spending categories include 

discretionary spending that is funded through annual appropriations, such as spending for national security, and mandatory 

(entitlement) spending that is generally funded with permanent or multi-year appropriations, such as spending for Social 

Security and Medicare. This year’s long-term fiscal projections for Social Security and Medicare are based on the same 

economic and demographic assumptions that underlie the 2023 SOSI, which is as of January 1, 2023. Accordingly, the 

economic and demographic assumptions used in the long-term fiscal projections are not adjusted for the more current nearterm economic information after the time assumptions were set in December 2022. 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 President’s FY 2024 Budget.9 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. 

The projections assume the continuance of current policy, which builds off current law, but can be different than current 

law in cases where lawmakers have in the past periodically changed the law in a consistent way. The specific assumptions 

that depart from current law and are used for the current policy basis of these projections are explained below.

6 For the purposes of this analysis, spending is defined in terms of outlays. In the context of federal budgeting, spending can either refer to budget authority –

the authority to commit the government to make a payment; to obligations – binding agreements that will result in payments, either immediately or in the 

future; or to outlays – actual payments made. 7 GDP is a standard measure of the overall size of the economy and represents the total market value of all final goods and services produced domestically 

during a given period of time. The components of GDP are: private sector consumption and investment, government consumption and investment, and net 

exports (exports less imports). Equivalently, GDP is a measure of the gross income generated from domestic production over the same time period. 8 PVs recognize that a dollar paid or collected in the future is worth less than a dollar today because a dollar today could be invested and earn interest. To 

calculate a PV, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed.

9 Social Security and Medicare Trustees Reports can be found at https://www.ssa.gov/OACT/TR/.
145 NOTES TO THE FINANCIAL STATEMENTS

The projections shown in the SLTFP are made over a 75-year time frame, consistent with the time frame featured in the 

Social Security and Medicare Trustees Reports. However, these projections are for fiscal years starting on October 1, whereas 

the Trustees Reports feature calendar-year projections. Using fiscal years allows the projections to start from the actual 

budget results from FYs 2023 and 2022.

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, compared to 4.2 percent as was projected in last year’s Financial Report.10 The above table reports the 

effects of various factors on the updated projections.

• The largest factor affecting the projections is the effect of new Social Security, Medicare, and Medicaid programspecific 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).

11 The 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.

12 Growth rates for the 2023 projections are based on the NHE data and reflect the expiration of temporary 

measures related to the COVID-19 pandemic.

• The second largest factor affecting the projections—increasing the imbalance as a share of the 75-year PV of GDP 

by 0.4 percentage points ($7.4 trillion)—is due to actual budget results for FY 2023 and baseline estimates published 

in the FY 2024 President’s Budget, plus adjustments to discretionary spending enacted in the FRA (P.L. 118-5).

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.

• The next largest factor affecting the projections is the update of economic and demographic assumptions that 

decreases 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.

• The fourth largest factor affecting the projected imbalance is the change in reporting period—the effect of shifting 

calculations from 2023 through 2097 to 2024 through 2098. The update increases the imbalance of the 75-year PV

10 The fiscal imbalances reported in the long-term fiscal projections do not include the initial level of publicly held debt, which was $26.2 trillion in 2023 and

$24.3 trillion in 2022, and, therefore, they do not by themselves answer the question of how large fiscal reforms must be to make fiscal policy sustainable. 

See “Sustainability and the Fiscal Gap” for additional discussion. More information on the projections in last year’s Financial Report can be found in Note 

24 to the financial statements here: https://fiscal.treasury.gov/reports-statements/#. 11 For more information on Social Security and Medicare actuarial estimates, refer to Note 25—Social Insurance. 12 Christopher J. Truffer, Kathryn E. Rennie, Lindsey Wilson, and Eric T. Eckstein II, 2018 Actuarial Report on the Financial Outlook for Medicaid, Office 

of the Actuary, CMS, and HHS.
NOTES TO THE FINANCIAL STATEMENTS 146

of receipts less non-interest spending by $1.9 trillion, which has a negligible effect as a share of 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). This imbalance can be broken down by funding source. 

Spending projections exceeded receipts by 2.2 percent of GDP (about $42.2 trillion) among programs funded by the 

government’s general revenues, and there is an imbalance of 1.6 percent of GDP (about $30.9 trillion)13 for the combination 

of Social Security (OASDI) and Medicare Part A, which under current law are funded with payroll taxes and not in any 

material respect with general revenues.14,15 By comparison, the FY 2022 projections showed that programs funded by the

government’s general revenues had an excess of spending over receipts of 2.7 percent of GDP ($50.2 trillion) while the 

payroll tax-funded programs had an imbalance of spending over receipts of 1.6 percent of GDP ($29.4 trillion).

Sustainability and the Fiscal Gap

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. As discussed further in the 

unaudited RSI, the projections based on this Financial Report’s assumptions indicate that current policy is not sustainable. If 

current policy is left unchanged, the projections show the debt-to-GDP ratio will be approximately 100 percent in 2024, rise

to 200 percent by 2047 and reach 531 percent in 2098. Moreover, if the trends that underlie the 75-year projections were to 

continue, the debt-to-GDP ratio would continue to rise beyond the 75-year window. 

The fiscal gap measures how much the primary surplus (receipts less non-interest spending) must increase in order for 

fiscal policy to achieve a target debt-to-GDP ratio in a particular future year. In these projections, the fiscal gap is estimated 

over a 75-year period, from 2024 to 2098, and the target debt-to-GDP ratio is equal to the ratio at the beginning of the 

projection period, in this case the estimated debt-to-GDP ratio at the end of FY 2023. The target year is the last year of the 

75-year period (2098). 

The 75-year fiscal gap under current policy is estimated at 4.5 percent of GDP, which is 23.8 percent of the 75-year PV

of projected receipts and 19.8 percent of the 75-year PV of non-interest spending. This estimate of the fiscal gap is 0.4

percentage points smaller than was estimated in 2022 (4.9 percent of GDP).

The projections show that projected primary deficits average 3.8 percent of GDP over the next 75 years under current 

policy. If policies were put in place that would close 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 

SLTFP. In these projections, closing the fiscal gap requires running a substantially positive level of primary surplus, 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 held by 

the public grows each year by the amount of interest spending, which under these assumptions would result in debt growing 

faster than GDP.

13 The 75-year PV imbalance for Social Security and Medicare Part A of $30.9 trillion is comprised of several line items from the SLTFP – Social Security 

outlays net of Social Security payroll taxes ($33.5 trillion) and Medicare Part A outlays net of Medicare payroll taxes ($10.4 trillion) – as well as 

subcomponents of these programs not presented separately in the statement. These subcomponents include Social Security and Medicare Part A 

administrative costs that are classified as non-defense discretionary spending ($0.6 trillion) and Social Security and Medicare Part A income other than 

payroll taxes: taxation of benefits (-$6.4 trillion), federal employer share (-$1.5 trillion), and other income (-$5.8 trillion). 14 Social Security and Medicare Part A expenditures can exceed payroll tax revenues in any given year to the extent that there are sufficient balances in the 

respective trust funds; these balances derive from past excesses of payroll tax revenues over expenditures and interest earned on those balances and represent 

the amount the General Fund owes the respective trust fund programs. When spending does exceed payroll tax revenues, as has occurred each year since 

2008 for Medicare Part A and 2010 for Social Security, the excess spending is financed first with interest due from the General Fund and secondly with a 

drawdown of the trust fund balance; in either case, the spending is ultimately supported by general revenues or borrowing. Under current law, benefits for 

Social Security and Medicare Part A can be paid only to the extent that there are sufficient balances in the respective trust funds. In order for the long-term 

fiscal projections to reflect the full size of these programs’ commitments to pay future benefits, the projections assume that all scheduled benefits will be 

financed with borrowing to the extent necessary after the trust funds are depleted.

15 The fiscal imbalances reported in the long-term fiscal projections are limited to future outlays and receipts. They do not include the initial level of 

publicly-held debt, $26.2 trillion in 2023 and $24.3 trillion in 2022, and therefore they do not by themselves answer the question of how large fiscal reforms 

must be to make fiscal policy sustainable, or how those reforms divide between reforms to Social Security and Medicare Part A and to other programs. Other 

things equal, past cash flows (primarily surpluses) for Social Security and Medicare Part A reduced federal debt at the end of 2023 by $3.0 trillion (the trust 

fund balances at that time); the contribution of other programs to federal debt at the end of 2023 was therefore $29.2 trillion. Similarly, because the $30.9

trillion imbalance between outlays and receipts over the next 75 years for Social Security and Medicare Part A does not take account of the Social Security 

and Medicare Part A trust fund balances, it overstates the magnitude of reforms necessary to make Social Security and Medicare Part A solvent over 75 

years by $3.0 trillion. The $3.0 trillion combined Social Security and Medicare Part A trust fund balance represents a claim on future general revenues.
147 NOTES TO THE FINANCIAL STATEMENTS

Assumptions Used and Relationship to Other Financial Statements

A fundamental assumption underlying the projections is that current federal policy (defined below) 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.

Even if policy does not change, actual spending and receipts could differ materially from those projected here. Longrange projections are inherently uncertain and are necessarily based on simplifying assumptions. For example, one key 

simplifying assumption is that interest rates paid on debt held by the public remain unchanged, regardless of the amount of 

debt outstanding. To the contrary, it is likely that future interest rates would increase if the debt-to-GDP ratio rises as shown 

in these projections. To help illustrate this uncertainty, projections that assume higher and lower interest rates are presented in 

the “Alternative Scenarios” discussion in the unaudited RSI section of this Financial Report.

As is true for prior long-term fiscal projections for the Financial Report, the assumptions for GDP, interest rates, and 

other economic and demographic variables underlying this year’s projections are the same assumptions that underlie the most 

recent Social Security and Medicare Trustees Report projections, adjusted for historical revisions that occur annually. These 

assumptions differ from those in the President’s Budget because they extend for 75 years, rather than 25 years. Additionally,

they assume extension of current policy whereas the economic assumptions in the President’s Budget assume full 

implementation of policy proposals reflected in the Budget.16 The use of discount factors consistent with the Social Security 

Trustees rate allows for consistent PV calculations over 75 years between the SLTFP and the SOSI. 

The following bullets summarize the key assumptions used for the categories of receipts and spending presented in the 

SLTFP and the disclosures:

• Social Security: Projected Social Security (OASDI) spending excludes administrative expenses, which are 

classified as discretionary spending, and is based on the projected spending in the 2023 Social Security Trustees 

Report for benefits and for the Railroad Retirement interchange. The projections of Social Security payroll taxes and 

Social Security spending are based on future spending and payroll taxes projected in the 2023 Social Security 

Trustees Report, adjusted for presentational differences and converted to a fiscal year basis. More information about 

the assumptions for Social Security cost growth can be found in Note 25 and the unaudited RSI discussion of Social 

Insurance.

• Medicare: Projected Medicare spending also excludes administrative expenses, which are classified as discretionary

spending, and is based on projected spending from the 2023 Medicare Trustees Report. The projections here make 

some adjustments to the Trustees Report projections. Medicare Part B and D premiums, as well as state 

contributions to Part D, are subtracted from gross spending in measuring Part B and Part D spending, just as they are 

subtracted from gross cost to yield net cost in the financial statements.17 Here, as in the federal budget, premiums are 

treated as “negative spending” rather than receipts since they represent payment for a service rather than payments 

obtained through the government’s sovereign power to tax. This is similar to the financial statement treatment of 

premiums as “earned” revenue as distinct from all other sources of revenue, such as taxes. The projections are based 

on Medicare spending in the Medicare Trustees Report, adjusted for presentational differences and converted to a 

fiscal year basis. Medicare Part A payroll taxes are projected similarly. More information about the assumptions for 

Medicare cost growth can be found in Note 25 and the unaudited RSI discussion of Social Insurance. As discussed 

in Note 25, there is uncertainty about whether the reductions in health care cost growth assumed in the Medicare 

Trustees Report will be fully achieved. Note 25 illustrates this uncertainty by presenting an illustrative alternative 

scenario. 

• Medicaid: The Medicaid spending projections start with NHE projections prepared by CMS’s Office of the 

Actuary, which were released in June 2023.

18,19 These projections are based on recent trends in Medicaid spending

and the demographic, economic, and health cost growth assumptions in the Medicare Trustees Report. The NHE 

projections, which end in 2031, are adjusted to accord with the actual Medicaid spending in FY 2023. After 2031, 

16 See the FY 2024 President’s Budget, Analytical Perspectives Volume, Chapter 3 “Long-Term Budget Outlook.” 17 Medicare Part B and D premiums and state contributions to Part D are subtracted from the Part B and D spending displayed in the SLTFP. The total 75-

year PV of these subtractions is $20.1 trillion, or 1.0 percent of GDP. 18 This represents an update to the model’s assumptions and methodology. In the 2022 Financial Report, Medicaid projections began with the projections 

from the 2018 Medicaid Actuarial Report prepared by the CMS’s Office of Actuary, and those projections were similarly adjusted to account for actual 

spending in the most recently completed fiscal year. Actual Medicaid spending in FY 2022 included temporary spending increases due to changes in 

enrollment and other temporary measures related to the COVID-19 pandemic. Spending associated with those temporary measures could not be identified 

and excluded from budget totals before Medicaid outlays were projected, adding uncertainty to the 2022 long-term fiscal projections. 19 NHE data are available at https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data.
NOTES TO THE FINANCIAL STATEMENTS 148

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. Between 1987 and 2017, the average annual 

growth rates of spending per beneficiary for Medicaid and Medicare were within 0.3 percentage point of each other. 

Projections of Medicaid spending are subject to added uncertainty related to: 1) assumed reductions in health care 

cost growth discussed above in the context of Medicare; 2) the projected size of the Medicaid enrolled population, 

which depends on a variety of factors, including future state actions regarding the PPACA Medicaid expansion; and 

3) any continued effects of the COVID-19 pandemic. 

• Other Mandatory Spending: 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.20,21 Projected spending for insurance 

exchange subsidies starting in 2024 grows with growth in the non-elderly population and with the NHE projected 

per enrollee cost growth for other private health insurance for the NHE projection period (through 2031 for the FY 

2023 projections), and with growth in per enrollee health care costs as projected for the Medicare program after that 

period. As discussed in Note 25, there is uncertainty about whether the reductions in health care cost growth 

projected in the Medicare Trustees Report will be fully achieved. Projected exchange subsidy spending as a percent 

of GDP remains below the failsafe provision in the PPACA that limits the federal share of spending to 0.504 percent 

of GDP. 

• Defense and Non-defense Discretionary Spending: Discretionary spending through 2025 follows the caps enacted 

in the FRA, then grows with GDP starting in 2026. To illustrate sensitivity to different assumptions, PV calculations 

under alternative discretionary growth scenarios are presented in the unaudited “Alternative Scenarios” RSI section.

• Receipts (Other than Social Security and Medicare Payroll Taxes): Individual income taxes are based on the 

share of salaries and wages in the current law baseline projection in the FY 2024 President’s Budget, and the salaries 

and wages projections in 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 TCJA. Individual income taxes 

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. Through 

the first 10 years of the projections, corporation tax receipts as a percent of GDP reflect the economic and budget 

assumptions used in developing the FY 2024 President’s Budget 10-year baseline budgetary estimates. After this 

time, corporation tax receipts grow at the same rate as nominal GDP. Other 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. 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. The ratio of other receipts, including excise taxes, estate 

and gift taxes, customs duties, and miscellaneous 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. To illustrate uncertainty, PV calculations 

under higher and lower receipts growth scenarios are presented in the “Alternative Scenarios” section.

• Debt and Interest Spending: 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.22 The average interest rate over this year’s projection period is 4.5 percent, approximately the same 

as the 2022 Financial Report. These rates are also used to convert future cash flows to PVs as of the start of FY

2024. 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.

Departures of Current Policy from Current Law 

The long-term fiscal projections are made on the basis of current policy, which in some cases is assumed to be different 

from current law. The notable differences between current policy that underlies the projections and current law are: 1) 

20 Other mandatory spending in 2023 from legislation enacted in response to the COVID-19 pandemic is considered temporary and is not assumed to 

increase with nominal GDP. Such spending is identified using Disaster Emergency Fund Code attributes in budget execution data for the following: the 

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); the CAA, 2021 (P.L. 116-260, Division N); and the ARP (P.L. 117-2). Spending data for COVID-19 response legislation are available 

on USAspending.gov. 21 This assumed growth rate for other mandatory programs after 2024 is slightly higher than the average growth rate in the most recent OMB and 

Congressional Budget Office 10-year budget baselines. 22 As indicated in the more detailed discussion of Social Insurance in Note 25 to the financial statements.
149 NOTES TO THE FINANCIAL STATEMENTS

projected spending, receipts, and borrowing levels assume raising or suspending the current statutory limit on federal debt; 2) 

continued discretionary appropriations are assumed throughout the projection period; 3) scheduled Social Security and 

Medicare Part A benefit payments are assumed to occur beyond the projected point of trust fund depletion; and 4) many 

mandatory programs with expiration dates prior to the end of the 75-year projection period are assumed to be reauthorized. 

As is true in the Medicare Trustees Report and in the SOSI, the projections incorporate programmatic changes already 

scheduled in law, such as the PPACA productivity adjustment for non-physician Medicare services and the expiration of 

certain physician bonus payments in 2025.