MANAGEMENT’S DISCUSSION AND ANALYSIS
Table 1 on the previous page and the following summarize the federal government’s financial position:
• This Financial Report includes discussion and analysis of the effects that the federal government’s response to the
COVID-19 pandemic continued to have on the government’s financial position during FY 2023.
• During FY 2023, the budget deficit increased by $319.7 billion (23.2 percent) to $1.7 trillion. However, net
operating cost decreased by $753.8 billion (18.1 percent) to $3.4 trillion.
• Net operating cost decreased due largely to significant decreases in non-cash costs (including decreases in losses
stemming from changes in assumptions affecting cost and liability estimates for the government’s employee and
veteran benefits programs (which do not affect the current year deficit), and reestimates of long-term student loan
costs).
• The government’s gross costs of $7.7 trillion, less $539.5 billion in revenues earned for goods and services provided
to the public (e.g., Medicare premiums, national park entry fees, and postal service fees), plus $760.6 billion in net
losses from changes in assumptions (e.g., interest rates, inflation, disability claims rates) yields the government’s net
cost of $7.9 trillion, a decrease of $1.2 trillion or 13.3 percent compared to FY 2022.
• Total tax and other revenues decreased $460.3 billion to $4.5 trillion. Deducting these revenues from net cost results
in a “bottom line” net operating cost of $3.4 trillion for FY 2023, a decrease of $753.8 billion or 18.1 percent
compared to FY 2022.
• Comparing total FY 2023 government assets of $5.4 trillion (including $1.7 trillion of loans receivable, net and $1.2
trillion of PP&E) to total liabilities of $42.9 trillion (including $26.3 trillion in federal debt and interest payable
3
,
and $14.3 trillion of federal employee and veteran benefits payable) yields a negative net position of $37.5 trillion.
• The budget deficit is primarily financed through borrowing from the public. As of September 30, 2023, debt held by
the public, excluding accrued interest, was $26.3 trillion. This amount, plus intra-governmental debt ($6.9 trillion)
equals gross federal debt, which, with some adjustments, is subject to the statutory debt limit. As of September 30,
2023, the government’s total debt subject to the debt limit was $33.1 trillion. Congress and the President increased
the debt limit by $480.0 billion in October 2021 and by $2.5 trillion in December 2021. On June 3, 2023, P.L. 118-5
was enacted, suspending the debt limit through January 1, 2025.
This Financial Report also contains information about projected impacts on the government’s future financial condition.
Under federal accounting rules, social insurance amounts as reported in both the SLTFP and in the SOSI are not considered
liabilities of the government. From Table 1:
• The SLTFP shows that the PV
4
of total non-interest spending, including Social Security, Medicare, Medicaid,
defense, and education, etc., over the next 75 years, under current policy, is projected to exceed the PV of total
receipts by $73.2 trillion (total federal non-interest net expenditures from Table 1).
• The SOSI shows that the PV of the government’s expenditures for Social Security and Medicare Parts A, B and D,
and other social insurance programs over 75 years is projected to exceed social insurance revenues
5
by about $78.4
trillion, a $2.5 trillion increase over 2022 social insurance projections.
• The Social Insurance and Total Federal Non-Interest Net Expenditures measures in Table 1 differ primarily because
total non-interest net expenditures from the SLTFP include the effects of general revenues and non-social insurance
spending, neither of which is included in the SOSI.
The government’s current financial position and long-term financial condition can be evaluated both in dollar terms and
in relation to the economy. GDP is a measure of 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. For example:
• The budget deficit increased from $1.4 trillion in FY 2022 to $1.7 trillion in FY 2023. The deficit-to-GDP ratio also
increased from 5.4 percent in FY 2022 to 6.3 percent in 2023.
• The budget deficit is primarily financed through borrowing from the public. As of September 30, 2023, the $26.3
trillion in debt held by the public, excluding accrued interest, equates to 97 percent of GDP.
• The 2023 SOSI projection of $78.4 trillion net PV excess of expenditures over receipts over 75 years represents
about 4.4 percent of the PV of GDP over 75 years. The excess of total projected non-interest spending over receipts
of $73.2 trillion from the SLTFP represents 3.8 percent of GDP over 75 years. As discussed in this Financial
Report, changes in these projections can, in turn, have a significant impact on projected debt as a percent of GDP.
• To prevent the debt-to-GDP ratio from rising over the next 75 years, a combination of non-interest spending
reductions and receipts increases that amounts to 4.5 percent of GDP on average is needed (4.9 percent of GDP on
3
On the government’s Balance Sheet, federal debt and interest payable consists of Treasury securities, net of unamortized discounts and premiums, and
accrued interest payable. The “public” consists of individuals, corporations, state and local governments, FRB, foreign governments, and other entities
outside the federal government.
4
PVs recognize that a dollar paid or collected in the future is worth less than a dollar today because a dollar today could be invested and earn interest. To
calculate a PV, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed.
5
Social Security is funded by the payroll taxes and revenue from taxation of benefits. Medicare Part A is funded by the payroll taxes, revenue from taxation
of benefits, and premiums that support those programs. Medicare Parts B and D are primarily financed by transfers from the General Fund, which are
presented, and by accounting convention, eliminated in the SOSI. For the FYs 2023 and 2022 SOSI, the amounts eliminated totaled $48.5 trillion and $47.5
trillion, respectively. In addition, the SOSI programs include DOL’s Black Lung Program, the projection period for which is 40 years.