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Financial Report of the United States Government

Executive Summary to the Fiscal Year 2020 Financial Report of U.S. 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 as one where the ratio of debt held by the public to GDP (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 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 reached 100 percent at the end of FY 2020. The long-term fiscal projections in this report are based on the same economic assumptions that underlie the Social Security Trustees’ Report, and those assumptions were developed using data available as of January 1, 2020, prior to the economic downturn. At this time, management cannot reasonably estimate the potential effects of COVID-19 on the projections or other sustainability measures (such as projected depletion dates for the Social Security and Medicare Hospital Insurance Trust Funds in Table 1 below), which could be significant.

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.1 The projections are therefore neither forecasts nor predictions. Nevertheless, the projections demonstrate that policy changes need to be enacted for the actual financial outcomes to differ from those projected.

Receipts, Spending, and the Debt

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Chart 6 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.

  • 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 financial crisis of 2008-09 and the ensuing severe recession, as well as increased spending and temporary tax reductions enacted to stimulate the economy and support recovery. As an economic recovery took hold, the primary deficit-to-GDP ratio fell, averaging 2.1 percent from 2013 through 2019. The ratio spiked again in 2020 rising to 13.3 percent of GDP due to increased spending to address the COVID-19 pandemic and lessen the economic impacts of stay-at-home and social distancing orders on individuals, hard-hit industries, and small businesses. The ratio is projected to fall to 6.0 percent in 2021 and then shrink to 2.9 percent in 2023 as the economy grows and spending due to legislation enacted in response to the COVID-19 pandemic decreases. After 2024, however, increased spending for Social Security and health programs2 due to the continued retirement of the baby boom generation and increases in health care costs is projected to result in increasing primary deficits that peak in 2042, when the primary deficit-to-GDP ratio reaches 5.4 percent. After 2042, the ratio gradually decreases as the aging of the population continues at a slower pace, and reaches 4.3 percent in 2095, the last year of the projection period.
  • The expiring individual income and estate and gift tax provisions of the TCJA are assumed to continue past their legal expiration on December 31, 2025 because of the recent historical pattern of such tax rates being extended, similar to the presentation in the FY 2021 President’s Budget. Congressional action is required to extend the provisions of the TCJA. GDP, interest, and other economic and demographic assumptions are the same as those that underlie the most recent Social Security and Medicare Trustees’ Report projections, adjusted for historical revisions that occur annually. The most recent Social Security and Medicare Trustees’ Reports were released in April 2020, and the economic and demographic assumptions do not reflect the effects of the COVID-19 pandemic, increasing the uncertainty surrounding this year’s long-term fiscal projections including the projected depletion dates in Table 1.
  • The persistent long-term gap between projected receipts and total spending shown in Chart 6 occurs despite the projected effects of the PPACA3 on long-term deficits.
    • Enactment of the PPACA in 2010 and the MACRA 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.

Table 1: Trust Fund Status
Fund Projected Depletion Projected Post-Depletion Trend
Medicare Hospital Insurance (HI)* 2026 
(unchanged from FY 2019 Report)
In 2026, trust fund income is projected to cover 90 percent of benefits, decreasing to 78 percent in 2044, then returning to 90 percent by 2094 
Combined Old-Age Survivors and Disability Insurance (OASDI)** 2035
(unchanged from FY 2019 Report)
In 2035, trust fund income is projected to cover 79 percent of scheduled benefits, decreasing to about 73 percent by 2094.
*Source: 2020 Medicare Trustees Report     ** Source: 2020 OASDI Trustees Report
Projections assume full Social Security and Medicare benefits are paid after fund depletion contrary to current law.
Projections do not include the effects of the pandemic. 

The primary deficit projections in Chart 6, along with those for interest rates and GDP, determine the debt-to-GDP ratio projections in Chart 7.

  • The debt-to-GDP ratio was 100 percent at the end of FY 2020, and under current policy and based on this report’s assumptions is projected to reach 623 percent in 2095.
  • 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 is unsustainable.
  • These debt-to-GDP projections are higher than both the 2019 and 2018 Financial Report projections.
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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 2020 is 5.4 percent of GDP (compared to 3.8 percent for 2019).
  • 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 5.4 percent of GDP on average over the next 75 years. The fiscal gap represents 30.2 percent of 75-year PV receipts and 23.8 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 may scroll on smaller screens

Table 2
Costs of Delaying Fiscal Reform
Period of Delay Change in Average Primary Surplus
Reform in 2021 (No Delay) 5.4 percent of GDP between 2021 and 2095
Reform in 2031 (Ten-Year Delay) 6.4 percent of GDP between 2031 and 2095
Reform in 2041 (Twenty-Year Delay) 7.8 percent of GDP between 2041 and 2095
  • Table 2 shows that, if action is delayed by 10 years, the estimated magnitude of primary surplus increases necessary to close the 75-year fiscal gap increases by 18.5 percent from 5.4 percent of GDP on average over 75 years to 6.4 percent on average over 65 years; if action is delayed by 20 years, the magnitude of reforms necessary increases by an additional 21.9 percent.
  • 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 is the difference between the taxes they pay and the programmatic spending from which they benefit.


  • 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.


1Current 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. (Back to Content)

2See the 2020 Trustees' Report for Medicare (pp 4-5) and Social Security (pp 4-23)  and the 2018 Medicaid Actuarial Report (Back to Content)

3The 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 rates relative to the rates that would have occurred in the absence of the PPACA. (See Note 23 and the RSI section of the Financial Report, and the 2020 Medicare Trustees’ Report for additional information). (Back to Content)

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Last modified 01/31/23