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United States Government

Required Supplementary Information 

(Unaudited) For the Fiscal Years Ended

September 30, 2023, and 2022

The Sustainability of Fiscal Policy

One of the important purposes of the Financial Report is to help citizens and policymakers assess whether current fiscal 

policy is sustainable and, if it is not, the urgency and magnitude of policy reforms necessary to make fiscal policy 

sustainable. A sustainable policy is defined as one where the ratio of debt held by the public to GDP (the debt-to-GDP ratio) 

is ultimately stable or declining. 

As discussed below, the projections based on this Financial Report’s assumptions indicate that current policy is not 

sustainable. The debt-to-GDP ratio was approximately 97 percent at the end of 2023, which is similar to (but slightly above) 

the debt-to-GDP ratio at the end of FY 2022. If current policy is left unchanged, the projections show the debt-to-GDP ratio 

will be approximately 100 percent in 2024, exceed 200 percent by 2047 and reach 531 percent in 2098. For comparison, 

under the 2022 projections, the debt-to-GDP ratio exceeded 200 percent one year earlier in 2046 and reached 566 percent in 

2097.

These conclusions are rooted in the projected trends in receipts, spending, and deficits in the context of current law and 

policy, although, as described in the following pages, there is considerable uncertainty surrounding these projections. The 

projections are on the basis of policies currently in place and are neither forecasts nor predictions. Changes in policy –

including investments in infrastructure efforts to mitigate the impact of climate change and enhancements to caregiving 

services to build a more resilient and sustainable economy – could have a significant effect on eventual fiscal outcomes.
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Current Policy Projections for Primary Deficits 

A key determinant of growth in the debt-to-GDP ratio and hence fiscal sustainability is the ratio of the primary deficit to 

GDP. The primary deficit is the difference between non-interest spending and receipts, and the primary deficit-to-GDP ratio 

is the primary deficit expressed as a percent of GDP. As shown in Chart 1, the primary deficit-to-GDP ratio spiked during 

2009 through 2012 due to the 2008-09 financial crisis and the ensuing severe recession, and rose again in 2020 due to the 

COVID-19 pandemic. Increased spending and temporary tax reductions enacted to stimulate the economy and support 

recovery contributed to elevated primary deficits, resulting in sharp increases in the ratio of debt to GDP. The debt-to-GDP 

ratio rose from 39 percent at the end of 2008 to 70 percent at the end of 2012 and then from 79 percent at the end of 2019 to 

approximately 100 percent at the end of 2020. 

The primary deficit-to-GDP ratio in 2023 was 3.8 percent, increasing by 0.2 percentage points from 2022, partially due 

to lower receipts. 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 following the expiration of temporary measures related to the COVID-19 pandemic. After 2024, increased 

spending for Social Security and health programs due in part to the continued retirement of the baby boom generation, is 

projected to result in increasing primary deficits that peak at 4.4 percent of GDP in 2043. Primary deficits as a share of GDP 

gradually decrease beyond that point as the aging of the population continues at a slower pace, and reach 2.8 percent 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 earning by the Federal Reserve. Receipts are projected to gradually 

increase and equal 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., inflationadjusted) incomes cause more taxpayers and a larger share of income to fall into the higher individual income tax brackets. 

Other possible paths for the receipts-to-GDP ratio and the implications for projected debt held by the public are analyzed in 

the “Alternative Scenarios” section. 

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 1). The aging of the baby boom generation, among other 

factors, is projected to increase the Social Security and Medicare spending shares of GDP by about 0.7 percentage points 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. 

Current Policy Projections for Debt and Interest Payments 

The primary deficit projections in Chart 1, along with projections for interest rates and GDP, determine the projections 

for the debt-to-GDP ratio shown in Chart 2. That ratio was approximately 97 percent at the end of FY 2023, and under 

current policy and based on this Financial Report’s assumptions is projected to reach 531 percent in 2098. The continuous 

rise of the debt-to-GDP ratio indicates that current policy under this Financial Report’s assumptions is unsustainable. 
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As a general approximation, the change in debt held by the public from one year to the next is the budget deficit, the 

difference between total receipts and total spending.1 Total spending is non-interest spending plus interest spending. Chart 3 

shows that the rapid rise in total spending and the unified deficit (total receipts less total spending) is almost entirely due to 

projected net interest, which results from the growing debt. As a percent of GDP, interest spending was 2.4 percent in 2023, 

and under current policy is projected to reach 5.3 percent in 2034, 15.0 percent in 2068, and 24.0 percent in 2098. 

1 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 

non-budgetary 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.
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Another way of viewing the change in the financial outlook in this year’s Financial Report relative to previous years’ 

Financial Reports is in terms of the projected debt-to-GDP ratio in 2096, the last year of the 75-year projection period used in 

the FY 2021 Financial Report. This ratio is projected based on this Financial Report’s assumptions to reach 518 percent in 

the FY 2023 projections, which compares with 559 percent projected in the FY 2022 projections and 701 percent projected in 

the FY 2021 projections.2

The Cost of Delay in Closing the 75-Year Fiscal Gap

The longer policy action to close the fiscal gap3 is delayed, the larger the post-reform primary surpluses must be to 

achieve the target debt-to-GDP ratio at the end of the 75-year period. This can be illustrated by varying the years in which 

reforms closing the fiscal gap are initiated while holding the target ratio of debt to GDP in 2098 equal to the 2023 ratio. Three 

timeframes for reforms are considered, each one beginning in a different year, and each one increasing the primary surplus 

relative to current policy by a fixed percent of GDP starting in the reform year. The analysis shows that the longer policy 

action is delayed, the larger the post-reform primary surplus must be to bring the debt-to-GDP ratio in 2098 equal to its level 

in 2023. Future generations are burdened by delays in policy changes because delay necessitates higher primary surpluses 

during their lifetimes, and those higher primary surpluses must be achieved through some combination of lower spending and 

higher revenue.

As previously shown in Chart 1, under current policy, primary deficits occur throughout the projection period. Table 1 

shows primary surplus changes necessary to make the debt-to-GDP ratio in 2098 equal to its level in 2023 under each of the 

2 For additional information on changes from the 2021 projections, see the unaudited RSI in the 2022 Financial Report. 3 The fiscal gap reflects how much the primary surplus (receipts less non-interest spending) must increase to maintain the debt-to-GDP ratio at the 2023

level. See Note 24 for a more complete discussion of the fiscal gap.
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three timeframes. If reform begins in 2024, then it is sufficient to raise the primary surplus share of GDP by 4.5 percentage 

points in every year between 2024 and 2098 in order for the debt-to-GDP ratio in 2098 to equal its level in 2023. This policy 

raises the average 2024-2098 primary surplus-to-GDP ratio from -3.8 percent to +0.6 percent.

In contrast to a reform that begins immediately, if reform begins in 2034 or 2044, then the primary surpluses must be 

raised by 5.3 percent and 6.5 percent of GDP, respectively, in order for the debt-to-GDP ratio in 2098 to equal its level at the 

end of 2023. The difference between the primary surplus increase necessary if reform begins in 2034 or 2044 and the increase 

necessary if reform begins in 2024, an additional 0.8 and 2.0 percentage points, respectively, is a measure of the additional 

burden policy delay would impose on future generations. The costs of delay are due to the additional debt that accumulates 

between the end of 2023 and the year reform is initiated, in comparison to the scenario in which reform begins immediately. 

Alternative Scenarios 

The long-run projections are highly uncertain. This section illustrates this inherent uncertainty by presenting alternative 

scenarios for the growth rate of health care costs, interest rates, discretionary spending, and receipts. (Not considered here are 

the effects of alternative assumptions for long-run trends in birth rates, mortality, and immigration, among other factors.)

The population is aging rapidly and will continue to do so over the next several decades, which puts pressure on 

programs such as Social Security, Medicare, and Medicaid. A shift in projected fertility, mortality, or immigration rates could

have important effects on the long-run projections. Higher-than-projected immigration, fertility, or mortality rates would 

improve the long-term fiscal outlook. Conversely, lower-than-projected immigration, fertility, or mortality rates would result 

in deterioration in the long-term fiscal outlook. 

Effect of Changes in Health Care Cost Growth

One of the most important assumptions underlying the projections is the future growth of health care costs. 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, PPACA in 2010 and MACRA in 2015 

lowered increases in payment rates for Medicare hospital and physician payments. 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 payment rates will be effective in producing a substantial slowdown in Medicare input cost growth. As 

discussed in Note 25—Social Insurance, the Medicare projections are subject to much uncertainty about the ultimate effects 

of these provisions to reduce health care cost growth. 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 grows at the same 

reduced rate as Medicare cost growth per beneficiary. 

As an illustration of the dramatic effect of variations in health care cost growth rates, Table 2 shows the effect on the 

size of reforms necessary to close the fiscal gap under per capita health care cost growth rates that are one percentage point 

higher or two percentage points higher than the growth rates in the base projection, as well as the effect of delaying closure of 

the fiscal gap.4 As indicated earlier, if reform is initiated in 2024, eliminating the fiscal gap requires that the 2024-2098

primary surplus increase by an average of 4.5 percent of GDP in the base case. However, that figure increases to 8.0 percent 

of GDP if per capita health cost growth is assumed to be 1.0 percentage point higher, and 14.2 percent of GDP if per capita 

4 The base case health cost growth rates are derived from the projections in the 2023 Medicare Trustees Report. These projections are summarized and 

discussed in Note 25 and the “Medicare Projections” section of the unaudited RSI for the SOSI.
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health cost growth is 2.0 percentage points higher. The cost of delaying reform is also increased if health care cost growth is

higher because debt accumulates more rapidly during the period of inaction. For example, the lower part of Table 2 shows 

that delaying reform initiation from 2024 to 2034 requires that 2034-2098 primary surpluses be higher by an average of 0.8

percent of GDP in the base case, 1.4 percent of GDP if per capita health cost growth is 1.0 percentage point higher, and 2.6

percent of GDP if per capita health cost growth is 2.0 percentage points higher. The dramatic deterioration of the long-run 

fiscal outlook caused by higher health care cost growth shows the critical importance of managing health care cost growth.

Effects of Changes in Interest Rates

A higher debt-to-GDP ratio is likely to increase the interest rate on government debt, making it costlier for the 

government to service its debt than if the debt-to-GDP ratio were lower. Table 3 displays the effect of several alternative 

scenarios using different nominal interest rates than assumed in the base case on the size of reforms to close the fiscal gap as

well as the effect of delaying closure of the fiscal gap. If reform is initiated in 2024, eliminating the fiscal gap requires that 

the 2024-2098 primary surplus increase by an average of 4.5 percent of GDP in the base case, 6.1 percent of GDP if the 

interest rate is 2.0 percentage points higher in every year, and 5.3 percent of GDP if the interest rate is 1.0 percentage point

higher in every year. The required increase in the 2024-2098 primary surplus decreases to an average of 3.6 percent of GDP 

if the interest rate is 1.0 percentage point lower in every year and 2.6 percent of GDP if the interest rate is 2.0 percentage 

points lower in every year. The cost of delaying reform is also increased if interest rates are higher, due to the fact that 

interest paid on debt accumulates more rapidly during the period of inaction. For example, the lower part of Table 3 shows 

that delaying reform initiation from 2024 to 2034 requires that 2034-2098 primary surpluses be higher by an average of 0.8

percent of GDP in the base case, 2.0 percent of GDP if the interest rate is 2.0 percentage points higher in every year, and 1.3

percent of GDP if the interest rate is 1.0 percentage point higher in every year. The required increase in the 2034-2098

primary surplus is higher by an average of 0.5 percent of GDP if the interest rate is 1.0 percentage point lower in every year 

and 0.2 percent of GDP if the interest rate is 2.0 percentage points lower in every year.
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Effects of Changes in Discretionary Spending Growth

The rate of growth of discretionary spending has a large impact on long-term fiscal sustainability. The current base 

projection for discretionary spending assumes that spending stays within statutory caps for 2024 and 2025 under the FRA 

then grows with nominal GDP starting in 2026. Under the base projection, discretionary spending is approximately 6.2 

percent of GDP each year over the projection period. The implications of an alternative scenario are shown in Table 4. In the 

alternative scenario, discretionary spending grows with inflation and population beginning in 2026 so as to hold discretionary 

spending constant on a real per capita basis. (This growth rate assumption is slower than growth with GDP but is still higher

than the standard 10-year budget baseline assumption, which assumes that discretionary spending grows with inflation but 

not with population.) As shown in Table 4, if discretionary spending grows with nominal GDP, eliminating the fiscal gap 

requires that the 2024-2098 primary surplus increase by an average of 4.5 percent of GDP. If discretionary spending grows 

with inflation and population, the fiscal gap is 2.2 percent of GDP. The cost of delaying reform is greater when discretionary 

spending levels are higher. Initiating reforms in 2034 requires that the primary surplus increase by an average of 0.8 percent 

of GDP per year in the base case and by an average of 0.4 percent of GDP if discretionary levels grow with inflation and 

population. If delayed until 2044, the primary surplus must increase by an average of 2.0 percent of GDP in the base case and 

by an average of 1.0 percent of GDP when spending grows with inflation and population.
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Effects of Changes in Individual Income Receipt Growth

The growth rate of receipts, specifically individual income taxes, is another key determinant of long-term sustainability. 

The base projections assume growth in individual income taxes over time to account primarily for the slow shift of 

individuals into higher tax brackets due to real wage growth (“real bracket creep”). This assumption approximates the longterm historical growth in individual income taxes relative to wages and salaries and is consistent with current policy without 

change, as future legislation would be required to prevent real bracket creep. As an illustration of the effect of variations in 

individual income tax growth, Table 5 shows the effect on the size of reforms necessary to close the fiscal gap and the effect 

of delaying closure of the fiscal gap if long-term receipt growth as a share of wages and salaries is 0.1 percentage point 

higher than the base case, as well as 0.1 percentage point lower than the base case. If reform is initiated in 2024, eliminating 

the fiscal gap requires that the 2024-2098 primary surplus increase by an average of 4.5 percent of GDP in the base case, 3.4 

percent of GDP if receipt growth is 0.1 percentage point higher, and 5.6 percent of GDP if receipt growth is 0.1 percentage 

point lower. The cost of delaying reform is also affected if receipt growth assumptions change, much as was the case in the 

previous alternative scenarios. 
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Fiscal Projections in Context

In this Financial Report, a sustainable fiscal policy is defined as one where the federal debt-to-GDP ratio is stable or 

declining over the projection period. However, this definition does not indicate what a sustainable debt-to-GDP ratio might 

be. Any particular debt ratio is not the ultimate goal of fiscal policy. Rather, the goals of fiscal policy are many. They include 

financing public goods, such as infrastructure and government services; promoting a strong and growing economy; and 

managing the debt so that it is not a burden on future generations. These goals are interrelated, and readers should consider 

how policies intended to affect one might depend on or affect another. 

This Financial Report shows that current policy under this Financial Report’s assumptions is not sustainable. In 

evaluating policies that could make policy sustainable, note that debt may play roles in both facilitating and hindering a 

healthy economy. For example, government deficit spending supports demand and allows the economy to emerge from 

recessions more quickly. Debt may also be a cost-effective means of financing capital investment that promotes future 

economic growth, which may in turn make future debt levels more manageable. However, economic theory also suggests that 

high levels of debt may contribute to higher interest rates, leading to lower private investment and a smaller capital stock that

the economy can use to grow. Unfortunately, it is unclear what debt-to-GDP ratio would be sufficiently high to produce these 

negative outcomes, or whether the key concern is the level of debt per se, or a trend that shows debt increasing over time. 

While several empirical studies have attempted to discern a definite relationship between debt and economic growth 

from the past experience of countries, the evidence is mixed. One study suggested that debt-to-GDP ratios in excess of 90 

percent had significant negative consequences for real GDP growth across advanced countries.5 Real GDP growth is 

generally lower by about 1 percent when the countries’ debt-to-GDP ratios are above 90 percent relative to the times when 

they are below 90 percent.6 However, after removing sample countries with very high indebtedness – those with debt-to-GDP 

ratios of more than 120 percent – and very low indebtedness – those with debt-to-GDP ratios of less than 30 percent – the 

negative relationship between growth and debt is difficult to determine. Another study reports that differences in average 

GDP growth in countries with debt-to-GDP ratios between 30-60 percent, 60-90 percent, and 90-120 percent cannot be 

statistically distinguished.7 Some countries with high debt-to-GDP ratios have been observed to experience lower-thanaverage growth, while other countries with similarly high debt-to-GDP ratios have continued to enjoy robust growth. 

Analogously, low debt-to-GDP ratios are no guarantee of strong economic growth. Moreover, the direction of causality is 

5 Reinhart, Carmen M., Vincent R. Reinhart and Kenneth S. Rogoff. 2012. “Public Debt Overhangs: Advanced-Economy Episodes Since 1800.” Journal of

Economic Perspectives, 26(3):69.86. 6 Errata: “Growth in a Time of Debt,” Carmen M. Reinhart and Kenneth S. Rogoff. Harvard University, 2013.

7 Herndon, Thomas, Michael Ash, and Robert Pollard, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” 

Cambridge Journal of Economics, 2013.
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unclear. High debt may undermine growth through increased interest rates and lower business confidence, or low growth may 

contribute to high debt by depressing tax revenues and increasing deficit spending on social safety net programs.

Nevertheless, to put the current and projected debt-to-GDP ratios in context, it is instructive to examine how the U.S. 

experience compares with that of other countries. The U.S. government’s debt as a percent of GDP is relatively large 

compared with central government debt of other countries, but far from the largest among developed countries. Based on 

historical data as reported by the IMF for 29 advanced economies, the debt-to-GDP ratio in 2019 ranged from 5.8 percent of 

GDP to 194.8 percent of GDP.8 The U.S. is not included in this set of statistics, which underscores the difficulty in 

calculating debt ratios under consistent definitions, but the 2023 debt-to-GDP ratio for the U.S. government was 

approximately 97 percent. Despite using consistent definitions where available, these debt measures are not strictly 

comparable due to differences in the share of government debt that is debt of the central government, how government 

responsibilities are shared between central and local governments, how current policies compare with the past policies that 

determine the current level of debt, and how robustly each economy grows. 

The historical experience of the U.S. may also provide some perspective. As Chart 4 shows, the debt-to-GDP ratio was 

highest in the 1940s, following the debt buildup during World War II. In the projections in this Financial Report, the U.S. 

would reach the previous peak debt ratio in 2028. However, the origins of current and future federal debt are quite different

from the wartime debt of the 1940s, which limits the pertinence of past experience.

As the cross-country and historical comparisons suggest, there is a very imperfect relationship between the current level 

of central government debt and the sustainability of overall government policy. Past accrual of debt is certainly important, but 

current policies and their implications for future debt accumulation and future growth are as well.

8 Government Finance Statistics Yearbook, Main Aggregates and Balances, available at https://data.imf.org. Data are for D1 debt liabilities for the central 

government, excluding social security funds, for Advanced Economies. While more current data are available, the recent pandemic has substantially 

distorted debt-to-GDP ratios. Pre-pandemic levels likely provide a better basis of comparison.
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Conclusion

The projections in this Financial Report indicate that if policy remains unchanged, the debt-to-GDP ratio will steadily 

increase throughout the projection period and beyond, which implies current policy under this Financial Report’s

assumptions is not sustainable and must ultimately change. Subject to the important caveat that policy changes are not so 

abrupt that they slow economic growth, the sooner policies are put in place to avert these trends, the smaller are the 

adjustments necessary to return the nation to a sustainable fiscal path, and the lower the burden of the debt will be to future

generations.