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.
At the end of fiscal year 2021, federal debt held by the public was about the same size as the economy (100% of GDP), a 33% increase from fiscal year 2019.
Debt rose primarily because COVID-19 disrupted the economy, leading to lower revenues in fiscal year 2020, and the federal government then increased spending in response to the pandemic. You can learn more about the current financial condition here.
We project the debt will grow faster than the economy in the intermediate- and longer-term, which is unsustainable. This situation will pose serious economic, security, and social challenges if not addressed.
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 plan to provide a cohesive picture of the government’s fiscal goals and a road map for achieving them. A fiscal plan would support the difficult policy decisions needed to achieve a more sustainable fiscal policy, one where publicly held debt is stable or declining relative to the size of the economy.
How Does GAO Help?
75-year fiscal simulation: We update it 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 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.Even to maintain the current ratio of debt at 100 percent of GDP over the next 30 years, Congress would need to make changes to spending or revenue of $33.7 trillion in present-value dollars. Explore the variables yourself in our interactive fiscal gap calculator.