1 EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF

EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Executive Summary to the FY 2022

Financial Report of the United States Government

The FY 2022 Financial Report presents the U.S. government’s current financial position and condition, and

discusses key financial topics and trends. The Financial Report is produced by Treasury in coordination with

OMB, which is part of the Executive Office of the President. The table on the preceding page presents several key

indicators of the government’s financial position and condition, which are discussed in this Executive Summary

and, in greater detail, in the Financial Report. The Secretary of the Treasury, the Director of OMB, and the

Comptroller General of the U.S. at the GAO believe that the information discussed in this Financial Report is

important to all Americans.

This Financial Report addresses the government’s financial activity and results as of and for the fiscal years

ended September 30, 2022, and 2021. Note 30—Subsequent Events discusses events that occurred after the end of

the fiscal year that may affect the government’s financial position and condition.

Results in Brief

The “Nation by the Numbers” table on the preceding page and the following summarize key metrics about

the federal government’s financial position for and during FY 2022:

• The budget deficit decreased by $1.4 tr

illion (50.4 percent) to $1.4 trillion and net operating cost

increased by $1.1 trillion (34.8 percent) to $4.2 trillion.

• Net operating cost increased due largely to significant increases in non-cash costs (

primarily losses

stemming from

changes in assumptions affecting cost and liability estimates for the government’s

employee and veteran benefits programs). These amounts do not affect the current year deficit.

• The government’s gross costs of $7.4 trillion, less $531.1 billion in revenue

s earned for goods and

services provided to the public, plus $2.2 trillion in net losses from changes in assumptions yields the

government’s net cost of $9.1 trillion.

• Tax and other revenues increased by $670.0 billion to $4.9 trillion. Deducting these revenues from net

cost yields the federal government’s “bottom line” net operating cost of $4.2 trillion referenced above.

• Comparing total government assets of $5.0 trillion (including $1.4 trillion of loans receivable, net and

$1.2 trillion of PP&E) to total liabilities of $39.0 trillion (including $24.3 trillion in federal debt and

interest payable, and $12.8 trillion of federal employee and veteran benefits payable) yields a negative net

position of $34.1 trillion.

• The Statement of Long-Term Fiscal Projections (SLTFP) shows that the present value (PV) of total non-

interest spending, over the next 75 years, under current policy, is projected to exceed the PV of total

receipts by $79.5 trillion (total federal non-interest net expenditures from the table on the previous page).

• The debt-to-GDP ratio was approximately 97 percent at the end of FY 2022. Under current policy and

based on this report’s assumptions, it is projected to reach 566 percent by 2097. The projected continuous

rise of the debt-to-GDP ratio indicates that current policy is unsustainable.

• The Statement of Social Insurance (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 by about $75.9 trillion, a $4.9 trillion increase over 2021 social

insurance projections.

• This Financial Report includes discussion and analysis of the continued effect of

the federal

government’s response to the COVID-

19 pandemic on the government’s financial position during FY

2022.

EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Where We Are Now

The Federal Government’s Response to the Pandemic

On March 11, 2020, a novel strain of the Coronavirus (COVID-19) was declared a pandemic by the WHO

and precipitated a severe global health and economic crisis. A national emergency was declared in the U.S. on

March 13, 2020. Since then, the federal government has taken broad action, including enacting multiple laws

providing approximately $4.5 trillion across the government, to protect public health and economic stability from

the effects of the unprecedented pandemic.

The corresponding financial effects of the government’s response to the COVID-19 pandemic were broad,

impacting many agencies in a variety of ways and to varying degrees. The Financial Report includes discussion

and analysis of the continued effect of the federal government’s response to the COVID-19 pandemic on the

government’s financial statements for FY 2022. Additional information can be obtained from individual agency

financial statements.

Comparing the Budget and the Financial Report

The Budget and the Financial Report present complementary perspectives on the government’s financial

position and condition.

• The Budget is the government’s primary financial planning and control tool. It accounts for past

government receipts and spending and includes the President’s proposed receipts and spending plan.

Receipts are cash received by the U.S. government and spending is measured as outlays, or payments

made by the federal government to the public or entities outside the government. In simple terms, when

total receipts exceed outlays, there is a budget surplus; conversely, if total outlays exceed total receipts,

there is a budget deficit.

• The Financial Report includes the government’s costs and revenues, assets and liabilities, and other

important financial information. It compares the government’s revenues (amounts earned, but not

necessarily collected), with costs (amounts incurred, but not necessarily paid) to derive net operating cost.

Chart 1 compares the government’s budget deficit (receipts vs. outlays) and net operating cost (revenues vs.

costs) for FYs 2018 - 2022. During FY 2022:

• A $550.0 billion decrease in outlays

combined with an $850.1 billion

increase in receipts resulting in a $1.4

trillion (50.4 percent) decrease in the

budget deficit from $2.8 trillion to

$1.4 trillion.

• Net operating cost increased $1.1

trillion or 34.8 percent from $3.1

trillion to $4.2 trillion, due mostly to a

$1.7 trillion or 23.8 percent increase in

net cost which more than offset a

$670.0 billion or 15.7 percent increase

in tax and other revenues.

The $2.8 trillion difference between the

budget deficit and net operating cost is

primarily due to accrued costs (incurred but not necessarily paid) that are included in net operating cost, but not

the budget deficit, primarily costs related to increases in estimated federal employee and veteran benefits

liabilities, particularly at VA. Significant estimated benefits cost increases are also the primary reason why net

operating cost increased during FY 2022. These amounts do not affect the current year budget deficit. Other

EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

sources of differences include but are not limited to decreases in taxes receivable, increases in advances and

deferred revenue received by the federal government from others, decreases in advances and prepayments made

by the federal government, as well as timing differences related to the recording of credit reform costs.

Costs and Revenues

The government’s “bottom line” net operating cost increased $1.1 trillion (34.8 percent) during FY 2022 to

$4.2 trillion. It is calculated as follows:

• Starting with total gross costs of $7.4

trillion, the government subtracts

earned program revenues (e.g.,

Medicare premiums, national park

entry fees, and postal service fees) and

adjusts the balance for gains or losses

from changes in actuarial assumptions

used to estimate future federal

employee and veteran benefits

payments to derive its net cost before

taxes and other revenues of $9.1

trillion (see Chart 2), an increase of

$1.7 trillion (23.8 percent) from FY

2021. This net increase is the

combined effect of many offsetting

increases and decreases across the

government, including the ongoing effects of the federal government’s response to the pandemic. For

example:

o Entities administering federal employee and veteran benefits programs, including the OPM, VA, and

DOD employ a complex series of assumptions to make actuarial projections of their long-term

benefits liabilities. These assumptions include but are not limited to interest rates, beneficiary

eligibility, life expectancy, and medical cost levels. Changes in these assumptions can result in either

losses (net cost increases) or gains (net cost decreases). Across the government, these net losses from

changes in assumptions amounted to $2.2 trillion in FY 2022, a loss increase (and a corresponding net

cost increase) of $1.7 trillion compared to FY 2021.

o In particular, VA net costs increased $1.2 trillion due largely to changes in benefits program

experience and assumptions as referenced above, including, but not limited to assumptions underlying

VA’s Veterans’ compensation plan participation and benefit level distribution rates (increasing

eligibility assumptions), decreasing mortality rates assumptions, and future long-term COLA.

o DOD net costs increased $568.4 billion due primarily to a $444.2 billion loss increase from changes

in assumptions referenced above. However, the majority of DOD’s net costs included military

operations, readiness and support, procurement, personnel, and R&D, which also collectively

increased.

o A $303.9 billion decrease in net costs at the SBA is largely attributable to substantially lower

pandemic-related loan and loan guarantee activity.

o A $304.4 billion decrease in Treasury net costs largely due to a significant decrease (from $569.5

billion in FY 2021 to $13.1 billion in FY 2022) in EIP disbursements made to eligible recipients as

part of pandemic relief efforts.

o A $354.4 billion decrease at DOL, much of which is attributable to a $348.6 billion decrease in

Income Maintenance programs costs, primarily due to decreases in unemployment benefits from the

September 2021 expiration of COVID-19 unemployment programs and fewer unemployment claims.

EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

o A $152.1 billion net cost increase at HHS primarily due to a $111.1 billion increase across the

Medicare and Medicaid benefits programs, including an increase in Medicaid grants to states to

continue COVID-19 relief efforts.

o Education net costs increased $330.9 billion due largely to a $337.3 billion upward cost modification

for Education’s direct loan program associated with announced broad-based student debt relief.

o SSA net costs increased $100.3 billion due largely to a 1.9 percent increase in the number of OASI

beneficiaries, combined with a 5.9 percent COLA provided to beneficiaries in 2022.

o Interest costs related to federal debt securities held by the public increased by $104.5 billion due

largely to increases in inflation adjustments, interest rates, and outstanding debt held by the public.

• The government deducts tax and other revenues from net cost (with some adjustments) to derive its FY

2022 “bottom line” net operating cost

of $4.2 trillion.

o From Chart 3, total government tax

and other revenues increased by

$670.0 billion (15.7 percent) to

about $4.9 trillion for FY 2022 due

primarily to growth in individual

income tax collections and tax

withholdings.

o Together, individual income tax

and tax withholdings, and

corporate taxes accounted for about

89.2 percent of total tax and other

revenues in FY 2022. Other

revenues include Federal Reserve

earnings, excise taxes, and customs

duties.

Assets and Liabilities

Chart 4 summarizes the assets and liabilities that the government reports on its Balance Sheet. As of

September 30, 2022:

• More than three-fourths of the federal

government’s total assets ($5.0

trillion) consist of: 1) $877.8 billion in

cash and monetary assets; 2) $406.9

billion in inventory and related

property; 3) $1.4 trillion in net loans

receivable (primarily student loans);

and 4) $1.2 trillion in net PP&E.

o Cash and monetary assets ($877.8

billion) is comprised largely of the

operating cash of the U.S.

government. Operating cash held

by Treasury increased $418.6

billion (211.0 percent) to $617.0

billion during FY 2022 due to

Treasury cash position decisions.

EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

That is, during 2021, debt ceiling constraints forced Treasury to maintain a significantly lower

operating cash balance. When the debt ceiling was increased in December 2021, Treasury was able to

restore the operating cash balance to its one-week prudent policy level.

o Inventory and Related Property ($406.9 billion) is comprised of: 1) inventory, which is tangible

personal property that is either held for sale, in the process of production for sale, or to be consumed in

the production of goods for sale or in the provision of services for a fee; 2) OM&S, or tangible

personal property to be consumed in normal operations (e.g., spare and repair parts, ammunition, and

tactical missiles); and 3) stockpiles, or strategic and critical materials held due to statutory

requirements for use in national defense, conservation, or local/national emergencies.

o Loans receivable, net ($1.4 trillion) is comprised of loans provided by multiple agencies, including

SBA and Education, to promote the nation’s welfare by making financing available to segments of the

population not served adequately by non-federal institutions or otherwise providing for certain

activities or investments. The government’s direct loan portfolio decreased by $216.9 billion (13.1

percent) during FY 2022. Education’s Federal Direct Student Loans, net decreased $288.2 billion as

Education announced broad-based debt relief. This decrease was partially offset by a $76.2 billion

increase in SBA direct disaster COVID-19 EIDL-funded loans.

o Federal government general PP&E includes many of the physical resources that are vital to the federal

government’s ongoing operations, including buildings, structures, facilities, equipment, internal use

software, and general-purpose land. DOD comprises approximately 68.0 percent of the government’s

reported general PP&E of $1.2 trillion as of September 30, 2022.

o Other significant government resources not reported on the Balance Sheet include the government’s

power to tax and set monetary policy, natural resources, and stewardship assets. Stewardship assets,

including heritage assets and stewardship land, benefit the nation as a whole (e.g., national

monuments, national parks) and are intended to be held indefinitely.

• Total liabilities ($39.0 trillion) consist mostly of: 1) $24.3 trillion in federal debt and interest payable; and

2) $12.8 trillion in federal employee and veteran benefits payable.

o Federal debt held by the public is debt held outside of the government by individuals, corporations,

state and local governments, FRB, foreign governments, and other non-federal entities.

o The government borrows from the public (increases federal debt levels) to finance deficits. During FY

2022, federal debt held by the public increased $2.0 trillion (8.9 percent) to $24.3 trillion.

o The government also reports about $6.7 trillion of intra-governmental debt outstanding, which arises

when one part of the government borrows from another. For example, government funds (e.g., Social

Security and Medicare Trust Funds) typically must invest excess annual receipts, including interest

earnings, in Treasury-issued federal debt securities. Although not reflected in Chart 4, these securities

are included in the calculation of federal debt subject to the debt limit.

o Federal debt held by the public plus intra-governmental debt equals gross federal debt, which, with

some adjustments, is subject to a statutory debt ceiling (“debt limit”). Congress and the President most

recently increased the debt limit by $2.5 trillion in December 2021 with the enactment of P.L. 117-73.

At the end of FY 2022, debt subject to the statutory limit was $30.9 trillion. On January 19, 2023,

Treasury began taking extraordinary measures to meet the government’s obligations as they come due

without exceeding the debt limit (see Note 30—Subsequent Events). Increasing or suspending the debt

limit does not increase spending or authorize new spending; rather, it permits the government to

continue to honor pre-existing commitments.

o Federal Employee and Veteran Benefits Payable ($12.8 trillion) represents the amounts of benefits

payable by agencies which administer the government’s pension and other benefit plans for its military

and civilian employees.

See Note 29—COVID-19 Activity, as well as the referenced agencies’ FY 2022 financial statements for

additional information about the financial effects of the federal government’s response to the pandemic. See Note

EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

30—Subsequent Events for information about events that occurred after the end of the fiscal year that may affect

the government’s financial results.

Key Economic Trends

An analysis of U.S. economic performance provides useful background when evaluating the government’s

financial statements. During the last two fiscal years, the economy’s performance has been deeply affected by the

COVID-19 global pandemic as well as the U.S. government’s extensive measures to provide fiscal support. Over

the course of FY 2022, the economy grew below trend, following the brisk recovery of the previous fiscal year.

These and other economic and financial developments are discussed in greater detail in the Financial Report.

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 was

approximately 97 percent at the end of FY 2022, down from approximately 100 percent at the end of FY 2021.

The long-term fiscal projections in this 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.

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

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.

• 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

increased during the financial

crisis of 2008 and the COVID-19

pandemic. Spending remained

elevated in 2021 due to

additional funding to support

economic recovery, but

increased receipts reduced the

primary deficit-to-GDP ratio to

10.8 percent. The primary deficit-to-GDP ratio in 2022 was 3.6 percent, decreasing by 7.1 percentage

points from 2021 as spending attributable to the pandemic winds down.

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.

EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

• The persistent long-term gap between projected receipts and total spending shown in Chart 5 occurs

despite the projected effects of the PPACA

on long-term deficits.

o 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.

o 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

approximately 97 percent at the

end of FY 2022, and under

current policy and based on this

report’s assumptions is projected

to reach 566 percent in 2097.

• 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 lower than both the 2021 and

2020 Financial Report

projections.

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 rates

relative to the rates that would have occurred in the absence of the PPACA. (See Note 25 and the RSI section of the Financial Report, and the 2022

Medicare Trustees Report for additional information).

EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

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 2022 is 4.9 percent of GDP

(compared to 6.2 percent for 2021).

• 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 4.2 percent of GDP on average over

the next 75 years. The fiscal gap represents 26.0 percent of 75-year PV receipts and 21.2 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.

o Table 2 shows that, if reform begins in 2033 or 2043, the estimated magnitude of primary surplus

increases necessary to close the 75-year fiscal gap is 5.7 percent and 7.0 percent of GDP, respectively.

The difference between the primary surplus increase necessary if reform begins in 2033 or 2043 and

the increase necessary if reform begins in 2023, an additional 0.9 and 2.1 percentage points,

respectively, is a measure of the additional burden policy delay would impose on future generations.

o 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.

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.

Reporting on Climate Change

As stated in EO 14008, Tackling the Climate Crisis at Home and Abroad “the United States and the world

face a profound climate crisis…Domestic action must go hand in hand with United States international leadership,

aimed at significantly enhancing global action.” In response, the administration has enacted key legislation and

issued important policy actions. As summarized in the Financial Report, many of the 24 CFO Act agencies have

leveraged their FY 2022 financial statements to discuss a wide range of topics concerning how their agencies are

responding to the climate crisis, including providing links to agency Climate Adaptation and Resilience Plans.

EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Find Out More

The FY 2022 Financial Report and other information about the nation’s finances are available at:

• Treasury, https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/fr_index.htm and

https://fiscaldata.treasury.gov/americas-finance-guide/;

• OMB’s Office of Federal Financial Management, https://www.whitehouse.gov/omb/management/office-

federal-financial-management/; and

• GAO, https://www.gao.gov/federal-financial-accountability.

The GAO audit report on the U.S. government’s consolidated financial statements can be found beginning on page 222

of the full Financial Report. GAO was unable to express an opinion (disclaimed) on these consolid

ated financial

statements for the reasons discussed in the audit report.