GAO Says the Nation’s Fiscal Health Is Woeful
By Federal Tax Update Staff
The Government Accountability Office (GAO), in its 2025 annual report to Congress, has declared that "the federal government is on an unsustainable fiscal path … which poses serious economic, security and social challenges if not addressed." (
GAO-25-107714)
"The fiscal outlook is unsustainable largely because spending is projected to increase faster than revenue," CBO noted. Time is of the essence to change the fiscal path and avoid more drastic measures said the report, which relied on fiscal simulation using information available as of December 2024.
The federal debt is comprised of debt held by the public and intragovernmental debt. As of December 31, 2024, debt held by the public was $28.7 trillion. At the end of fiscal year 2024, intragovernmental debt totaled $7.1 trillion. During the period of FY 2017-2024, the federal government added $14 trillion to the debt.
One of the implications for the growing debt cited in the report is risks to the nation's credit. The three main credit rating agencies have reduced their assessments of the federal government's creditworthiness, a situation which "could affect the country's ability to borrow at affordable rates," the report said. "According to the rating agencies, the federal government's rising publicly held debt burden and repeated debt limit impasses have eroded confidence in the nation's fiscal management," it added.
The report highlighted a mushrooming nightmare that, until recently, remained below the public's radar screen — interest on the debt. "We project that in 20 years (2045) spending for net interest will exceed Social Security (the largest federal program). By 2054 spending on net interest will account for 27% of all federal spending (up from 8% in 2019)," GAO warned.
Since 2017, GAO has "suggested that Congress develop a strategy to place the government on a sustainable fiscal path — where government spending and revenue result in a stable or declining ratio of debt held by the public to GDP over the long term. A strategy can provide a cohesive picture of the government's long-term goals [and] serve as a road map for achieving them," the report said.
According to GAO, in brief, potential elements of a long-term fiscal strategy could include the following:
- Establish fiscal rules and targets to address the spending and revenue imbalance.
- Address financing gaps for Social Security and Medicare.
- Pursue other opportunities to improve fiscal responsibilities.
- Consider replacing the debt limit.
