Executive Summary to the FY 2025 Financial Report of the United States Government

An Unsustainable Fiscal Path

An important purpose of this Financial Report is to help citizens understand current fiscal policy and the importance and magnitude of policy reforms necessary to make it sustainable. A sustainable fiscal policy is defined in this report as one where the debt-to-GDP ratio is stable or declining over the long term. GDP measures the size of the nation’s economy in terms of the total value of all final goods and services that are produced in a year. Considering financial results relative to GDP is a useful indicator of the economy’s capacity to sustain the government’s many programs. 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 99 percent at the end of FY 2025, up slightly from approximately 98 percent at the end of FY 2024. The long-term fiscal projections in this Financial Report are based on the same economic and demographic assumptions that underlie the SOSI.

The current fiscal path is unsustainable. To determine if current fiscal policy is sustainable, the projections based on the assumptions discussed in the Financial Report assume current policy will continue indefinitely.³  The projections are therefore neither forecasts nor predictions. Nevertheless, the projections demonstrate that policy changes need to be enacted to achieve a sustainable fiscal policy.

Receipts, Spending, and the Debt

Chart 5 shows historical and current policy projections for receipts, non-interest spending by major category, net interest, and total spending expressed as a percent of GDP.

Download the chart's data source here in CSV format

• The primary deficit is the difference between non-interest spending and receipts. The ratio of the primary deficit to GDP is useful for gauging long-term fiscal sustainability.
• 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 Coronavirus Disease 2019 (COVID-19) pandemic and ensuing economic downturn. Increased spending and temporary tax reductions enacted to stimulate the economy and support recovery contributed to elevated primary deficits over both periods, resulting in sharp increases in the ratio of debt to GDP. The primary deficit-to-GDP ratio in 2025 was 2.7 percent, a decrease of 0.6 percentage points from the primary deficit-to-GDP ratio in last year’s Financial Report partially due to higher receipts.
• The primary deficit-to-GDP ratio is projected to average 3.3 percent over the next 10 years, based on the technical assumptions in this Financial Report, and projected changes in receipts and outlays, then increase to a peak of 4.2 percent in 2046, and then gradually decrease to 3.1 percent of GDP in 2100, the last year of the projection period.
• The persistent long-term gap between projected receipts and total spending shown in Chart 5 occurs despite the projected effects of the Patient Protection and Affordable Care Act (PPACA)⁴ on long-term deficits.
  • Enactment of the PPACA in 2010 and the Medicare Access and Children’s Health Insurance Program Reauthorization Act of 2015 (MACRA) (P.L. 114-10) in 2015 established cost controls for Medicare hospital and physician payments whose long-term effectiveness is still to be demonstrated fully.
  • There is uncertainty about the extent to which these projections can be achieved and whether the PPACA’s provisions intended to reduce Medicare cost growth will be overridden by new legislation.

Table 1 summarizes the status and projected trends of the government’s Social Security and Medicare Trust Funds.

The primary deficit projections in Chart 5, along with those for interest rates and GDP, determine the debt-to-GDP ratio projections in Chart 6.

• The debt-to-GDP ratio was 99 percent at the end of FY 2025, and under current policy and based on this report’s assumptions is projected to reach 576 percent in 2100.
• The debt-to-GDP ratio rises continuously in great part because primary deficits lead to higher levels of debt. The continuous rise of the debt-to-GDP ratio indicates that current fiscal policy under this Financial Report’s assumptions is unsustainable.
• These debt-to-GDP projections are higher than the corresponding projections in both the FY 2024 and 2023 Financial Reports.

The long-term projections are highly uncertain. To illustrate this, the unaudited RSI section of the Financial Report presents alternative scenarios for the growth rate of health care costs, interest rates, discretionary spending, individual income tax receipts, and customs duties.

The Fiscal Gap and the Cost of Delaying Fiscal Policy Reform

• The 75-year fiscal gap is a measure of how much primary deficits must be reduced over the next 75 years in order to make fiscal policy sustainable. That estimated fiscal gap for 2025 is 4.7 percent of GDP (0.3 percentage points higher than 2024).
• This estimate implies that making fiscal policy sustainable over the next 75 years would require some combination of spending reductions and receipt increases that equals 4.7 percent of GDP on average over the next 75 years. The fiscal gap represents 25.1 percent of 75-year PV receipts and 20.7 percent of 75-year PV non-interest spending.
• The timing of policy changes to make fiscal policy sustainable has important implications for the well-being of future generations as is shown in Table 2.

  Table 2
  Costs of Delaying Fiscal Reform
  Period of Delay	Change in Average Primary Surplus
  Reform in 2026 (No Delay)	4.7 percent of GDP between 2026 and 2100
  Reform in 2036 (Ten-Year Delay)	5.6 percent of GDP between 2036 and 2100
  Reform in 2046 (Twenty-Year Delay)	6.9 percent of GDP between 2046 and 2100

  • Table 2 shows that, if reform begins in 2036 or 2046, the estimated magnitude of primary surplus increases necessary to close the 75-year fiscal gap is 5.6 percent and 6.9 percent of GDP, respectively. The difference between the primary surplus increase necessary if reform begins in 2036 or 2046 and the increase necessary if reform begins in 2026, an additional 0.9 and 2.2 percentage points, respectively, is a measure of the additional burden policy delay would impose on future generations.
  • The longer policy action to close the fiscal gap 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. Future generations are harmed by a policy delay because the higher the primary surpluses are during their lifetimes, the greater the difference is between the taxes they pay and the programmatic spending from which they benefit.

Conclusion

• Projections in the Financial Report indicate that the government’s debt-to-GDP ratio is projected to rise over the 75-year projection period and beyond if current policy is kept in place. The projections in this Financial Report show that current policy is not sustainable.
• If changes in fiscal policy are not so abrupt as to slow economic growth and those policy changes are adopted earlier, then the required changes to revenue and/or spending will be smaller to return the government to a sustainable fiscal path.

Footnote

³ Current policy in the projections is based on current law but includes extension of certain policies that expire under current law but are routinely extended or otherwise expected to continue. The assumptions that underlie this analysis are discussed in the Management’s Discussion and Analysis and Note 24—Long-Term Fiscal Projections sections of this Financial Report. See the “Departures of Current Policy from Current Law” in Note 24. (Back to Content)

⁴ The PPACA refers to P.L. 111-148, as amended by P.L. 111-152. The PPACA expands health insurance coverage, provides health insurance subsidies for low-income individuals and families, includes many measures designed to reduce health care cost growth, and significantly reduces Medicare payment rate updates relative to the rates that would have occurred in the absence of the PPACA. (See Note 25 and the Required Supplementary Information (RSI) section of the Financial Report, and the 2025 Medicare Trustees Report for additional information).(Back to Content)