The Nation’s Unsustainable Fiscal Path
How much federal debt is held by the public -- past, present, and future?
Debt held by the public is the total amount of money that the federal government owes to its investors. We compare projections of the debt (what is owed) to gross domestic product, or GDP (what is earned), to show the debt in relation to the size of the economy supporting it. Our annual report on the nation’s fiscal health, released May 2023, provides our latest projections.
At the end of fiscal year (FY) 2022, federal debt held by the public was about 97% of the GDP.
The federal deficit in FY 2022 decreased 50% from FY 2021 to $1.4 trillion—but it was still the fourth largest deficit in U.S. history. The decline is attributable to higher tax revenue and lower federal spending due to the COVID-19 pandemic. You can learn more about the current financial condition here.
Why Is It Happening?
The underlying conditions driving this unsustainable fiscal outlook existed well before the pandemic. Every fiscal year since 2002, the federal government has run a deficit—meaning spending exceeds its revenues—and added to its debt. Going forward, spending, including for Social Security, Medicare/Medicaid, and net interest on the debt, is projected to continue to outpace revenue by increasing amounts.
Demographic and other trends—like rising health care costs—are putting pressure on declining Social Security and Medicare trust funds. Higher interest rates could also combine with rising debt to increase deficits going forward.
Learn more in our annual report:
What’s the Solution?
Congress should develop a long-term fiscal plan to provide a cohesive picture of the government’s fiscal goals and a road map for achieving them. A fiscal plan could include an assessment of the drivers of deficits—both revenue and spending—and alternative approaches to the debt limit. For example, the debt limit could be set as part of the budget resolution or Treasury could be given the authority to propose a change in the debt limit that would take effect without needing congressional approval.
How Does GAO Help?
75-year fiscal simulation: We update this simulation each year to monitor the government’s long-term fiscal outlook. We also analyze the drivers of debt and the social and other trends contributing to it. Find the details in our annual report.
Debt sensitivity analysis: This analysis can give policymakers a more complete picture of how potential economic and fiscal changes to our assumptions about the variables in our simulation can affect the fiscal outlook. You can explore the effects of different variables on the debt in our interactive graphic.
Fiscal gap sensitivity analysis: The fiscal gap is a way of quantifying the policy changes required to meet a given target debt ratio. It measures how much primary deficits must be reduced through policy changes (some combination of revenue increases or spending cuts) over a period of time. Explore the variables that affect the fiscal gap in our interactive fiscal gap calculator.