Glossary

Unfunded liabilities

Promised future benefits, such as Social Security and Medicare payments, that are not covered by dedicated funding projected to be available.

Also called: unfunded obligations, fiscal gap, long-term obligations

Unfunded liabilities are the estimated gap between the benefits a government has promised and the revenue or assets it is expected to have to pay for them. They are most often discussed for Social Security, Medicare, and state and local government pension plans, and are measured in present value, often over 75 years or in perpetuity.

For federal programs, the trustees of Social Security and Medicare issue annual reports estimating the shortfalls. Because the programs are not funded like private pensions, the numbers depend on assumptions about demographics, wages, health costs and interest rates, so estimates vary widely and are expressed over long horizons. The government accounts for them differently from the national debt, which only includes amounts already borrowed.

Fiscal conservatives and some economists say that unfunded liabilities represent much larger obligations than the official debt and call for reform of entitlement programs. Others note that these are projections which Congress can change, that comparing them to the debt mixes different types of commitment, and that benefits depend on future taxes and growth. Public pensions in states and cities such as Illinois and New Jersey have similar issues. See also Social Security trust fund.

Last reviewed November 8, 2026

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Related terms

Social Security trust fund The accounts, holding special Treasury securities, that receive Social Security payroll taxes and pay benefits. Mandatory spending Federal spending set by permanent law rather than annual appropriations, including Social Security, Medicare and Medicaid. Entitlement A government benefit to which people are legally entitled if they meet eligibility rules, such as Social Security and Medicare. National debt The total amount the federal government owes from past borrowing, including debt held by the public and by government accounts. Debt-to-GDP ratio Federal debt measured as a share of the economy's annual output, used to judge whether borrowing is sustainable.