REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 174

United States Government

Required Supplementary Information 

(Unaudited) For the Fiscal Years Ended

September 30, 2022, and 2021

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 report’s assumptions indicate that current policy is not sustainable. 

The debt-to-GDP ratio was approximately 97 percent at the end of 2022, and was approximately 100 percent at the end of 

2021. If current policy is left unchanged, the projections show the debt-to-GDP ratio will be approximately 100 percent in 

2025, exceed 200 percent by 2046 and reach 566 percent in 2097. For comparison, under the 2021 projections, the debt-toGDP ratio exceeded 200 percent in 2041 and reached 701 percent in 2096.

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 

100 percent at the end of 2020. 

The primary deficit-to-GDP ratio in 2022 was 3.6 percent, decreasing by 7.1 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 technical assumptions1

 in this report, and then average 3.0 percent through 2029. After 2029, however, 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 4.8 percent of GDP in 2044. Primary deficits as a share of GDP 

gradually decrease beyond that point as the aging of the population continues at a slower pace, and reaches 3.5 percent 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. As a share of 

GDP, 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. 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 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 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 0.9 

percentage points 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. 

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 2022, and under 

current policy and based on this report’s assumptions is projected to reach 566 percent in 2097. The continuous rise of the 

debt-to-GDP ratio indicates that current policy under this report’s assumptions is unsustainable. 

1

 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. 
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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.2 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 1.9 percent in 2022, 

and under current policy is projected to reach 5.1 percent in 2034, 15.2 percent in 2066, and 25.6 percent in 2097. 

2 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 report relative to previous years’ reports is in 

terms of the projected debt-to-GDP ratio in 2095, the last year of the 75-year projection period used in the FY 2020 report. 

This ratio is projected based on this report’s assumptions to reach 552 percent in the FY 2022 projections, which compares 

with 691 percent projected in the FY 2021 projections and 623 percent projected in the FY 2020 projections.3

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

The longer policy action to close the fiscal gap4 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 2097 equal to the 2022 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 2097 equal to its level 

in 2022. 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 2097 equal to its level in 2022 under each of the 

three timeframes. If reform begins in 2023, then it is sufficient to raise the primary surplus share of GDP by 4.9 percentage 

3 For additional information on changes from the 2020 projections, see the unaudited RSI in the 2021 Financial Report. 4 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 2022

level. See Note 24 for a more complete discussion of the fiscal gap.
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points in every year between 2023 and 2097 in order for the debt-to-GDP ratio in 2097 to equal its level in 2022. This policy 

raises the average 2023-2097 primary surplus-to-GDP ratio from -4.2 percent to +0.6 percent.

In contrast to a reform that begins immediately, if reform begins in 2033 or 2043, then the primary surpluses must be 

raised by 5.7 percent and 7.0 percent of GDP, respectively, in order for the debt-to-GDP ratio in 2097 to equal its level at the 

end of 2022. The difference between the primary surplus increase necessary if reform begins in 2033 or 2043 and the increase 

necessary if reform begins in 2023, an additional 0.9 and 2.1 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 2022 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 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 2022 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.5 As indicated earlier, if reform is initiated in 2023, eliminating the fiscal gap requires that the 2023-2097

5 The base case health cost growth rates are derived from the projections in the 2022 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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primary surplus increase by an average of 4.9 percent of GDP in the base case. However, that figure increases to 8.9 percent 

of GDP if per capita health cost growth is assumed to be 1.0 percentage point higher, and 15.9 percent of GDP if per capita 

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 2023 to 2033 requires that 2033-2097 primary surpluses be higher by an average of 0.9

percent of GDP in the base case, 1.6 percent of GDP if per capita health cost growth is 1.0 percentage point higher, and 2.8

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 (and real) 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 2023, eliminating the fiscal gap 

requires that the 2023-2097 primary surplus increase by an average of 4.9 percent of GDP in the base case, 6.4 percent of 

GDP if the interest rate is 2.0 percentage points higher in every year, and 5.6 percent of GDP if the interest rate is 1.0 

percentage point higher in every year. The required increase in the 2023-2097 primary surplus decreases to an average of 4.0

percent of GDP if the interest rate is 1.0 percentage point lower in every year and 3.2 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 2023 to 2033 requires that 2033-2097 primary surpluses be higher by an average 

of 0.9 percent of GDP in the base case, 2.1 percent of GDP if the interest rate is 2.0 percentage points higher in every year, 

and 1.4 percent of GDP if the interest rate is 1.0 percentage point higher in every year. The required increase in the 2033-

2097 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 0.3 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 grows with nominal GDP starting in 2023. Under the base 

projection, discretionary spending is approximately 6.6 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 2023 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 2023-2097 primary surplus 

increase by an average of 4.9 percent of GDP. If discretionary spending grows with inflation and population, the fiscal gap is 

2.3 percent of GDP. The cost of delaying reform is greater when discretionary spending levels are higher. Initiating reforms 

in 2033 requires that the primary surplus increase by an average of 0.9 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 2043, the primary 

surplus must increase by an average of 2.1 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 2023, eliminating

the fiscal gap requires that the 2023-2097 primary surplus increase by an average of 4.9 percent of GDP in the base case, 3.8

percent of GDP if receipt growth is 0.1 percentage point higher, and 6.0 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 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 report shows that current policy under this 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.6 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 

6 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.
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they are below 90 percent.7 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.8

 Some countries with high debt-to-GDP ratios have been observed to experience lower-thanaverage growth, while other countries with similarly high debt 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 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 5.9 percent of 

GDP to 194.6 percent of GDP. 9

 The U.S. is not included in this set of statistics, which underscores the difficulty in 

calculating debt ratios under consistent definitions, but the 2022 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 report, the U.S. would reach 

the previous peak debt ratio in 2029. 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. 

7

 Errata: “Growth in a Time of Debt,” Carmen M. Reinhart and Kenneth S. Rogoff. Harvard University, 2013. 

8

 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. 9

 Government Finance Statistics Yearbook, Main Aggregates and Balances, available at https://data.imf.org. Data is 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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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.

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 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.