Executive Summary to the Fiscal Year 2023 Financial Report of U.S. Government

Costs and Revenues

The government’s “bottom line” net operating cost decreased $753.8 billion (18.1 percent) during FY 2023 to $3.4 trillion. It is calculated as follows:

• Starting with total gross costs of $7.7 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 $7.9 trillion (see Chart 2), a decrease of $1.2 trillion (13.3 percent) from FY 2022. This net decrease is the combined effect of many offsetting increases and decreases across the government. For example:
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  • Entities administering federal employee and veteran benefits programs, including the VA, DOD, and OPM 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 $760.6 billion in FY 2023, a loss decrease (and a corresponding net cost decrease) of $1.4 trillion compared to FY 2022.
  • In particular, VA net costs decreased $479.6 billion due largely to decreased losses from changes in assumptions as referenced above, partially offset by an increase in costs as a result of legislation expanding and extending eligibility for veteran’s benefits.
  • DOD net costs decreased $455.6 billion due primarily to a $437.7 billion loss decrease from changes in assumptions as referenced above. However, most of DOD’s net costs included those related to military operations, readiness and support, procurement, personnel, and R&D.
  • A $222.7 billion decrease in Treasury net costs was largely due to a decrease in costs associated with Treasury’s pandemic relief programs, including: 1) the Coronavirus State and Local Fiscal Recovery Funds; and 2) COVID-19 related refunds and other payments such as the EIP and advances for child tax credits.
  • Education net costs decreased $521.0 billion due largely to the combined effect of: 1) an FY 2022 cost increase of $330.9 billion due largely to a $337.3 billion loan modification stemming from the announced broad-based student loan debt relief; and 2) an FY 2023 cost decrease of $319.9 billion from a downward modification to reverse the broad-based student loan debt relief, as a result of the Supreme Court’s ruling on Biden v. Nebraska. Education’s FY 2023 net costs were also impacted by: 1) $71.4 billion in upward cost reestimates of the Department’s existing loan portfolio; and 2) $115.7 billion of upward modifications related to COVID-19 administrative actions, changes to repayment plans, and other programmatic changes.
  • A $54.1 billion net cost increase at HHS primarily due to a $116.1 billion increase across the Medicare and Medicaid benefits programs largely associated with increasing benefits payments. This cost increase was offset by a $62.0 billion cost decrease across all other HHS segments primarily due to decreases in COVID-19 costs.
  • SSA net costs increased $138.8 billion due largely to a 2.5 percent increase in the number of OASI beneficiaries, combined with an 8.7 percent COLA provided to beneficiaries in 2023.
  • Interest costs related to federal debt securities held by the public increased by $181.5 billion due largely to increases in outstanding debt held by the public and the average interest rates, which were offset by a decrease in inflation adjustments.

• The government deducts tax and other revenues from net cost (with some adjustments) to derive its FY 2023 “bottom line” net operating cost of $3.4 trillion.
  • From Chart 3, total government tax and other revenues decreased by $460.3 billion (9.3 percent) to about $4.5 trillion for FY 2023 due primarily to a decline in individual income and tax withholdings and corporate income taxes as well as decreased deposits of earnings from the Federal Reserve due to increased interest rates.
  • Together, individual income tax and tax withholdings, and corporate income taxes accounted for about 91.4 percent of total tax and other revenues in FY 2023. 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, 2023:

• More than three-fourths of the federal government’s total assets ($5.4 trillion) consist of: 1) $922.2 billion in cash and monetary assets; 2) $423.0 billion in inventory and related property; 3) $1.7 trillion in loans receivable, net (primarily student loans); and 4) $1.2 trillion in net PP&E.
  
  • Cash and monetary assets assets ($922.2 billion) is comprised largely of the operating cash of the U.S. government. Operating cash held by Treasury increased $21.9 billion (3.5 percent) to $638.9 billion during FY 2023.
    
    
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  • Inventory and Related Property ($423.0 billion) includes: 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.
  • Loans receivable net, ($1.7 trillion) is comprised of loans provided by multiple agencies, Education and SBA, 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 net loan portfolio increased by $261.0 billion (18.2 percent) during FY 2023. This net increase was largely due to a $214.3 billion increase in Education’s Federal Direct Student Loans, net, primarily due to a reversal of the broad-based student loan debt relief as a result of the Supreme Court’s ruling in Biden v. Nebraska. Additional Loans Receivable, net increases included Treasury’s purchase of a $50 billion note issued by a trust created by FDIC in its receivership capacity and backed by a guarantee from the FDIC in its corporate capacity. These and other net increases were partially offset by a $49.6 billion decrease in SBA’s loan receivables, net, due largely to write-offs of direct disaster loans. Other changes included fluctuations in loan programs for HUD, DOT, and DFC.
  • 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 67.4 percent of the government’s reported general PP&E of $1.2 trillion as of September 30, 2023.
  • 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 (e.g., national monuments, national parks) and are intended to be held indefinitely.

• Total liabilities ($42.9 trillion) consist mostly of: 1) $26.3 trillion in federal debt and interest payable; and 2) $14.3 trillion in federal employee and veteran benefits payable.
• Federal debt held by the public is debt held outside of the government by individuals, corporations, state and local governments, the FR System, foreign governments, and other non-federal entities.
• The government borrows from the public (increases federal debt levels) to finance deficits. During FY 2023, federal debt held by the public increased $2.0 trillion (8.3 percent) to $26.3 trillion.
• The government also reports about $6.9 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 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.
• 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 increased the debt limit by $2.5 trillion in December 2021 with the enactment of P.L. 117-73. In response to delays in raising the statutory debt limit, Treasury took extraordinary measures to meet the government’s obligations as they came due without exceeding the debt limit from January 19 through June 2, 2023. On June 3, 2023, P.L. 118-5 was enacted, suspending the debt limit through January 1, 2025. On Monday, June 5, 2023, Treasury discontinued its use of extraordinary measures and resumed normal debt management operations. At the end of FY 2023, debt subject to the statutory limit was $33.1 trillion. 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 (see Note 12—Federal Debt and Interest Payable).
• Federal employee and veteran benefits payable ($14.3 trillion) represents the amounts of benefits payable by agencies that 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 2023 financial statements for additional information about the financial effects of the federal government’s response to the pandemic. See Note 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. Over the course of FY 2023, the economy’s growth accelerated even as inflation continued to slow. In addition, labor markets remained tight and continued to generate a substantial number of jobs but also showed signs of very gradual easing over the course of FY 2023. These and other economic and financial developments are discussed in greater detail in the Financial Report.